|Shares Out. (in M):||0||P/E|
|Market Cap (in M):||3,150||P/FCF|
|Net Debt (in M):||0||EBIT||0||0|
# of shrs o/s: 1.7bn
II. Blue Cross (
III. China operation: HK$4/shr (1x P/B on 25% of its tangible BV @ HK$14+/shr, excluding Tricor & Blue Cross)
I + II + III => HK$7-8/shr (BEA stock hit HK$7-8 last time during the last Asian Crisis back in '98; however, at that time, it didn't have much China presence, neither Tricor business)
A corporate services/share/custody/corporate secretariat and accounting services businesees, Tircor was built up through the purchases of these units from the Big Four accounting firms post-Enron/Worldcom scandals, at which point the accounting firms were forced to divest non-core businesses that could have inherent conflicts of interest with the core auditing function. It has also continued to acquire similar operations elsewhere in the region, including
BEA owns 75% of Trior, with New World Group as minority shareholder. Tricor has 60% market share in
The volatility of the business comes from two sources: 1) IPO activity: collecting HK$13 for each share of IPO issuance; 2) M&A. IPO benefit far outweighes M&A impact. With the redcued IPO actiivity, its 1H08 fee income was HK$400mm, or running at HK$800mm/yr, 20% lower than '07 level of HK$1bn (a good year for IPO). This business has 40% gross margin. At 16% tax rate and 1.7bn shares, even at depressed fee income level, Tricor generates over HK$250mm net profit, or 15c/shr. In a good year, it could earn 20c/shr profit. Growing at 20% over the cycle, at low-teen to mid-teen P/E multiple Tricor could be worth HK$2-3/shr to BEA.
Tricor doesn't carry too much book value on BEA's balance sheet, probably just HK$200mm, out of over HK$30bn equity.
Mainly medical insurance, sold to non-government/commerical entities (citing CHeung Kong among its clients). Started life insurance business 18 months ago. Growth has been good. Made pretax profit HK$100m in the first half of 2008. ON annualized basis, Blue Cross could earn 10c/shr or another HK$1/shr value to BEA.
% of total assets: 25%
% of profit contribution: 30-35% (on normalized basis, excluding one-time items such as trading loss, write-off, etc.)
25% of customers are from strictly defined HK-based customers, however they contribute to majority of total earnings.
Asset mix (loan book) in
Property development & construction loans: 12%
Property investement (shopping mall, etc.): 26%
Hotel: 7% (only 5-star)
Total hotel & property exposure: 50-55%
Wholesale and retail trade: 22%
Manufacturing: 9% (also a lot to do with exports)
Total exports related exposure: 30+%
BEA mgmt admitted the exports-related area is the most vulnerable given the worsening L/C market condition.
The current guidance of
Loan-to-deposit ratio in