By Ben Otto
Fosun Tourism Group shares surged in early trading on plans to buy back shares for around $300 million and end the global resort operator's six-year run on the Hong Kong bourse.
FTG shares opened 83% higher Wednesday morning in their first day of trading since Nov. 26, with investors clamoring for shares after the company said it would buy shares at a 95% premium to their last closing price. In midday trade, shares were up 79% at 7.15 Hong Kong dollars.
Shanghai-based FTG, the operator of resorts including luxury chain Club Med, said late Tuesday that it planned to buy back all shares not currently held by group entities. It said it could spend up to HK$2.34 billion, equivalent to US$301 million, on the plan, funded via a combination of internal cash resources and debt.
It said it was opting to delist given the low trading volume of shares for a sustained period of time, along with "considerable downward pressure in recent years" on leisure and tourism companies due to geopolitical factors and uncertainty in markets. It also cited goals of transitioning to an asset-light operation over the longer term which it said would take significant time.
Shares of parent company Fosun International were 5.9% higher, bucking a 0.2% drop in the benchmark Hang Seng Index. Post-buyback, the conglomerate's stake in FTG would rise to more than 98% from about 78% currently.
FTG has been hurt by a slowing economy in China and pandemic-era border closures that cut into travel spending. When the company halted trade last month, shares were down 77% from a closing peak in 2019, having shed 31% of their value this year alone.
Citi analysts said the delisting plan made sense given the company's low valuation and lack of liquidity in the Hong Kong stock market.
"The company has proactively explored an asset-light approach, aiming to recoup the cash flow and further deleverage," but, "that said, it may still take time to bear fruit," they wrote in a research note.
Citi had a buy rating and a HK$7.06 target price on shares, having trimmed from HK$9.40 in August on disappointing first-half earnings, weak property sales, and soft travel trends in China.
Write to Ben Otto at ben.otto@wsj.com
(END) Dow Jones Newswires
December 10, 2024 22:46 ET (03:46 GMT)
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