[ET Net News Agency, 17 November 2017] Sunac China (01918) provided RMB1.8bn loans and
RMB3bn guarantee to Leshi Internet (Shenzhen: 300104) and Leshi Zhixin. The borrowers will
collectively pledge equity stakes in multiple assets, key one being 40% equity stake in
Leshi Zhixin (Sunac owns 33.5% currently) and 50% stake in Leshi Cloud.
Citi Research beleives extra financing looks strategically necessary to fasten the
turnaround of the valuable businesses and for new partners introduction. While this extra
financing will undoubtedly trigger market's concerns on "endless investment" in Leshi and
impact the share price, the research house views this financing is "strategically
sensible" and necessary to accelerate the turnaround of Leshi's valuable business by
directly holding the assets and minimize any negative impact of founder Mr. Jia's
financial issues.
Citi maintained its "buy" call on Sunac, with a target priec of HK$39.8. (KL)