China Everbright Limited (00165.HK) 2012 Annual Results Presentation Press Conference 2013.03.26
Management Team Chen Shuang Executive Director & CEO Richard Tang Executive Director & CFO Frederick Tsang Chief Risk Officer Joined Everbright s Board of Directors in 2004 Chairman of Management Committee, Execution Committee and Strategy Committee Non-official member of Hong Kong Financial Service Development Council Over 20 years experience in merchant and investment banking Certified lawyer and senior economist Director of China Everbright Group Joined the Company in 2005 Joined the Board of Directors in 2007 Responsible for the overall financial resources planning, execution and monitoring Certified accountant, member of CPA Over 25 years experience in audit, investment, accounting and finance Joined the Company in 2000 Member of SFC s Advisory Committee and member of Securities and Futures Appeals Tribunal CFA, Director of HKSFA Over 27 years experience in finance 2
Program Rundown Part 1 Part 2 Part 3 Part 4 Results Highlights Review of Hong Kong Operations Financial Performance Review Future Development 3
Part 1 Results Highlights
Restructuring of Macro Asset Management platform Completed the structural adjustment of the macro asset management business platform, optimising the resource allocation and strengths of each business segment to facilitate longterm growth Core business includes: (1) primary market investment, (2) secondary market investment, (3) structured financing & investment, and (4) aircraft leasing Primary Market Investment Secondary Market Investment Structured Financing & Investment Aircraft Leasing The most mature and scalable business segment of Everbright Focus on opportunities from non-public enterprises and industry, via private equity funds, venture capital funds and sector funds Focus on opportunities from listed equities, offering clients more flexible options for asset allocation Major products include bond investment funds and hedge funds Utilises Everbright s abundant financial resources and extensive business channels in primary and secondary market investment to exploit mid to short-term financing + investments opportunities Established a RMB-denominated mezzanine fund, planning an offshore USD mezzanine fund Major shareholder of China Aircraft Leasing, expanding the aircraft leasing business in China and emerging market The fleet includes primarily Boeing 737 and Airbus 320 & 330, serving China s major airline carriers 5
Business Highlights 2012 The cross-border macro asset management platform managed a total of 14 funds. It added numerous investment products, e.g. medical & healthcare fund, QDII bond trust scheme, hedge funds and mezzanine fund Total fundraising scale rose 37% to HK$23 billion, with fair value increasing by 35% to HK$23.9 billion Added 15 investment projects to bring the current total to 49 Aircraft leasing business has 16 aircrafts in the fleet (HK$ billion) 30 25 Total fundraising scale AUM by business segment Secondary market investment 9% Structured financing & investment and mezzanine fund 4% 20 15 10 10.5 16.8 23 Primary market investment 87% 5 0 2.6 3.1 5.5 2007 2008 2009 2010 2011 2012 6
Performance Highlights 2012 Operating income surged 24% to HK$840 million Profit attributable to shareholders amounted to HK$1.14 billion. It dropped 18% after the deduction of a one-off disposal gain from the divestment of 51% shareholding in Everbright Securities International in 2011 - Pre-tax profit for HK business: HK$1.41 billion, up 57% - CEL s sharing of Everbright Securities profits: HK$410 million (Net profit sharing: HK$150 million, down 76%, after deducting the provision of HK$260 million made for the reduction in value of various investments held by Everbright Securities in accordance with Hong Kong Financial Reporting Standards) - Pre-tax income from Everbright Bank: HK$296 million, up 40% Equity to shareholder amounted to HK$28.1 billion, up 6.2% EPS at HK$0.663, down 18%* Full year dividend as HK$0.26, down 42% Profit contribution mix Everbright Bank 22% - Interim dividend at HK$0.11 - Final dividend at HK$0.15 *After the deduction of a one-off disposal gain from the divestment of 51% shareholding in Everbright Securities (International) Everbright Securities 11% HK business 67% 7
Part 2 Review of Hong Kong Operations
