faeaco：重新审视已知和未知

CMBI Credit Commentary FAEACO:Revisit the knowns and unknowns Glenn Ko, CFA高志和(852) 3657 6235glennko@cmbi.com.hk The knownknowns Far East Consortium (FEC) posted weaker FY25 results with a loss before tax ofcHKD1bn as expected after the profit warning on19 Jun’25. Its adj. cash profit,excluding non-cash impairment losses, lowered to HKD266.0mn in FY25 fromHKD780.3mn.That said,compared with the adj. cash profit since 2HFY24, wesee signs of stabilization ofitsoperating performance.We take comfort that itsadj.net gearing ratio improved to 67.6%in Mar’25(vs 68.8% in Sep’24 and 68.1%in Mar’24).The net debt reduction more than offset net losses and variousimpairment losses.Subsequent to the completion of sales of HK mortgageassets and BC investment (1 month earlier than expected),FEC’sliquidity profileandleverage should further improved.We estimateits liquidity position(cash+investment securities) to increase to cHKD4.7bn from cHKD3.9bn on apro-forma basis. Cyrena Ng, CPA吳蒨瑩(852) 3900 0801cyrenang@cmbi.com.hk JerryWang王世超(852)3761 8919jerrywang@cmbi.com.hk The known unknowns The major known unknown is the rationale of why FEC turned much morecautious in terms of perp coupon payment and the partial call.A few gesturesuch as skipping the final dividend and salesof perps by the spouse of FEC’schairman are fueling the speculations of coupon deferral and further delay inpartial,as well aseven talks on a LME.However, these appear to be inconsistentwith ourexpectationof improving liquidity and the environment of lower fundingcost.Furthermore, the attributable GDV for projects to be completed by Mar’26is HKD12bn and HKD5.1bn was pre-sold.We expect a net cash inflow ofHKD2bnafter settlement of construction loans even on a conservativescenario.We also expectto seeproceeds of cHKD400mnfromsales ofHornseyhotel and town hall expected to be completed early next year. Anotherknown unknown is whether there will be further write-down onDBC.However, we take comfort that the full year impairment losses on DBC wascHKD250mn,i.e cHKD45mn in 2HFY25,down from cHKD204mn in1HFY25.FEC does not rule out further impairment losses.That said, in oursensitized case of 100% write-down of the carrying value of DBC, FEC still hasroom to start the partial call this year despite the pace of the partial callcouldbeslower. FEC terminated the HOA on asset swap with Star but we believethat CTF andFEC are still interested in pursuing the assetswap as reflected by Star’swillingnessto continue the negotiation of asset swap.Hence, we do not assumeFEC will receive the refund AUD22.5mn (i.e 50% of AUD45mn)because of thetermination of HOA.At the same time,we also expect if CTF and FECwill goaheadwith the asset swap,they will be prudent in pursue hoteldevelopments.Another known unknown is the refinancing of AUD1.3bn due CMBI Fixed Incomefis@cmbi.com.hk Dec’25 at DBC level.The “hiccup” of negotiation with Star will likely slow down the progress of refinancing for thetime being. Unknown unknowns Theunknown unknown arewhether there will beany changes in the attitude of banks on FEC’s refinancing exercises,even for the supposedly straight-forward rollover of secured financing after the recent refinancing issues for HK corpssuch as NWD and Emperor.This may partly explain why FEC turned more cautious.There are talks ontender offerataprice well below par.However, we are not convinced that an unfriendly proposal like this can be pushed throughas FEC’s liquidity and maturity profiles are quite manageable, in our view. Our view FAEACOPERPmoved 10pts lower since FY25 results, reflecting the concernsofcoupondeferral and further delayin partial calls.While we note the company’s more cautious tone on coupon payment and the time table of partialcall, we believe that the incentive for FEC to call the perps remains strong, especially HIBOR has significantlylowered.Additionally, our expectation of solid cash receipt from non-core asset sales and deliveries of propertydevelopments inthe UK and Australia.At 53, we believe that FAEACO 12.814 PERP offers decent risk and returnprofile and maintain buy on FAEACO 12.814 PERP. Source: Company filling, CMBI Research. CMB International Global MarketsLimited Author Certification The author who is primary responsible for the content of this research report, in whole or in part,certifies that with respect to the securities or issuer that the authorcovered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or hercompensation was, is, or will be, directly or indirectly, related to the specific views expressed by that author in this report. Besides, the author confirms that neither the author nor his/her associates (as defined in the code of conduct issued by TheHong Kong Securities and FuturesCommission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate o