ZhongAn’s shares receive boost from China joint venture deal

Hong Kong-listed online insurer’s chairman Ou Yaping has stakes in both parties involved in the agreement to set up a company in Chongqing

PUBLISHED : Thursday, 12 October, 2017, 7:02pm
UPDATED : Thursday, 12 October, 2017, 11:36pm

Shares of ZhongAn Online Property & Casualty Insurance, Hong Kong’s newly listed fintech company, rose 5.7 per cent to HK$91.50 in Thursday’s morning session, after the insurance platform announced a joint venture deal with a company controlled by its promoter— its first since the initial public offering.

The shares eased later and eventually closed 2.5 per cent higher at HK$88.75.

ZhongAn said it had entered into a related party agreement with Sinolink Worldwide (HK), a company controlled by the firm’s chairman Ou Yaping, to set up a small loan joint venture (JV) in Chongqing in western China.

Sinolink Worldwide is a wholly-owned subsidiary of Sinolink Worldwide Holdings, with 45.1 per cent owned by ZhongAn’s Ou.

Ou also controls a more than 15 per cent stake in ZhongAn through companies owned by him and his brother, Ou Yafei, according to the prospectus.

The JV, which is unnamed as yet, will have a registered capital of 300 million yuan (HK$357 million), in which ZhongAn has agreed to contribute 70 per cent or 210 million yuan, and Sinolink Worldwide (HK) the remaining 30 per cent.

The company said it will provide loans, discounted notes, fund transfer and equity investments as permitted by the Chongqing Finance Office.

Some analysts considered the deal as a shift away from ZhongAn’s core business. They said investors should keep a close watch on the joint venture’s business and cash flow direction to prevent it from being used to serve major shareholders.

But others see a synergy potential.

“The JV could create a new business channel to foster the consumer finance business,” said Dayton Wang, head of insurance research at Huatai Financial in Hong Kong.

He said that the company’s consumer finance segment grew by 9 per cent in 2016 and is set to grow by 10 per cent in 2017.

ZhongAn priced its IPO at the top of an indicated range, raising US$1.5 billion in Hong Kong’s biggest ever financial technology stock offering on September 22.

Backed by its founders including Alibaba Group Holding’s executive chairman Jack Ma, Tencent Holdings’ chairman Pony Ma and Ping An Insurance Group chairman Ma Mingzhe, ZhongAn shares soared nearly 60 per cent to HK$96.1 in its first week of trading.

However, the group expects to post a loss this year. In the first three months of the year, it reported a net loss of 202 million yuan, according to its prospectus. Part of that loss stems from the company’s shift in product mix as it attempts to sell policies with longer maturities.