Yamato: CHOW TAI FOOK (01929) issued convertible bonds to reduce financing costs, maintains a "buy" rating.

Daiwa released a research report stating that CHOW TAI FOOK (01929) announced the issuance of convertible bonds (CB) to raise approximately 8.8 billion yuan, and simultaneously conducted a share repurchase. After adjusting for the share repurchase, the diluted net equity ratio is 3.7%, with a face interest rate as low as 0.375%. This is lower than the group's existing financing cost by 100 to 200 basis points, effectively reducing its financing costs. Management also mentioned that the funds raised will be used entirely for the development of the jewelry business and promised to maintain a dividend payout policy of 70% to 80%. Daiwa believes that although CHOW TAI FOOK has a strong free cash flow and did not originally need to issue bonds, seizing the opportunity of low-interest long-term financing window this time will help drive its business transformation. The conversion period is set three years later, and the share repurchase and interest savings in the short term will boost earnings per share growth. Therefore, Daiwa maintains its "buy" rating on the company.