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Peter Fuhrman
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Chairman, Founder and Chief Executive Officer at China First Capital (www.chinafirstcapital.com) , China-based international investment bank and advisory firm for private capital markets and M&A transactions. China First Capital has a disciplined focus on -- and strives for a leadership... More
My company:
China First Capital
My blog:
China Private Equity, by China First Capital
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  • China's SOEs Attract PE Interest — Private Equity International Magazine

    March 4th, 2014 EditNo comments

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    China's state-owned enterprise promise big returns for PE investors, as well as a big challenge.

    By: Clare Burrows-

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    In 2013, private equity investment in China dropped to just $4.5 billion - about 47 percent below the equivalent figure for 2012, according to data from Thomson Reuters. Since China's dry powder level was estimated at $59 billion at the end of 2012, it's clear that China's GPs need to find new ways to deploy the vast amounts of capital raised during better times.-

    What seems to be catching the industry's eye more than ever are the country's state-owned enterprises:large, government-controlled organisations, many of which are in dire need of restructuring. While state-owned enterprises account directly or indirectly for 60 percent of China's GDP, according to research by China First Capital, almost 100 percent of institutional capital, especially private equity, has
    been invested into China's privately-owned sector.

    However, as the number of traditional opportunities falls, "this may leave investing in SOEs as the best, largest and most promising new area for private equity investment," Peter Fuhrman, chairman and chief executive at China First Capital suggests.-

    And, some industry sources ask: what better target for private equity than these bloated, inefficient giants, which the newly-appointed Chinese government is apparently so keen to reform? SOEs are highly compliant when it comes to tax and accounting laws (a rare phenomenon among China's privately-owned companies). Better still, they're a bargain - because China's State-owned Assets Supervision and Administration Commission (SASAC) regulates their price based on net asset value.-

    "If you have a highly profitable SOE that has very low net assets, you can potentially buy it at incredibly low P/E multiples," Fuhrman says. With one deal China First is advising on, 51 percent of the business is being offered at 2x EBITDA, he adds. China First is currently acting as an investment banker for five of China's largest SOEs, including China Aerospace, China State Construction, China Huadian, Wuliangye Group and Shandong Energy.

    Click here to read full article

    Mar 04 4:55 AM | Link | Comment!
  • China's New IPO Regime — Manipulation Or Emancipation?

    (click to enlarge)

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    In English we use the phrase " bee in one's bonnet" to explain someone with an obsession for a particular point of view. In Chinese, a similar idiom is 挥之不去, meaning you can't wipe out the stain.

    Have a look at this article today by Reuters, about the IPO process in China. To me, the reporters started off this story with a bee in their hats, that China's domestic IPO industry remains a nest of corruption, manipulation and ominous doings by the regulator, the CSRC. They found someone to quote, and then asked me for my opinion. I shared it across several emails. As you'll see, I end up being quoted in the article providing something of an antidote to all the negativity. I don't think, to switch back to the Chinese, I quite wiped away the stain.

    Here's the story that didn't get reported. In the last five weeks, China's domestic stock markets had 48 successful IPOs. That is exactly 48 more than China had in all of 2013, and ahead of the successful IPOs so far this year in Hong Kong and the US. In my view, China is on track, as I said in one of those emails to the Reuters reporter, "to shatter all worldwide records for number of IPOs in a year and money raised."

    That's big news. Instead, the article focuses on a whole lot else that all boils down to dark mutterings, but not a lot of facts, suggesting that insider trading is or may become rife; that there's some form of "moral hazard" at work here. Hard to refute. Equally hard to confirm.

    The one example cited, of the cancelled Jiangsu Aosaikang, is said by an unnamed source to be "most heavily intervened IPO in the history of China". IPOs, for those keeping score, get pulled all the time, everywhere, most often because investors wouldn't commit to buying all the shares on offer.

    What happened with the Jiangsu Aosaikang IPO no one can say for sure. But, the quote is just silly. Until two months ago, all China IPOs involved a level of direct, disclosed, intensive intervention by the CSRC that covered not only the IPO offering price, but included too the CSRC making decisions on which Chinese companies should IPO, when, with what level of profits. This was intervention on a grand, intentional and absolutist scale.

    We're only in the second month of the new IPO regime in China. Things might degenerate. The CSRC and market participants like underwriters are still feeling their way forward. But, there's ample room for optimism here: a highly-damaging IPO embargo is over, Rmb 3 billion ($5 bn) has been raised, and there's clearly investor appetite for more new issues.

    Feb 20 4:03 AM | Link | 1 Comment
  • China's Newest Billionaire, My Buddy Laowu

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    It took my friend and client Laowu 20 years to build his business, but less than four months from the IPO in Hong Kong to reach dollar billionaire status. While I hardly doubted he'd someday make it, it certainly happened quicker than I would have hoped or guessed. You can read my account of this remarkable businessman, his humble beginnings and his high-flying real estate development company, by clicking here.

    Laowu's company, Hydoo, has had a torrid run on the Hong Kong exchange. The share price is up over 70% since the listing on the last day of October 2013. That's lifted the value of his family's shares to north of $1 billion. I hadn't kept track of the stock price, so didn't know my friend had reached the milestone. Bloomberg's China Billionaires reporter called today to ask if I would comment for the story he's doing.

    That article can be found here.-

    Feb 17 4:45 AM | Link | Comment!
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