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China's Fosun eyes UK, Europe opportunities after Brexit vote

06/28/2016 | 10:35am EST

BEIJING (Reuters) - Fosun Group, China's biggest private conglomerate, will look for more opportunities in the United Kingdom and Europe in the volatile wake of Britain's referendum vote to leave the European Union, the company's billionaire co-founder and chairman said at a Reuters Newsmaker event on Tuesday.

Guo Guangchang, a self-styled student of U.S. investor Warren Buffett, said the Brexit vote has created more opportunities for investors amid jumpy financial markets following Thursday's referendum.

"For a value investor, volatility is a friend not an enemy. Market volatility and panic will probably bring better investment opportunities. So we are increasingly looking for development opportunities in Europe, and particularly in the UK," Guo said.

The Brexit vote has reverberated through financial markets, sending the pound <GBP=> to its lowest level in 31 years despite government attempts to relieve some of the confusion about the political and economic outlook.

"Our currency risks in the UK have been fully hedged because we used insurance funds for some investments," Guo said, adding his company has not been affected much by the Brexit vote.

Guo, 49 and one of China's most powerful business leaders, said now is also a good time to invest in oil and commodities. "Oil is not trading at a high price, and Fosun has accumulated experience and learned lessons. So we will increase our investment in oil."


Guo said Fosun will this year focus on its tourism and health interests.

Already invested in medical companies, Fosun will invest more in health management and health insurance, he said, and will create synergies among its tourism holdings, including Club Med and Cirque du Soleil.

The group is, however, adopting a "conservative" expansion strategy as it looks to gradually reduce its overall debt ratio, extend debt durations and lower financing costs, Guo said.

Fosun's total debt rose by a fifth to 115 billion yuan ($17.3 billion) last year as it borrowed more to expand its businesses. Its net gearing ratio was 69 percent at end-2015.

Fosun this year has issued more than 10 billion yuan in the domestic open market at an average cost of about 3.7 percent, compared with costs of around 5 percent last year, Guo said. "We are going to increase the liquidity of Fosun's assets, building a more prudent debt structure by pushing individual business segments to seek direct finance from capital markets."

Fosun plans to list U.S. property and casualty insurer Ironshore Inc "as soon as possible" this year, Guo told Reuters ahead of the Newsmaker event. Fosun International said last week it would spin off Ironshore, which it spent $2.3 billion over two years to acquire, through a listing on the New York Stock Exchange or Nasdaq market.

While it reduces its debt load, Fosun has slowed its foreign investments - just as China's outbound M&A deals have soared. Deals so far this year have topped last year's total of $106 billion, and domestic investment bank CICC has projected total overseas acquisitions could rise to $150 billion this year.

Guo, ranked 19th on Forbes' China Rich List last year with a net worth of $5.3 billion, told Reuters last month that Fosun was "working hard" to reduce debts and obtain an investment grade rating - three notches above Ba3.

In April, Moody's restored the outlook on Fosun International Ltd's Ba3 corporate family rating to stable from negative, reflecting Fosun's "demonstrated ability to maintain its access to the funding markets and improve its debt maturity profile."

Born in a rural village in the eastern province of Zhejiang, Guo studied philosophy at Shanghai's elite Fudan University before founding an information service company with some classmates and around $15,0000 in capital in 1992.

Fosun first partnered with state-owned enterprises and invested in industrial assets before turning to insurance and consumer businesses.

Guo serves as a delegate to the National Committee of the Chinese People's Political Consultative Conference, a parliamentary advisory body.

(Reporting by Jason Subler, Shu Zhang and Matthew Miller; Editing by Ian Geoghegan)

By Jason Subler

ę Reuters 2016
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SHANGHAI A INDEX -0.50% 3762.1032 Real-time Quote.2.89%
SHANGHAI FOSUN PHARMACEUTICAL (GROUP) CO., LTD. -3.49% 51.22 End-of-day quote.-5.13%
THE EASTERN COMPANY -0.88% 24.75 Delayed Quote.3.61%
TOURISM HOLDINGS LIMITED 0.00% 2.83 End-of-day quote.8.85%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) -0.01% 6.3756 Delayed Quote.-2.42%
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Sales 2021 155 B 24 336 M 24 336 M
Net income 2021 12 046 M 1 891 M 1 891 M
Net Debt 2021 126 B 19 761 M 19 761 M
P/E ratio 2021 4,97x
Yield 2021 4,62%
Capitalization 60 542 M 9 495 M 9 502 M
EV / Sales 2021 1,20x
EV / Sales 2022 1,14x
Nbr of Employees 78 000
Free-Float 27,4%
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Mean consensus BUY
Number of Analysts 10
Last Close Price 7,27 CNY
Average target price 11,07 CNY
Spread / Average Target 52,2%
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Managers and Directors
Qi Yu Chen Co-Chief Executive Officer & Executive Director
Xiao Liang Xu Co-Chief Executive Officer & Executive Director
Ping Gong Chief Financial Officer & Executive Director
Hou Lin Zhang Co-Chief Financial Officer & Senior Vice President
Li Gang Zhang Co-CFO & GM-Financial Management
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