China Merchants Holdings Pacific

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(22-07-2014, 10:58 PM)greengiraffe Wrote:
(22-07-2014, 10:54 PM)Jack31 Wrote:
(22-07-2014, 08:50 PM)greengiraffe Wrote: Quick glance on the following announcements by CM Pac will reveal the shrewed and patient deal making ability by the management team within a year:

Old deal: http://infopub.sgx.com/FileOpen/Acquisit...leID=57001

New deal: http://infopub.sgx.com/FileOpen/Acquisit...eID=306007

Old deal: consideration RMB 891m (adjusted for comparable concession life), net debt HK$1.94bn

New deal: RMB 697m, net debt HK$1.59bn

Difference - 21.8% cheaper in consideration, 18% less net debt absolute certainty in concession life. New shares issued as consideration @ $0.98 is 16.7% dearer than previously indicated price of $0.84 (ie less dilution should same amount of shares are issued)

DBS Vickers in the old analysis when the old deal was announced estimated a borrowing costs of 6.55% back then. Given that overall credit situation in China has deteriorated over the last 18 months, it is highly likely that borrowers with inferior credit ratings are likely to have paid higher interest rates in order to roll over their loans.

Simply assuming a tax rate of 20%, every 1% savings on the latest net debt of HK$1.59bn will lift Jiurui net earnings by HK$12.7m. Assuming a conservative 5% savings on interest simply due to CM Pac credit standing, Jiurui would easily enjoy a HK$63.6m uplift in net earnings.

In the short term at least until further details on the targeted company are revealed in the EGM circular, the market and analysts can only guess. In the meantime, the ongoing conversion of the in-the-money CB is likely to provide explanation of the seemingly "never-ending" supply of CMP shares (assuming there are actively traders arbitraging between the CB and the mother shares).

Vested
GG

Hi GG,
Thank you for the analysis, agree with you mostly but why is 5% saving on interest conservative? I thought 5% should be a very very optimistic assumption. Even if we assume a high interest rate of 7% and cmp is able to pull it down to 3%, it's only 4%. (And I consider a 4% savings optimistic). Unless u r assuming interest rate now is 8-9% and cmp can easily down it to 2-3%. I highly doubt the interest rate they are paying now are so sky high at 8-9%? If we can take Beilun refinance as a gauge, the interest rate was abt 6% to 2.6% for a 3+% savings.

Times have changed for highly leveraged high risks borrowers. If you recollect, Trust Loans almost equal to that of Ah Long rates - never say never especially when this is a key asset that borrower can collateralised for other risky ventures like property developments or commodities trading...

Certainly hope you are right about this! Smile
Reply
(22-07-2014, 11:11 PM)Jack31 Wrote:
(22-07-2014, 10:58 PM)greengiraffe Wrote:
(22-07-2014, 10:54 PM)Jack31 Wrote:
(22-07-2014, 08:50 PM)greengiraffe Wrote: Quick glance on the following announcements by CM Pac will reveal the shrewed and patient deal making ability by the management team within a year:

Old deal: http://infopub.sgx.com/FileOpen/Acquisit...leID=57001

New deal: http://infopub.sgx.com/FileOpen/Acquisit...eID=306007

Old deal: consideration RMB 891m (adjusted for comparable concession life), net debt HK$1.94bn

New deal: RMB 697m, net debt HK$1.59bn

Difference - 21.8% cheaper in consideration, 18% less net debt absolute certainty in concession life. New shares issued as consideration @ $0.98 is 16.7% dearer than previously indicated price of $0.84 (ie less dilution should same amount of shares are issued)

DBS Vickers in the old analysis when the old deal was announced estimated a borrowing costs of 6.55% back then. Given that overall credit situation in China has deteriorated over the last 18 months, it is highly likely that borrowers with inferior credit ratings are likely to have paid higher interest rates in order to roll over their loans.

Simply assuming a tax rate of 20%, every 1% savings on the latest net debt of HK$1.59bn will lift Jiurui net earnings by HK$12.7m. Assuming a conservative 5% savings on interest simply due to CM Pac credit standing, Jiurui would easily enjoy a HK$63.6m uplift in net earnings.