Primary market investment Everbright s most scalable business segment Focus on non-public investment opportunities with solid track record With the slowdown of China s economic growth, the investment teams took a highly selective approach to new investments and consequently added 15 projects during the year, bringing the current total to 49 investment projects Fewer exits were made due to the underperformance of A-share market and a slowdown in the listing approvals, which led to a 59% decrease in the profit before tax to HK$290 million USD-denominated PE funds x 3 RMB-denominated VC funds x 3 Total capital raised by the three PE funds of the China Primarily invest in small-medium-cap high-technology Special Opportunities Fund series was US$550 million projects from 17 projects. These projects were all operating well Total capital raised was about RMB 1.2 billion, with a total with sustainable growth in fair value as a whole of 15 projects on hand. Jiawei Shenzhen went public on CSOF I and CSOF II are in exit period Shenzhen Stock Exchange in May 2012 CSOF III invested in Yucheung via a privatisation, and Finished for the most part with the investment period, participated in BGI, adding China s largest IT solutions funds are now focusing on post-investment management provider for the banking industry and the world s leading and strengthening the value-added services for the genetics company to its portfolio projects 9
Primary market investment AUM of sector funds grew rapidly The four sector funds, which specifically focus on exploring opportunities in China sectors with mid- to long-term growth potential, have expanded the fundraising scale to HK$14.2 billion Everbright Ashmore Real Estate Fund Macquarie Everbright Greater China Infrastructure Fund Low Carbon New Energy & New Materials Fund Medical & Healthcare Fund Sector focus Real estate Infrastructure New energy Medical and healthcare Fundraising scale USD 789 million USD 805 million RMB 1000 million RMB 500 million Primary investment focus High-end commercial and residential property projects Traditional infrastructure facilities (e.g. toll roads, railway and ports) and infrastructure facilities supporting environmental protection New materials and environmental-friendly energy Biopharmaceuticals, medical devices and equipment, medical services and medical IT 2012 progress The USD-denominated part has nearly finished its investment period, and it has started the second tranche of a fundraising exercise Successfully launched RMB-denominated fund business and raised RMB 3.35 billion Exited a Hangzhou project Added four investment projects Successfully applied for a US$200 million quota under a pilot programme for QFLP in Shanghai. Established a cross-border RMB-denominated fund in Chongqing, further enhancing the investment efficiency Cautious investment approach in consideration of the sector s volatility Added only one project in 2012 Everbright provided RMB500 million as seed funding to support initial operations Undergoing the first tranche of fund raising from external institutions Joined CSOF III to invest in BGI 10
Secondary market investment diversified asset management product offerings With the increasing demand for offshore investments and wealth management services from China, Everbright is committed to building its secondary market investment platform with increased competitiveness, in order to capture opportunities arising from the opening of the outbound investment market Underwent a comprehensive restructuring by turning the existing operation into two segments: (1) fixed income products and (2) worldwide hedging products Recorded a profit of HK$10.5 million Fixed income products Worldwide hedging products Completed the fundraising of RMB 1000 million in Nov 2012 for its QDII Trust Scheme of the Greater China Bond Investment. It also took bond positions in several sectors including real estate, raw materials, transportation, and 中小企基金 3.5 consumables This is the first QDII collective trust scheme in China Finished the fundraising of another USDdenominated bond fund at USD 30 million in Feb 2013 Completed building up the portfolio management team of the absolute return funds and trading platform Launched two funds in July 2012, which both have an extremely low association with the market, with an annualised rate of return approximately 12% 11
Structured financing & investment significant profit growth Utilises Everbright s abundant financial resources and extensive business channels in primary and secondary market investment to identify mid to short-term financing + investments opportunities Successfully established a domestic Mezzanine Fund by raising the first tranche of capital at RMB800 million, and this has already been invested in a fixed income debenture project Establishing a USD-denominated Mezzanine Fund to further enhance the product mix of asset management business Begins to bear fruits with nine projects in the pipeline which have generated HK$220 million in interest income and HK$540 million in investment income, leading to a profit before taxation of HK$710 million 12
