China Merchants Holdings Pacific

Infrastructure is the key assets of infrastructure player, more infrastructure = more revenue = more profit, so long as debts remain manageable level.

Whether it is the old deal or new (and better) deal, I am convinced.

[ vested ]

(10-09-2014, 10:18 AM)CityFarmer Wrote:

(10-09-2014, 05:55 AM)Drizzt Wrote: if you think that this is a distressed asset and at big discount to original valuation, then all these depreciation and valuation doesn't matter, cause it serves to justify the price of purchase as saying it is close to the purchase price.

its more like them telling the valuer "hey i want to purchase it at 600 mil, make your valuation report close to that". its the same as they say about housing purchase here in the past. i need to borrow this amount for the property, shift the value close to it.

is it dark? perhaps yes. but end of the day it is still the assets cash generation nature. this is going to last the same duration and produce cash flow that many would underestimate.

this is my guess.

I would say, the previous professional valuation and acquisition proposal were wrong. It is not wrong due to professional incompetency, IMO, but wrong in reality check months later.

What make us so sure that the current valuation is "right" months later, after the reality check then. I am convinced the outlook is good, but the risk is always there.

I would say, the company is lucky that the previous acquisition failed. Will the company remains lucky in future M&A, assuming more to come?

Having said so, I am optimistic on the company, but remains caution on the risks

(vested)

i was thinking even this reports figures could be far off haha

CMP, DBS Vickers maintain BUY:

Green light for Jiurui Expressway acquisition; parent converts RCPS
•
Jiurui Expressway acquisition approved and parent company converts its RCPS
•
Company can sustain its 7-Sct annual dividend payout comfortably, assuming full dilution (including outstanding convertible bonds)
•
Our previous TP of S$1.32 already takes into account dilution from RCPS and convertible bonds but we have yet to update our numbers and TP for the Jiurui acquisition
• Maintain BUY and S$1.32 TP for now CMHP announced last night that it has received approval for its acquisition of Jiurui Expressway (the majority of the consideration is via issue of 119.4m new shares at S$0.985 each), and that its major shareholder China Merchants Group has also converted its remaining block of Redeemable Convertible Preference Shares (RCPS) into
135.78m equity shares in the company. Following these two new developments, China Merchants Group will have a 71.9% stake in CMHP’s current outstanding share cap of 1,012.6m shares, with the sellers of Jiurui Expressway owning 11.8% (1/3 no moratorium, 1/3 6-month moratorium and 1/3 12-month moratorium on disposal of shares).

Meanwhile, some 16% of its convertible bonds have been converted in recent months, which leaves another potential c.186.5m new shares to be converted, and CMHP has c.6.6m employee options as well. If fully converted, these will take CMHP’s share cap to 1,205.7m shares, and the parent would own c.60.4% of the company.

The key concern for investors would revolve around the company's ability to sustain its dividend payout postconversion/dilution, but let's take a quick look at this issue:

We project CMHP to make HK$665m in 2015 (and there should be some positive contribution from Jiurui Expressway but we leave that out for now), which represents 9 Scts per share on a fully-diluted basis (1,205.7m shares). This means that the company will be paying out c.78% of its earnings to maintain a 7-Sct annual dividend, which is definitely sustainable for a
business where cash flows are higher than profits.

We have already taken into account both the RCPS and Convertible Bond conversions in our target price of S$1.32. With the approval of the Jiurui Expressway acquisition obtained, we will be looking to update our numbers and TP later on. We expect some EPS dilution (though absolute profit should increase slightly) for FY14 and FY15 but expect the acquisition to enhance its target price (by 5%-10%), given this concession still has over 20 years to run and lengthens the Group's average remaining concession to over 15 years.

Somehow i have a feeling this isn't the end of the acquisition spree, looking at their cash holding and small amount of cash to acquire jiurui, they definitely can leverage up more for even more acquisition. Just my opinion and food for thoughts hope

(11-09-2014, 08:56 PM)Jack31 Wrote: Somehow i have a feeling this isn't the end of the acquisition spree, looking at their cash holding and small amount of cash to acquire jiurui, they definitely can leverage up more for even more acquisition. Just my opinion and food for thoughts hope

Active M&A in the near future, with an indicative target of RMB 30 billion net asset, is a well-disclosed strategy of the management. The latest current net asset is slightly more than RMB 6 billion.

