[ET Net News Agency, 15 June 2018] China Railway Group (CRG)(00390) unveiled the first
phase of fund raising of Rmb11.5966bn through debt-to-equity swap with its four
subsidiaries. Citi Research said the scale of funding is smaller than prior expectation of
over Rmb20bn.
That said, despite current tight liquidity conditions amid China de-leveraging and
subdued end-demand response of bond market for some infra counters in A-share market, CRG
is able to execute the fund raising, saving at least Rmb580m interest a year or 2-3% of
Citi's 2019 earnings projection.
But the EPS enhancement would likely be offset by share dilution via the planned A-share
issuance next year (second phase) so Citi retained its EPS forecasts at this moment. It
maintained its "buy" rating, with a target price of HK$8.8. (KL)