查看PDF原文公告日期：2015-12-15
恒天立信(00641) Background. CHTC Fong’s Industries Company Limited (CHTC Fong’s),爱游戏体育through its subsidiaries,爱游戏登录入口 manufactures and sells dyeing machines andstainless steel casting products. Dyeing and finishing machine accountedfor 70.6% of total turnover in 1H2015. The company also trades stainlesssteel supplies and machine parts as well as invests in properties. Established by Mr Fong Sou Lam in 1963, Fong’s Industries is a longhistory supplier of textile dyeing machines. The company has successfullyexpanded its product range from dyeing to downstream (setting & finishing)through M&As, forming JV with overseas players and organic expansion.Compared to its competitors, the one-stop shop strategy definitely givenFong’s a strong edge by leveraging off its existing customer base to crosssell new products. It currently runs five brands (Fong’s, Then, Goller,Xorella and Monforts), all leading names in their own territory. Two noncore business units, Fong’s Steel and Tycon Alloy, were set up in 1988 and1995 as natural extension of internal operation of steel trading and steelcasting, respectively. CHTC Fong’s formed Fong’s Water Technology Co.,Ltd in 2007 which provides “turn-key” water re-use system withcomprehensive services, including design, installation, maintenance andtechnical supports. CHTC Fong’s has a well-diversified customer base including well-knownlisted companies. Apart from leading players in China, CHTC Fong’s alsohas a strong customer base in other Asian countries such as India,Pakistan, Bangladesh. One key advantage of CHTC Fong’s over itsinternational rivals is its competitive operating efficiency and productioncosts that are underpinned by China’s lower product cost and thecompany’s integrated production base.China Hengtian Group (a centrally-owned SOE) acquired a major stake inCHTC Fong’s in 2011 and became the major shareholder of CHTC Fong’s. China Hengtian Group now owns a 55.8% stake in CHTC Fong’s.According to management, the company was in a transition period in lastseveral years and was low profile in terms of IR activities. Operatingperformance of the existing textile related equipment business is capped bymacro economic environment and CHTC Fong’s management is looking forbusiness opportunities to boost operating performance. According tomanagement, the other subsidiaries under the parent, China HengtainGroup, have been completing the business transformation and therefore,China Hengtain Group can focus more on the development of CHTCFong’s. Apart from M&A opportunities outside, CHTC Fong’s managementis looking for M&A targets including new materials, new energy vehicle andcultural related business under China Hengtain Group. CHTC Fong’s reported a 76.2% YoY decline in net profit in 1H2015. Thedecline in net profit was mainly due to margin pressure from keenercompetition. There is no major improvement in 2H2015 given weak macroenvironment. Management highlights that the company is one of thebeneficiaries of TPP agreement. The establishment of textile & garment incountries which joined TPP will create growth opportunity to CHTC Fong’sgiven its leading global position. After relocation of the production facilities to Zhongshan, CHTCentered into an agreement with Zhongyi Hengshang PropertyDevelopment Company Limited in respect of the redevelopment ofCHTC’s land in Shenzhen by way of urban renewal. According tothe agreement, CHTC will receive (through resettlement anddemolition compensation):爱游戏官方入口 a) RMB1bn in cash and b) office with agross floor area of approximately 30,000 m2 (and, in addition, atleast 100 car-parks). Net gearing of CHTC Fong’s was 64.4% in 1H2015. The disposal gains will have positive impact on the CTHCFong’s net profit and financial position in coming years . Our view. We share the view that CHTC Fong’s existing equipmentbusiness does not look particularly attractive in near term giveneconomic slowdown. However, TPP offers growth opportunities toCHTC Fong’s as it is a global leader in dyeing and finishingequipment. CHTC Fong’s is a SOE reform play and the company isthe only HK listed platform after China Hengtian Group privatized Hshares of Jingwei Textile [0350.HK]. We believe China HengtianGroup will provide support to CHTC Fong’s to grow existingbusiness and searching for growth drivers. The weak marketsentiment might create volatility to CHTC Fong’s share priceespecially there is limited news flow on CHTC Fong’s. Any shareprice weakness will provide re-visit opportunity to investors. Catalysts. More news flow on re-development project in Shenzhen,acquisition of assets from parents, more IR activities.
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