Hi Jacmar,
Thanks for your valuable input.
China has recently undergone a new leadership change. Just as in all change in dynasty in the Middle Kingdom history, new leadership are always more comfortable with their own kind.
On that assumption, I m inclined to think that CMG is the chosen SOE to spearhead consolidation domestically and to continue to the fly the flag overseas.
CMG has its roots dated all the way back to the Cheng Ho days and hence the logic for it to carry the Chinese flag for overseas infrastructure deals. They have been diligently carrying out their mission steadily over the years.
As to why Huajian chose CMP as the flagship to consolidate toll roads particularly those distress, I think CMP is based outside HK where the bigger ones in which they have small stakes are too big to be of any meaningful contributions to these big established toll players. Anyway, since CMP has risen above NAV, its $ printing capability has been kindled and like REITs are able to undertake accretive purchases.
Toll roads are usually awarded to connected and financially strong people. However, most of such businessmen in China typically have property exposures in line with the directions of the previous leadership.
Since public discontent over hugely inflated housing prices can no longer be ignored in Communist China, the weaker previously connected businessmen are likely to have fallen out of favour and hence the need to be bailed out. Only financially strong and connected parties are privy to such deals - certainly not any financially able and capable foreign investment banks let alone foreign sovereign wealth fund (SWF). This status should help to mitigate the concerns over the S Chip Gate being repeated at CMP in the medium term.
To me CMP is a very interesting rich yielding infrastructure with decent growth both organically and via acquisitions.
CMP share price has been held backed by whatever force and I reiterate that I m more focus on the buyers intention than the sellers.
Fair value - buy for 7.5% yield with 5% capital growth in hope for 5% dividend yield with 7.5% capital growth since market is aways known for being stupid when it comes to valuation. What is interesting here is if CMP keeps on growing its dividend steadily, it will not take a lot of growth when yield compression kicks in.
Once the CB overhang is cleared, ie all being converted, the other focus will then be the balance between new shares placement and debt undertaken for future purchases.
In Communist Merchant Party
We Trust
Vested
Core Holdings
GG
(03-10-2014, 02:36 PM)Jacmar Wrote: OK here are some more interesting titbits post-EGM discussion with the CEO. Sorry for the belated posting as I was accumulating and do not want to talk up the price for selfish reasons. I am about done now unless the price drops significantly. I still won't be able to catch up with Mr GG(oh), salute for being top20 shareholder.
1. the ex-jiurui owners was borrowing money at the rate of 10-11%. This is at the owner level and not the Jiurui company level. Now you know how much of a distress sale it was to CMHP. Kudos to CMHP for having the discipline and patience to squeeze them by sabotaging the deal 1st time round. At the jiurui company level, earlier posting already mentioned the restructuring of the company loans to save on interest cost.
2. to another forumer who asked why there is long sell queue. If you are in financial distress, you would unload all the shares from CMHP upon getting it to the point that you would even short it. Ex-jiurui owners shares is subject to 1/3 lock up for 6mths and another 1/3 for 12 mths. My belief is that come AR season you won't find them as top 20 shareholder. Now I know who has been borrowing my shares, it is them and not the CBs people.
3. mr jang hinted yes they are working on some deals but he quickly qualified that even after negotiating for about 8 mths(a typical deal negotiating) there is no guarantee of success. With their skills in negotiating, yes patience and discipline is good. last thing you want is they get a lemon.
4. Mr jang also said that there will be more distress deals coming. Since their parent is in the banking biz I would expect them to know where the distress deals are. so be patient and expect more deals.
There are 2 kinds of people you should buy your stocks from:
1. those who panic but sometimes you also got chicken out too
2. those in distress......this is why the price of CMHP hasn't move despite the good deal done on jiurui and high div. this is good for us to accumulate more.
core holding
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