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Greater China Appraisal: Valuations on Private Equity Investments Getting Increasingly Prominent -- Time to Prepare for IFRS9

Greater China Appraisal was appointed as the independent valuer for Shougang Concord's latest business acquisitions

HONG KONG, Nov. 7, 2017 /PRNewswire/ -- In 2016, 1,675 RMB-denominated PE funds raised capital in China, hitting a historical record of a total of RMB 996 billion. The internet sector is still the most favoured investment in the first half of 2017 with 282 completed deals. The IT sector comes next with 236 completed deals. In addition, bio & healthcare, media & entertainment, electronics and fintech are also popular sectors.

Greater China Appraisal Limited ("GCA") was honored to be appointed by Shougang Concord International Enterprises Company Limited ("Shougang Concord") as the independent valuer in relation to the acquisitions of two target companies, one being a Beijing-Hebei-focused fund management company with diversified investments in smart-city infrastructures, green technologies and urban medical services ("Beijing-Hebei Fund"), and another being an intelligent parking solution provider ("Shouzhong Investment").

Beijing-Hebei Fund is principally engaged in the provision of private fund management services in the PRC. The management company, under its capacity as the general partner, had established 12 partnerships with its limited partners with an aggregate capital commitment of approximately RMB 15.3 billion and a total paid-up capital of approximately RMB 4.0 billion from the partners. Shouzhong Investment is principally engaged in the provision of smart car parking system services in the PRC. One of its recent strategic deployments was an intelligent car park system project for the new airport in Beijing.

"We appreciate the trust from the management of Shougang Concord," said Max Tsang, Director of GCA. "The valuations on the fund management company and the private equity investment were on market value basis in accordance with the International Valuation Standards. The selection and application of appropriate valuation approaches required experience and intensive industry knowledge. For example, the various fee structures in Beijing-Hebei Fund case required thorough analyses for valuation. Due to limited number of fund management companies in Hong Kong and the PRC that are publicly traded (excluding listed trust companies and limited partners), we had to study the US market as well. Comprehensive industry research and benchmarking analyses were also required to meet the more stringent requirements from the boards of listed companies, financial advisors and regulators especially after the latest 'Guidance note on directors' duties in the context of valuations in corporate transactions' published by the SFC in May 2017."

As IFRS 9 will officially come into effect starting from 1 January 2018, private equity funds will face the new requirements on measuring and recognising expected credit losses for its loans and receivables. In addition, instead of recording as investment cost, revaluation of equity investments will be required from time to time for recognition of fair value changes in either P&L or other comprehensive income. Besides, International Private Equity and Venture Capital Valuation Guidelines will also play a pivotal role in the future.

About Shougang Concord

Shougang Concord is listed on the Stock Exchange of Hong Kong (Stock code: 00697.HK). It was one of the first "Red Chips" listed in Hong Kong. The Company principally engaged in trading of iron ore.

About GCA

Established in 1997, GCA provides professional valuation services on business, intangible assets, real estates, industrial assets, financial instruments and business consulting services. It has undertaken valuations for over 400 companies listed on the Hong Kong Stock Exchange and other global clients.

For further information, please contact Mr. Max Tsang at max.tsang@gca-group.com / +852 3582 3348 or Mr. Jimmy Wong at jimmy.wong@gca-group.com / +852 3582 3918, or visit www.gca-valuation.com.

 

Source: Greater China Appraisal Limited
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