Daily Brief Financials: Road King Infrastructure, China UnionPay, Deutsche Beteiligungs AG and more

Road King’s H1/23 results were mixed in our view. The company reported robust top-line growth, albeit gross profit plunged due to lower ASP of properties delivered. In addition, cash dividends from toll roads declined materially, owing to the non-renewal of the Tangjin expressway concession upon expiry in April.

Positively, Road King’s net debt continued to decrease, as it repaid borrowings using cash collection from property deliveries. The company could sustain its sales momentum in H2/23, as it is poised to launch the So Kwun Wat project (its sole remaining undeveloped project in Hong Kong) for sale.

We believe Road King will remain current on its obligations for the next 12 months. That said, the company’s medium-term prospects appear dim. Moreover, the small and dwindling land bank might suffice for only another two years of development. In the meantime, the company is likely to continue repurchasing offshore bonds.

We move our LARA to “High Risk”. We maintain our “Hold” recommendation on the ROADKG 2024 notes, but move to “Not Recommended” on the remaining notes.

• Regulators cleared state-backed bank card giant China UnionPay, the world’s largest provider of debit cards, to more than triple its registered capital to almost 10 billion yuan ($1.37 billion).
• Such a capital increase usually is intended to improve a payment institution’s risk control system and ensure the safety and stability of the business, a senior analyst in the payment industry said.
• People at UnionPay told Caixin that the capital increase was a distribution of unrealized shareholder equity and was a normal financial adjustment with no impact on its shareholding structure.

Deutsche Beteiligungs (DBAG) posted a 20% NAV total return in the nine months to end-June 2023, thereby recouping the valuation loss in FY22. The uplift to last carrying value from its recently agreed sale of R+S (implying a healthy internal rate of return of over 40%) contributed €14m to its net income in Q323. As a result, management now expects FY23 results to be at the upper half of its guidance of net income at €85–115m and NAV of €610–715m. DBAG’s asset management business delivered a profit of €11.3m in 9M23, on track to meet management’s FY23 guidance of €13–15m. DBAG’s shares currently trade at a c 15% discount to last reported NAV (with the latter not capturing the value of the asset management business).