China Merchants Holdings Pacific

I calculate that after dilution, assume dividend remain the same, yield will be a very decent 6% at $9.

After the conversion, debt will go down further, allowing yield accretive acquisition.

(No vested, top 3 on radar though, waiting)

Its either half full or half empty. I m vested so I will look at it half full:

CMH is a tightly held counter. As the parent holds the RCCPS, should it be converted, its stake in CM Pac will once again rise. However, management has stated that there are no plans to convert the RCCPS. In fact, this is in line with the parent's current strategy of not collecting their annual dividends. Their dividends are currently recorded as current liabilities and basically the parent company is telling the market that they do not need CM Pac's generous dividend payout not just for this year but for a couple of years already.

Anyway, trading liquidity has always been tight at CM Pac. For it to become a larger company, it is expected that trading liquidity will increase as well. In fact, the increased liquidity comes from convertible instruments that were previously issued to acquire accretive assets when those instruments were not in the money.

Hence, when an acquisition established a good track record and starts to reward shareholders, it is natural that these instruments will be in the money and as it is currently dilutive.

Vested
GG

(03-06-2014, 09:25 PM)memphisb Wrote: Main concern from the report.

4.5 Potential dilution
As at 31 Dec 2013, CMH had outstanding convertible preference shares,
convertible bonds and share options. These, if fully converted, will translate to a
total of 355.3m new ordinary shares. In view of the existing ordinary share base
of 718.8m, the potential dilution impact from the conversion could be very
substantial.
All the dilutive instruments are in the money. The convertible bonds'
conversion price is S$0.826; the holders of preference shares are entitled to
convert the preference shares into fully-paid ordinary shares at the conversion
rate of one ordinary share for every preference share (preference dividend rate
of 1.5%, with a par value of S$0.50); while the share option exercise price is
S$0.789.

Have some questions... Hope it will be answered by you guys...

1. Has the management indicate any interest in buying up the remaining stake of their current JV?

2. For the cancelled Jiurui Expressway acquisition, will the management reopen this proposition?

3. The management has indicated before that they are uncomfortable with their high holdings % and low float. Is there plans to remedy that problem e.g. selling stakes to outside investors?

(03-06-2014, 10:34 PM)marandaz Wrote: Have some questions... Hope it will be answered by you guys...

1. Has the management indicate any interest in buying up the remaining stake of their current JV?

2. For the cancelled Jiurui Expressway acquisition, will the management reopen this proposition?

3. The management has indicated before that they are uncomfortable with their high holdings % and low float. Is there plans to remedy that problem e.g. selling stakes to outside investors?

1) There was never any mention of buying up the remaining stakes. It probably won't be cheap since the JVs are debt free and matured - no reason for vendors to sell.

2) No mention on this.

3) They have no intention of selling their shares. Free floats can be increased by placing out new shares. The conversion of the 'in-the-money' CB will improve the free float.

(03-06-2014, 10:09 PM)greengiraffe Wrote: Its either half full or half empty. I m vested so I will look at it half full:

CMH is a tightly held counter. As the parent holds the RCCPS, should it be converted, its stake in CM Pac will once again rise. However, management has stated that there are no plans to convert the RCCPS. In fact, this is in line with the parent's current strategy of not collecting their annual dividends. Their dividends are currently recorded as current liabilities and basically the parent company is telling the market that they do not need CM Pac's generous dividend payout not just for this year but for a couple of years already.

Anyway, trading liquidity has always been tight at CM Pac. For it to become a larger company, it is expected that trading liquidity will increase as well. In fact, the increased liquidity comes from convertible instruments that were previously issued to acquire accretive assets when those instruments were not in the money.

Hence, when an acquisition established a good track record and starts to reward shareholders, it is natural that these instruments will be in the money and as it is currently dilutive.

Vested
GG

(03-06-2014, 09:25 PM)memphisb Wrote: Main concern from the report.

4.5 Potential dilution
As at 31 Dec 2013, CMH had outstanding convertible preference shares,
convertible bonds and share options. These, if fully converted, will translate to a
total of 355.3m new ordinary shares. In view of the existing ordinary share base
of 718.8m, the potential dilution impact from the conversion could be very
substantial.
All the dilutive instruments are in the money. The convertible bonds'
conversion price is S$0.826; the holders of preference shares are entitled to
convert the preference shares into fully-paid ordinary shares at the conversion
rate of one ordinary share for every preference share (preference dividend rate
of 1.5%, with a par value of S$0.50); while the share option exercise price is
S$0.789.

so as long as whoever is vested or going to put their money are aware of underlying risks.

(03-06-2014, 09:25 PM)memphisb Wrote: Main concern from the report.

4.5 Potential dilution
As at 31 Dec 2013, CMH had outstanding convertible preference shares,
convertible bonds and share options. These, if fully converted, will translate to a
total of 355.3m new ordinary shares. In view of the existing ordinary share base
of 718.8m, the potential dilution impact from the conversion could be very
substantial.
All the dilutive instruments are in the money. The convertible bonds'
conversion price is S$0.826; the holders of preference shares are entitled to
convert the preference shares into fully-paid ordinary shares at the conversion
rate of one ordinary share for every preference share (preference dividend rate
of 1.5%, with a par value of S$0.50); while the share option exercise price is
S$0.789.

Drizzt website provide a comprehensive breakdown of the potential dilution/eps after dilution. He posted in here too if you go a few pages back. It's a concern but I'm not too worried about it after looking at the numbers and also taking into consideration that the parent state they won't be converting soon. Patiently waiting for the 1 billion acquisition that the management is aiming.

I think the parent owns the ordinary and preference shares not the convertible bonds.

To do a simple calculation:

- shares to be allotted from CB amounted to approximately 25.5% of total ordinary + preference shares
- the diluted NAV assuming all RCPS be converted is HK$6.10 or S$0.99 (per company's calculation)
- assume the conversion price for the bonds at S$0.826
- so the completely diluted NAV = (1 x 0.99 + 0.255 x 0.826) / 1.255 = 0.956

The latest price per SGX is 0.95, so why worry for the dilution?

The company did make an illustration on the fully diluted EPS of HK$0.1484 or S$0.0241 for last quarter or S$0.0964 annualised, it still gives a PE of less than 10, and still sufficient to pay the 0.7c dividend annually.

i have taken this table from my post here >> http://www.investmentmoats.com/money-man...7-5-yield/

[Image: qcqqClY.png]

the current profit is around 564, so perhaps fully diluted 8.5 cents. in agm, there was a guy who kept saying he doesn't want to vote for a raise in dividends to 7 cents bcause they cannot pay for it.

(04-06-2014, 01:28 PM)Drizzt Wrote: i have taken this table from my post here >> http://www.investmentmoats.com/money-man...7-5-yield/

[Image: qcqqClY.png]

the current profit is around 564, so perhaps fully diluted 8.5 cents. in agm, there was a guy who kept saying he doesn't want to vote for a raise in dividends to 7 cents bcause they cannot pay for it.

Didn't attend the agm, Surprise that someone have the same qns as me of whether they were overstretching themselves with the bump in div. Partly why I was concern is toll road are depreciating assets, if they do not keep building up more cash,
End of toll period = 0