Shanshui issues 3yr RMB1bn MTN at 6.2% -7.2% According to filing from the Shanghai Clearing House on Feb 25, Shanshui will issue a RMB1bn MTN with maturity of 3 years on Feb 27 at 6.2%-7.2% to roll its previous issuance in 2011 at 5.78%. The refinancing will contribute to the company's RMB5.2bn of loans that are due to mature by the end of this year and will help towards clearing up an important overhang for the stock. Through this issuance, Shanshui’s finance cost will increase by RMB3m-13m but will be lower than the company’s overall borrowing cost of (7.4% in 2012). The impact on FY14 earnings should be minimal. Shanshui continues to look attractively valued. Maintain BUY with TP of HKD3.49.
Large amounts debt due this ye ar should not be a concern For 2014, the company's RMB 5.2bn of loans maturing are broken down as follows. Short-term bank loan: (RMB580mn), Long-term bank loan: (RMB2.3bn), Corporate bond: (RMB2.4bn) and the rest shareholder loan: (RMB75m). We believe Shanshui has ab undant resources to refinance its current debt as it has 1) RMB3bn fr om operating cash flows; 2) RMB3.8bn remaining credit line from onshore bank 3) RMB2.2bn/RMB3bn credit line from MTN/CP issuance. Meanwhile, company is committed to cutting capex to RMB2.5bn in 2014/2015 from RMB3.5bn in 2013, and should turn positive FCF in 2014.