(5 July 2022) Bloomberg terminal has posted an analyst’s in-depth analysis today about Fosun International.  The following is the article extracted from the Bloomberg terminal post:

Seasonal patterns typically see shares perform weakly in May and June and rebound in July. Since early 2022, global markets have experienced sharp declines due to unfavorable factors such as the geopolitical landscape, the Federal Reserve’s interest rate hikes, soaring oil prices, and volatile epidemics. The market is generally concern about refinancing risks in the public bond market, leading to macro concerns of rating agencies. Hong Kong stocks fell on the first trading day of July. Nonetheless, there is still hope for a turnaround in July. Against a backdrop of market volatility, it is key to look for high-quality stocks with resilience and long-term growth momentum.

S&P Global Ratings twice issued reports affirming Fosun's debt management and flexibility to replenish cash

Recently, major firms have expressed their optimistic views on Fosun International, S&P Global Ratings (“S&P”) issued two reports confirming Fosun’s financial strength. On 1 June, S&P issued a report, maintaining Fosun International's BB (stable) rating. In the face of volatility, S&P still affirmed Fosun's rating, fully recognizing Fosun’s efforts in debt management and endogenous growth strategy.

On 22 June, Fosun International announced to accept Any-and-All for full outstanding principal amount of its only two offshore bonds maturing this year. On 23 June, S&P issued another report, stating that Fosun has adequate resources to manage debts maturities. S&P pointed out that Fosun’s tender offer on June 22 to repurchase all offshore notes due this year (totaling about US$800 million) reflects its efforts to ease recent market skepticism. 

S&P believes that Fosun can use secured debt, bank borrowings, etc. to settle and well manage its maturities. The firm expects Fosun's offshore and onshore bank facilities will increase this year, and Fosun's banking relationships are unlikely to be hit in the near future. Moreover, S&P also pointed out that Fosun’s global business scale, diversified investment portfolio and ability to strike a balance between investments and divestments, could offer it flexibility to replenish cash.

Major investment banks including Morgan Stanley recognize Fosun's ample liquidity

Goldman Sachs published a report on 25 June. It also believes that the recent bond price fluctuations of Fosun were caused by weak market sentiment, including recession concerns for the US and European economies. It also quoted S&P’s report, stating that Fosun has adequate resources to meet its debt maturities in the near term, and Fosun’s recent tender offer could help it restore stability in its bond prices.

Morgan Stanley, the first investment bank to express optimistic view on Fosun International, published a report on 21 June, stating that the market overreacted to the refinancing risks in the public bond market. Morgan Stanley reiterated an “overweight” rating on Fosun International with a target price of HK$11.4. The firm sees the Company's current valuation as attractive and believes Fosun has the ability to raise further cash even if debt market liquidity conditions deteriorate further.

UBS published a report on 23 June, it believes Fosun can effectively manage near-term financing risks amid the refinancing risks are rising on China macro concerns. UBS sees that Fosun is currently trading at a 63% discount to its net asset value (NAV), which is largely attributed to China's macro concerns. Thus, the firm assigned Fosun a target price of HK$9.1.

In addition, Daiwa Capital, a Japanese securities firm, published a research report on 27 June in support of Fosun International, stating that Fosun’s recent bond price fluctuations were due to market overreaction and Fosun’s stable leverage and diversified funding channels should help it maintain stable liquidity. Therefore, Daiwa believes Fosun is trading at an attractive entry price and reiterated “buy” rating and set the target price at HK$11.50. Daiwa pointed out that Fosun's recent tender offer to accept Any-and-All for full outstanding principal amount of its only two offshore bonds maturing this year will boost investor confidence, and Fosun’s healthy cash position, diversified funding channels and large investment portfolio should help it defend against external risks.

These ratings and reports fully affirm Fosun's sound fundamentals and its steady growth potential. Facing the volatility in the public market, Fosun has always been able to leverage its diversified funding channels to maintain stable liquidity.

Thanks to its globalization strategy, Fosun’s businesses continue to achieve growth

Fosun has established a global asset portfolio with its global operations and investment capabilities developed over the past 30 years. During the 30 years of development, Fosun has formed its global core competency of “Global Organization + Local Operations”. As of 2021, Fosun has established its profound industry operations in nearly 30 countries and regions, and revenue from overseas countries and regions amounted to RMB67.7 billion, accounting for nearly 42% of the total revenue for the year. 

As a global enterprise, Fosun always focuses on investments that will expedite the development of the Chinese market, and assists overseas member companies to expand their businesses and further penetrate their local markets. The global asset portfolio allows Fosun to effectively resist market volatility and risks, and promote the multiplier growth of its global business.

In the face of the on-going epidemic and many external uncertainties, Fosun has been leveraging its long-term accumulation of innovation and comprehensive globalization capabilities to drive growth with profound industry operations and industrial investment, demonstrating high resilience in its businesses.

Taking Fosun’s Happiness segment as an example, Fosun Tourism Group’s businesses show strong recovery momentum and its overseas business saw rebound. Since Fosun Tourism Group announced in April that it has turned profitable in the first quarter of 2022, international brands such as Club Med, Thomas Cook and Casa Cook under Fosun Tourism have actively seized the opportunity of the recovery of the global tourism industry, and have made remarkable progress. On 16 April, the bookings of Club Med in the second half of the year have surpassed that of the same period in 2019 before the epidemic. Among them, the bookings in two major regional markets of Europe and the Americas have increased significantly, outperforming the industry level. 

Thomas Cook's business in the UK saw an increase of more than 8-fold year-on-year in the first quarter of this year. Thomas Cook has also expanded into the Netherlands in March. On the basis of its original partners, it has adopted digital business models such as the use of websites and applications to expand its regional business in Europe. Casa Cook has also accelerated its expansion in Europe, with the new opening of Casa Cook Samos in Greece in May this year.

After experiencing the trough period of the epidemic, Fosun's businesses is poised for a new round of growth

Thanks to the relaxation of the epidemic prevention measures in Hainan, Fosun’s happiness business, Atlantis Sanya under Fosun Tourism Group has seen a significant rebound in visitor flow and occupancy rate. Entering the second half of June, the occupancy rate of Atlantis Sanya has exceeded 90%, and the hotel bookings at the end of the month are almost full.

Another flagship of Fosun's Happiness segment, Yuyuan Inc., is accelerating business recovery thanks to the resumption of dine-in services in major business districts in Shanghai and the robust momentum in its business operations. In the first quarter of this year, Yuyuan Inc. continued to expand the business channels of its Jewelry & Fashion segment and continued to improve its product competitiveness. The sales volume of the Guyun Gold series products reached a new high, with a year-on-year increase of over 100%. In the first quarter, Yuyuan Jewelry & Fashion chain business opened 140 net stores, which brings the total number to 4,121 stores, consolidating its leading position in store expansion in the industry.

Multiple securities firms trust Fosun that it can protect itself against market risk with its diversified business portfolio and believe the Company will continue to adhere to its strict financial and capital management systems to further consolidate its capital foundation. In addition, the well-known international rating agency S&P also reaffirmed “stable” outlook for Fosun and recognized Fosun’s sound financial structure and abundant cash flow. Major investment bank Morgan Stanley is bullish on Fosun International and even expects the Company's share price can rebound in 60 days, therefore, investors are suggested to buy Fosun's shares now as the current valuation is attractive.