China Ping An's Lujin Exchange (06623. HK, abbreviated as Lukong) has recently received market attention. According to a recent announcement by Ping An China, due to its wholly-owned subsidiary's choice of using shares as a substitute for interest in the special dividends distributed by Lufax, Ping An China's stake in Lufax has increased to 56.82%, and it will passively merge with Lufax, triggering a mandatory comprehensive offer under the Hong Kong Takeover Code.
Note: Announcement from Ping An in China
A loss of 830 million yuan in the first quarter of this year
For the Lujinsuo mentioned earlier. The company was incorporated in the Cayman Islands on December 2, 2014, and quickly grew into the largest Internet finance enterprise in China relying on Ping An Group. Subsequently, it was listed on the New York Stock Exchange and the Hong Kong Stock Exchange at the end of October 2020 and April 2023, respectively.
According to the latest performance, Lujin achieved a total revenue of 6.964 billion yuan in the first quarter, a year-on-year decrease of 30.9%; A loss of 830 million yuan was incurred during the same period.
How much impact does Ping An of China have on the choice of using stocks as a substitute for the special dividend of Lufax?
Firstly, from the perspective of equity structure, the equity structure of Lufax is as follows: Ping An of China holds 41.40% of Lufax's equity through its wholly-owned subsidiaries Anke Technology and Ping An Overseas Holdings, the second largest shareholder Tun Kong holds 26.87%, and the public shareholder holds 31.73%.
After the special dividend was distributed by Lujin, Ping An of China chose to pay dividends through shares, Tun Kong chose cash dividends, and some public shareholders chose to pay dividends through shares. The new equity structure is: Ping An's shareholding has increased to 56.82%, Tun Kong's shareholding has decreased to 17.78%, and public shareholding has decreased to 25.4%.
Bank of Communications International pointed out that this move indicates that Ping An in China is optimistic about the development prospects of Lufax's business. The financial gains and losses generated by Ping An's consolidation of Lujin will be treated as non recurring items and will not affect Ping An's operating profits.
At present, Ping An's stock price in China corresponds to a price to book ratio of 0.65 times in 2024, with a dividend yield exceeding 7%, and its valuation has once again returned to an attractive range. They expect the company's operating profit to achieve positive growth at last year's low level in 2024 with high certainty, maintaining a buy rating and a target price of HKD 51.