Wednesday, February 19, 2014
GLP
GLP: Spins off its Chinese business into a holding company (Holdco) and invited a Chinese strategic investor consortium (Bank of China, a Chinese insurance company and HOPU funds, which is backed by SOEs and insti investors) and GLP employees (management inclusive) to co-invest up to US$2.35b (34%) in the Holdco.
US$2.1b will be injected into the new China Holdco at 1.01x P/B, while 74.3m new shares will be issued at $2.755 (3% discount to 30 day VWAP) in GLP's listed entity, representing 1.5% dilution of existing shares.
CLSA views the 1.01x P/B, below current stock multiple of 1.3x is fair and necessary to entice the SOE linked consortium, which management guides will enable growth of 20-30% by tapping on new relationships such as China Rail, COFCO, and other SOEs in a less capital-intensive manner.
Pending further clarifications on the deal, latest broker ratings remain unchanged:
CLSA: Buy, TP $3.45
CS: Netural, TP $3.15
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