Aircraft leasing business recorded rapid growth China is the world s fastest developing aviation market. Continued economic growth, an extensive geographical area and diverse aircraft requirements have laid solid foundations for aircraft leasing in China Acquired China Aircraft Leasing Company Limited in 2011 and introduced Aerospace Investment Holdings Limited as strategic investor in 2012. Currently, Everbright holds 44% 20 15 10 Number of aircrafts in operation 8 10 16 Purchased 36 new aircraft from Airbus S.A.S as it continued to expand the scale of operations. It has 16 aircrafts in operations, serving primarily China s major airline carriers 5 0 2010 2011 2012 Contributed HK$40 million in profit 13
Everbright Bank and Everbright Securities Everbright Bank remained healthy with continuous profit growth. In 2012, Everbright received pre-tax dividend contribution of HK$296 million, up 40%. Everbright Bank s H-share listing plan is in progress The revenue of Everbright Securities was affected by the glooomy domestic equities market and capital market financing, both of which resulted in a big drop in transaction volumes. In accordance with Hong Kong Financial Reporting Standards, Everbright made a provision for the reduction in value of various investments held by Everbright Securities at HK$260 million. As such, Everbright enjoyed the net profit shared by Everbright Securities at HK$150 million, representing a substantial decrease of 76% compared to 2011 14
Part 3 Financial Performance Review
Financial performance at a glance (HK$ million) FY2012 FY2011 Changes Operating income 840 678 24% Profit of direct operating business 1,413 902 57% Profit before taxation of major business segments Primary market investment 289 708 (59%) Secondary market investment 10 (245) -- Structured financing & investment 707 404 75% Aircraft leasing 40 11 264% Share of profit minus losses of associates (as per the associates financial statements)* 415 627 (34%) Gain on disposal of subsidiaries (Everbright Securities International) _ 512 Profit attributable to shareholders 1,142 1,923 (41%) Earnings per share $0.663 $1.116 (41%) Dividend per share (full year) $0.26 $0.45 (42%) *Net profit sharing HK$150 million Major financial ratios FY2012 FY2011 Changes Interest-bearing gearing ratio 3.6% 5.8% (2.2%) Return on shareholders equity 4.06% 7.26% (3.2%) _ 16
FY2012 Performance Return on assets Return on equity 40% 30% 20% 33% 27% 23% 50% 40% 30% 20% 45% 36% 27% 10% 0% 8% 6% 6% 6% 6% 6% 4% 4% 4% 2007 2008 2009 2010 2011 2012 ROA ROA (after one-off gain) 10% 0% 9% 6% 6% 7% 7% 7% 5% 4% 4% 2007 2008 2009 2010 2011 2012 ROE ROE (after one-off gain) CEL s sharing of Everbright Securities profits (HK$ million) 3,500 2906 3,000 2,500 2,000 1349 1,500 1,000 835 637 480 500 148 0 2007 2008 2009 2010 2011 2012 Dividend income from Everbright Bank (pre-tax) (HK$ million) 300 296 250 212 200 153 150 100 84 50 0 0 0 2007 2008 2009 2010 2011 2012 17
FY2012 Performance (HK$ million) 6,000 5,000 4,000 3,000 2,000 1,000 0 Operating profit and profit after tax 1,632 5,265 703 975 319 4,759 2,167 1,469 1,856 1,428 1,4131,368 2007 2008 2009 2010 2011 2012 Operating Profit Profit After tax (HK$ million) 35000 30000 25000 20000 15000 10000 5000 0 Shareholders equity 28,140 28,112 26,465 20,985 16,359 13,199 2007 2008 2009 2010 2011 2012 (HK$) 4 3 Basic earnings per share 3.17 2.99 (HK$) 0.5 0.4 Dividend per share 0.45 0.43 0.375 2 1 0.64 1.19 1.12 0.663 0.3 0.2 0.1 0.10 0.20 0.26 0 2007 2008 2009 2010 2011 2012 0 2007 2008 2009 2010 2011 2012 18
Part 4 Future Development
Market outlook global economy stablises but remains cautious The United States took advantage of the reserve currency status of the US dollar to implement quantitative easing measures to boost the economy, but signs of rapid recovery in the US economy remain uncertain Despite Eurozone debt issues beginning to ease, the discrepancies in financial policies, product competitiveness and cultural differences in the Eurozone countries mean that they will still face long-term political disputes and economic downturn. Even so, the overall situation has vastly improved Japan s economy is no longer as influential as it once was. Its worsening debt crisis still poses uncertainties to the global financial markets and economic development in the region The outlook for China is relatively optimistic. Having touched bottom during the fourth quarter of 2012, the Chinese capital market reacted positively. But the structural economic transformation remains challenging Hong Kong s finance industry will benefit from its position as an offshore renminbi trading and asset management centre, and will see many development opportunities. Together with the increasing demand for outbound investments from the Chinese enterprises, this will also present huge business opportunities for Everbright s cross-border macro asset management 20
