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Li Ka-shing, Chairman of the Department of Long Harmony, who has always been prudent in investment, deposited his money in the Postal Savings Bank of China (01658)! A spokesman for the Chang He Department voluntarily disclosed that Li Ka-shing, through his charitable foundation and his eldest son Li Zak Ju, holds a performance linked note in PSBC, which is equivalent to an 11.62% H-share interest in PSBC, valued at over HK $10 billion based on the closing price of PSBC yesterday. 'Li sees this as a long-term investment,' the spokesman said.
In accordance with the Securities and Futures Ordinance, one day after the listing of the world's largest fund raising Postal Savings Bank in the past two years, Li Ka-shing disclosed that three charitable foundations founded by Li Ka-shing, Li Ka-shing himself and Li Ze-ju held performance-linked notes issued by a financial institution, equivalent to holding about 11.62% of the constructive interest in Postal Savings Bank's H shares. It is also about 2.8% of the total issued share capital of PSBC.
In response, the spokesmen for Changhe (00001) and Changshi (01113) said that Li Ka-shing had "absolute confidence" in PSBC as a suitable financial investment for Li Ka-shing and his foundation, and that Li Ka-shing regarded PSBC as a long-term investment project. Earlier, Li Ka-shing sold about 351 million shares of Wulong Electric Vehicles (00729), with a market value of about 150 million yuan. After the transaction, his stake was reduced to 4.93%. As a rule, he was not required to disclose his shareholding.
The securities world was left scratching its head over Li Ka-shing's sudden disclosure of his holdings. Charles Shik, research manager at Yocai Securities, said it was difficult to assess the intention of Li Ka-shing's purchase of PSBC. He bluntly compared with other domestic banking stocks, PSBC current valuation is not cheap.
Zhao Xwen, vice head of research of Xinda International, pointed out that, as of the first quarter of March, the non-performing loan ratio of PSBC is only 0.81%, which is lower than Xwen among the four major domestic banks. The loan-to-deposit ratio is less than 40%, which suggests that there is still room for lending. However, he believes that if Li Ka-shing holds PSGC in equity-linked notes (ELNs), he can generally continue to earn a higher dividend as long as he does not fall below a certain "receiving price", depending on the conditions under which he holds the notes.
Li has faith in PSBC
According to the data, Li Ka-shing does not own any Hong Kong-listed domestic banking shares at the disclosure level of holding more than 5%. Postal Savings Bank can be regarded as his investment in domestic banking shares in recent years. Shares in PSBC, which listed on Tuesday, closed unchanged at 4.77 yuan, giving Mr Li a market value of about 10.8 billion yuan if he exercised all the performance-linked notes. Analysts estimate that compared with other domestic banks, PSBC's current price-to-book ratio is 1.04 times, which is higher than the 0.69 to 0.87 times of the four major banks (Industry, China, Agriculture and China Construction Bank). This reflects that PSBC is not cheap, and the current dividend yield of the four major banks ranges from 5.5 to 5.7 percent. Therefore, it is estimated that Li Ka-shing purchased the derivative instruments of PSBC. A coupon of at least 6 per cent or more and a price of at least 15 per cent or more off the current price will attract Li Ka-shing to place the bet.
Separately, market sources said Chang Wa issued US $1.25 billion (about HK $9.75 billion) of notes, of which US $750 million (about HK $5.85 billion) was for a five-year maturity at the reference rate plus 90 dots. The other US $500 million (about HK $3.9 billion) is for 10 years at the reference rate plus 130 dots. Funds are used for specific debt refinancing and general corporate purposes.
