[ET Net News Agency, 10 May 2018] AviChina Industry & Technology (02357) has received
formal approval from CSRC (China Securities Regulatory Commission) to participate in the
H-share full circulation pilot project.
Pursuant to the CSRC approval, AviChina is allowed to convert up to 3.6bn domestic
shares into H shares, accounting for 60.5% of total issued shares.
Morgan Stanley believes the full circulation of domestic shares is part of SASAC's
strategy in improving "market cap management" to boost the value of state-owned assets, as
it aims to align the interests of the parent group and current H-shareholders.
As result, it could prompt future asset injections to increase AVIC's securitization
ratio and bolster its asset value. Morgan sees limited risk of AVIC, the parent group of
AviChina, selling down its shares after full circulation, given significant valuation
discount of AviChina (16x 2018 P/E) versus its four domestic subsidiaries listed in A
share market (median level at 40x P/E) and its intention in keeping long term control of
AviChina.
Morgan maintained its "overweight" rating on AviChina, with a target price of HK$6.85.
(KL)