Daiwa: Chow Tai Fook's issuance of CB can drop financing costs, maintains "Buy" rating.

Jin10 data June 18 news, Daiwa issued a research report stating that Chow Tai Fook (01929.HK) announced the issuance of convertible bonds (CB) to raise approximately HKD 8.8 billion while simultaneously conducting a share buyback. After adjusting for the share buyback, the net equity dilution rate is 3.7%. The coupon interest rate of 0.375%, which is significantly lower than the group’s existing financing cost, will save 100 to 200 basis points, effectively dropping its financing costs. Management also mentioned that the funds raised will be used entirely for the development of the jewelry main business and committed to maintaining a dividend payout policy of 70% to 80%. Daiwa believes that although Chow Tai Fook has strong free cash flow and originally did not need to issue bonds, seizing the low-interest long-term financing window will help promote its business transformation, with the conversion period set for three years later. In the short term, the share buyback and interest savings will drive earnings per share growth; therefore, it maintains its “Buy” rating.