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Proposed Restructuring Plan Unlikely to Receive Shareholders' Approval

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

On Jan. 12, 2017, China Vanke announced that its second-largest shareholder, China Resources Holding, has agreed to dispose its entire stake in the company to Shenzhen Metro. The disposal clears the way for Shenzhen Metro to become the largest shareholder in China Vanke. While the share price will likely run up as the investors are relieved that the long-running shareholder battle is coming to an end, we maintain our fair value estimate of HKD 22.90, or CNY 19.10, along with our no-moat rating for the company.China Resources Holding has agreed to dispose its entire stake or 15% of China Vanke to Shenzhen Metro at a price of CNY 22 per share. Last month, China Vanke terminated a proposed transaction with Shenzhen Metro, owing to opposition from its major shareholders, China Resources Holding and Baoneng. The exit of China Resources Holding sets the stage for Shenzhen Metro to become the largest shareholder of the company, likely through share placement and asset injection. Given the recent regulatory scrutiny encountered by Baoneng, including the suspension of the sales of certain insurance products by its subsidiaries, Baoneng is unlikely to continue the takeover battle by increasing its stake. China Vanke will likely conduct a smaller scale share placement with Shenzhen Metro in order to dilute Baoneng, currently the largest shareholder with a stake of 25%.Analyst: Phillip Zhong

On Jan. 12, 2017, China Vanke announced that its second-largest shareholder, China Resources Holding, has agreed to dispose its entire stake in the company to Shenzhen Metro. The disposal clears the way for Shenzhen Metro to become the largest shareholder in China Vanke. While the share price will likely run up as the investors are relieved that the long-running shareholder battle is coming to an end, we maintain our fair value estimate of HKD 22.90, or CNY 19.10, along with our no-moat rating for the company.China Resources Holding has agreed to dispose its entire stake or 15% of China Vanke to Shenzhen Metro at a price of CNY 22 per share. Last month, China Vanke terminated a proposed transaction with Shenzhen Metro, owing to opposition from its major shareholders, China Resources Holding and Baoneng. The exit of China Resources Holding sets the stage for Shenzhen Metro to become the largest shareholder of the company, likely through share placement and asset injection. Given the recent regulatory scrutiny encountered by Baoneng, including the suspension of the sales of certain insurance products by its subsidiaries, Baoneng is unlikely to continue the takeover battle by increasing its stake. China Vanke will likely conduct a smaller scale share placement with Shenzhen Metro in order to dilute Baoneng, currently the largest shareholder with a stake of 25%.Analyst: Phillip Zhong

Swapping China Resources for Shenzhen Metro Should End Shareholder Battle

China Vanke (H)

Swapping China Resources for Shenzhen Metro Should End Shareholder Battle