(vested)

(11-09-2014, 09:17 PM)CityFarmer Wrote:

(11-09-2014, 08:56 PM)Jack31 Wrote: Somehow i have a feeling this isn't the end of the acquisition spree, looking at their cash holding and small amount of cash to acquire jiurui, they definitely can leverage up more for even more acquisition. Just my opinion and food for thoughts hope

Active M&A in the near future, with an indicative target of RMB 30 billion net asset, is a well-disclosed strategy of the management. The latest current net asset is slightly more than RMB 6 billion.

(vested)

Think Much will depend on how huajian is gonna inject the assets into cmp. Looking at their strict criteria of yield accretive acquisition, it will be difficult for them to acquire full"external" assets from unrelated parties. There are so much other bigger toll road company in hk and china that are willing to depress their margin to get these toll road cashcow in my opinion.

(11-09-2014, 10:19 PM)Jack31 Wrote:

(11-09-2014, 09:17 PM)CityFarmer Wrote:

(11-09-2014, 08:56 PM)Jack31 Wrote: Somehow i have a feeling this isn't the end of the acquisition spree, looking at their cash holding and small amount of cash to acquire jiurui, they definitely can leverage up more for even more acquisition. Just my opinion and food for thoughts hope

Active M&A in the near future, with an indicative target of RMB 30 billion net asset, is a well-disclosed strategy of the management. The latest current net asset is slightly more than RMB 6 billion.

(vested)

Think Much will depend on how huajian is gonna inject the assets into cmp. Looking at their strict criteria of yield accretive acquisition, it will be difficult for them to acquire full"external" assets from unrelated parties. There are so much other bigger toll road company in hk and china that are willing to depress their margin to get these toll road cashcow in my opinion.

Do note that Huajian also have stakes (albeit significantly smaller stakes) in all these HK/Chinese toll operators that you have mentioned.

Have you ask yourself why Huajian has chosen CMP to be the vehicle for "consolidating" toll roads in China? Why not the bigger and more established operators?

Why keep dangling how yield in hope to lift share prices for more accretive acquisitions?

GG

(11-09-2014, 10:19 PM)Jack31 Wrote:

(11-09-2014, 09:17 PM)CityFarmer Wrote:

(11-09-2014, 08:56 PM)Jack31 Wrote: Somehow i have a feeling this isn't the end of the acquisition spree, looking at their cash holding and small amount of cash to acquire jiurui, they definitely can leverage up more for even more acquisition. Just my opinion and food for thoughts hope

Active M&A in the near future, with an indicative target of RMB 30 billion net asset, is a well-disclosed strategy of the management. The latest current net asset is slightly more than RMB 6 billion.

(vested)

Think Much will depend on how huajian is gonna inject the assets into cmp. Looking at their strict criteria of yield accretive acquisition, it will be difficult for them to acquire full"external" assets from unrelated parties. There are so much other bigger toll road company in hk and china that are willing to depress their margin to get these toll road cashcow in my opinion.

I don't know what is in Huajian management mind, but CMHP is one good candidate for China gov "SOE securitization policy", IMO. In other words, market competition might not the primary factors for M&As

FYI, there are few HK listed toll operators, while the company is the only SG listed toll operator IIRC. Both SGX and SEHK are the key platforms for the securitization.

In short, the company seems at a sweet spot, amid the consolidation of toll road asset in China.

Well, I might be wrong

(vested)

http://www.cmhp.com.sg/

The corporate website has been revamped significantly. A lot more 'professional' and investor friendly now. Juirui Expressway has been added in.

http://www.cmhp.com.sg/investor-dividends - this page speaks volume on the quality of the Company track record and its cash generating abilities. I understand many retail investors often hunt (and punt) S Chips though I wonder why they don't really consider this haha !

(Vested)

Why so many sellers for this counter?