Message from Infini Capital to the Board of Directors and other shareholders of Aoyuan Healthy Life Group Company Limited (HKEx share code: 3662)
HONG KONG, November 9, 2021 / PRNewswire / – Infini Capital, an SFC approved Type 9 fund management company, today issued a letter to members of the board of directors and other shareholders of Aoyuan Healthy Life Group Company Limited.
Dear members of the board of directors and dear shareholders,
We, Infini Capital, currently hold more than 6% of the ordinary share capital of Aoyuan Healthy Life Group Company Limited (“Healthy Aoyuan” Where “the companyAfter careful diligence and analysis of Aoyuan Healthy, we made the investment with the firm belief that there is substantial value in the business of Aoyuan Healthy, whose current market capitalization is an undervaluation. significant of the underlying activity.
The purpose of today’s letter is to share our thoughts on the underperformance and undervaluation of Aoyuan Healthy business, and our proposition to unleash its true value for its shareholders. We are aware of the Company’s announcement dated November 4, 2021 concerning the holding of prior discussions with several independent third parties with a view to a possible transfer of interests in certain property management subsidiaries and other related services. We support the actions of the board of directors to recover the true value of the company, and we believe that the best way forward for the company would be to have a transparent and competitive auction process in place to fully realize the value. intrinsic to the business.
Considering the importance of this issue and our intention to unleash the enormous value of Aoyuan Healthy with all of its shareholders, we are sharing this letter publicly so that our fellow shareholders and all parties with an interest or potential interest in it. future of Aoyuan Healthy can participate in the dialogue. in order to fully realize its value potential.
Aoyuan Healthy share price underperformance and undervaluation
Over the past 12 months, Aoyuan Healthy has seen its share price drop by 42.3%, significantly underperforming the 3.9% average positive return achieved by its peers in the property management industry. .(1).
Based on the comparable trading multiples, a huge gap between Aoyuan Healthy and its peers is identified. For example, from November 5, 2021, Aoyuan Healthy is trading at 5.2x the FY21E price-to-earnings ratio, while its peers are trading on average at 27.3x the FY21E price-to-earnings ratio.(1).
In our view, Aoyuan Healthy’s chronic underperformance and undervaluation is attributable to the company’s lack of scale, breadth and depth relative to its peers. Taking into account the difference in scale of the activities of the parent company, Aoyuan Healthy has a significantly smaller gross floor area (“GFA“) under management and GFA’s potential additions of the parent company’s newly constructed properties relative to its peers. Additionally, given the liquidity conditions and regulatory landscape in the China In the real estate industry, the financial strength and growth prospects of their developers have been the subject of much scrutiny and concern when investors assess the business fundamentals of property management companies. These concerns about liquidity and business continuity at the Chinese group Aoyuan level are, in our view, putting considerable pressure on the share price and growth prospects of Aoyuan Healthy, as any slowdown in China The activities of the Aoyuan Group would directly translate into slower growth prospects or even reduced revenue for Aoyuan Healthy, and would overshadow the company’s inorganic growth prospects, as M&A targets would take into account strength. from the sponsor developer when assessing potential suitors.
In addition, at Aoyuan Healthy level, there is also a smaller suite of value-added services (“EVA“) relative to its peers, resulting in fewer cross-sell and up-sell opportunities with current tenants. As its peers continue to expand both the scale and scope of VAS offerings , it would become increasingly difficult for Aoyuan Healthy to outperform its peers and earn third-party GFAs with the current company profile.
Proposal to unlock the true value of Aoyuan Healthy: conduct a transparent and competitive auction process
In order to truly realize the value of GFA and Aoyuan Healthy tenant base, we recommend that the board conduct a transparent and competitive auction for the company, with the aim of selling the company to suitors. potentials who are willing to pay an appropriate premium. the current share price of the Company which appropriately reflects the true value of the company.
For reference, based on public news and broker research reports, recent mergers and acquisitions in the property management industry value targets at more than 10 times the price-to-earnings ratio, which represents a significant premium over the current trading multiple of Aoyuan Healthy.(2).
We urge the board of directors and shareholders to review our proposal. We hope and believe that our proposal will generate the appropriate value for Aoyuan Healthy business and thus allow all shareholders to have the opportunity to earn their deserved return on their investment in Aoyuan Healthy. We value the open approach of our Board of Directors in our dialogue and look forward to working together to unleash the true value of Aoyuan Healthy for stakeholders in society.
About Infini Capital
Infini Capital is a fund management company. As a global investment firm, we aim to generate consistently by capitalizing on considerable opportunities in global markets, combining the region’s best investment talent with strict risk management tailored to the unique characteristics of the market. Asian investment environment.
Our investment team deploys a multi-strategy approach to investing in global markets across a variety of asset classes to seek risk-adjusted returns for our investors. We believe that the carefully chosen independent strategy package enables us to generate consistent high quality returns in all market conditions.
The company has a global footprint, with a strong presence in United States and offices at Hong Kong, new York, Japan, London and Taipei.
Infini Capital is currently approved by Securities Futures and Commission (Type 9 – Asset Management), Japan Financial Services Agency (High Speed Trading License), Securities Exchange Commission (Professional Institutional Investor), FINRA (Exempted Reporting Adviser) and NFA ( Commodity Trading Advisor and Commodity Mutual Fund).
(1) Source: Bloomberg as of November 5, 2021. Peers include Country Garden Services Holdings Company Limited, China Resources Mixc Lifestyle Services Limited, Sunac Services Holdings Limited, Shimao Services Holdings Limited, Greentown Service Group Co. Ltd., CIFI Ever Sunshine Services Group Limited, Poly Property Services Co., Ltd., China Overseas Property Holdings Limited
(2) Source: Wall Street Broker Research Reports. Based on recent research reports on Wall Street brokers, over the past 3 months there have been a number of M&A transactions in the property management industry including: (1) CG Services acquired 100% of R&F Service (Wealth BestGlobal) at 14.0 x P / E, (2) CG Services acquires 100% of Link Joy (Color Life) at 10.7x P / E, (3) Ever Sunshine acquires 80 % of Shanghai Macalline PM at 13.4x, (4) Sunac Services acquires 32.2% of First Service (modern land) at 14.1x P / E
SOURCE Infini Capital