Business outlook and strategic planning for FY2013 The adjusted business platform complements the gradual opening of China s financial market with the transformation of a one-way flow of capital from the mainland to abroad to a larger scale two-way capital flow. At the same time, there are fewer domestic limitations because the platform s operation model can be easily duplicated for other products to bring endless business opportunities In 2013, we aim to expand our scale of asset management and achieve solid profit growth through our cross-border macro asset management platform Primary market investment business maintains stable growth by focusing on sector-specific opportunities Will not join cut-throat pricing wars but will maintain the approach of a mid to long-term value investor Continued optimism about the outlook and strengths of sector investments Look for other divestment opportunities and means other than from the equity market only, aiming to strike a good balance between investments and divestments Secondary market investment speeds up business scale Finished the development of the quantitative funds trading model and started external fundraising Fixed income products will be expanded upon the QDII platform, further enhancing the AUM scale Continue to look at offshore M&A opportunities Structured financing & investment Stablises interest income and control credit risk Transform into fund management mode upon the domestic and overseas mezzanine funds, wishing to stablise the asset management fee Aircraft leasing Maintain the rapid growth of the fleet size, looking forward to the equity market 21
Disclaimer This presentation and subsequent discussions may contain forward-looking statements that involve risks and uncertainties. These statements are generally indicated by the use of forward-looking terminology such as believe, expect, anticipate, estimate, plan, project, target, may, will or may be expressed to be results of actions that may or are expected to occur in the future. You should not place undue reliance on these forward-looking statements, which reflect our belief only as of the date of this presentation. These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. They relate to future events or our future financial, business or other performance and are subject to a number of uncertainties that may cause our actual results to differ materially. All the information or messages are for reference only, and do not constitute any investment advices. Please consult with related professional parties if needed. 22
23 Q&A Session Thank you!
24 Appendix
Diversified investment fund platform provides optimal investment conditions 14 funds with over HK$23 billion of fundraising scale Business segment Fund name Launch date Investment focus Fund raising scale Primary market investment Private equity funds (offshore) China Special Opportunities Fund I (SOF I) China Special Opportunities Fund II (SOF II) 2004 2007 High growth industry and service industry Telecom, media, hi-tech and consumer industry USD 50 mln (in exit period) USD 100 mln China Special Opportunities Fund III (SOFIII) 2010 Agriculture, consumer goods, service industry USD 400 mln Venture capital funds (domestic) Beijing Zhongguncun Investment Fund 2007 High-growth manufacturing, hi-tech and servicing industry RMB 200 mln (in exit period) Everbright Guolian Fund 2009 High-growth industries, e.g. hi-tech RMB 500 mln Sector-specific funds Jiangyin Asset Investment Fund Everbright Ashmore Real Estate Fund Everbright Jiangyin New Energy (low carbon) Asset Investment Fund Macquarie Everbright Infrastructure Fund Everbright Medical and Healthcare Fund 2009 Hi-tech industry RMB 500 mln 2009 Chinese real estate apprx. USD 789 mln 2010 New energy RMB 1 bln 2011 Chinese infrastructure, e.g. toll roads, airports apprx. USD 805 mln 2012 Medical and healthcare RMB 500 mln Secondary market investment QDII Greater China Bond Fund 2012 Offshore bonds or fixed income RMB 1 bln products for Chinese enterprises Absolute Return Funds x 2 2012 Global hedging opportunities USD 100 mln Structured financing & investment Domestic Mezzanine Fund 2012 Domestic mezzanine financing RMB 800 mln TOTAL: HK$23 bln 25
Brand Positioning Leveraging its excellent corporate governance structure, the Company fulfills its brand promise Making Wealth Simple Providing efficient, professional, practical and tailored solutions, creating wealth and value 26