In the short term at least until further details on the targeted company are revealed in the EGM circular, the market and analysts can only guess. In the meantime, the ongoing conversion of the in-the-money CB is likely to provide explanation of the seemingly "never-ending" supply of CMP shares (assuming there are actively traders arbitraging between the CB and the mother shares).

Vested
GG

Hi GG,
Thank you for the analysis, agree with you mostly but why is 5% saving on interest conservative? I thought 5% should be a very very optimistic assumption. Even if we assume a high interest rate of 7% and cmp is able to pull it down to 3%, it's only 4%. (And I consider a 4% savings optimistic). Unless u r assuming interest rate now is 8-9% and cmp can easily down it to 2-3%. I highly doubt the interest rate they are paying now are so sky high at 8-9%? If we can take Beilun refinance as a gauge, the interest rate was abt 6% to 2.6% for a 3+% savings.

Times have changed for highly leveraged high risks borrowers. If you recollect, Trust Loans almost equal to that of Ah Long rates - never say never especially when this is a key asset that borrower can collateralised for other risky ventures like property developments or commodities trading...

Certainly hope you are right about this! Smile

Maybe we should cross check with YZJ's loan portfolio returns...
Reply
天启99号九瑞高速项目集合资金信托计划
http://www.yanglee.com/product/product_d...x?pid=2860

This is the collective trust fund for the Jiurui Expressway from 2011-03-01 to 2013-03-01. The interest rate was already 8%.
Reply
Hi Kiwi,

Thanks for the detective work. The www is simply fantastic if one knows where to look for info. Sometimes I really wonder what type of work does high paying analysts produce...

Vested
GG

(23-07-2014, 06:54 AM)yeokiwi Wrote: 天启99号九瑞高速项目集合资金信托计划
http://www.yanglee.com/product/product_d...x?pid=2860

This is the collective trust fund for the Jiurui Expressway from 2011-03-01 to 2013-03-01. The interest rate was already 8%.
Reply
(23-07-2014, 06:54 AM)yeokiwi Wrote: 天启99号九瑞高速项目集合资金信托计划
http://www.yanglee.com/product/product_d...x?pid=2860

This is the collective trust fund for the Jiurui Expressway from 2011-03-01 to 2013-03-01. The interest rate was already 8%.

thanks a lot yeokiwi.
Dividend Investing and More @ InvestmentMoats.com
Reply
(23-07-2014, 06:54 AM)yeokiwi Wrote: 天启99号九瑞高速项目集合资金信托计划
http://www.yanglee.com/product/product_d...x?pid=2860

This is the collective trust fund for the Jiurui Expressway from 2011-03-01 to 2013-03-01. The interest rate was already 8%.

Wow, thank you for the CSI work. Amazing buddies here.

GG, nice prediction on the interest rate. U are indeed an "old ginger".
Reply
(22-07-2014, 11:27 PM)greengiraffe Wrote:
(22-07-2014, 11:11 PM)Jack31 Wrote:
(22-07-2014, 10:58 PM)greengiraffe Wrote:
(22-07-2014, 10:54 PM)Jack31 Wrote:
(22-07-2014, 08:50 PM)greengiraffe Wrote: Quick glance on the following announcements by CM Pac will reveal the shrewed and patient deal making ability by the management team within a year:

Old deal: http://infopub.sgx.com/FileOpen/Acquisit...leID=57001

New deal: http://infopub.sgx.com/FileOpen/Acquisit...eID=306007

Old deal: consideration RMB 891m (adjusted for comparable concession life), net debt HK$1.94bn

New deal: RMB 697m, net debt HK$1.59bn

Difference - 21.8% cheaper in consideration, 18% less net debt absolute certainty in concession life. New shares issued as consideration @ $0.98 is 16.7% dearer than previously indicated price of $0.84 (ie less dilution should same amount of shares are issued)

DBS Vickers in the old analysis when the old deal was announced estimated a borrowing costs of 6.55% back then. Given that overall credit situation in China has deteriorated over the last 18 months, it is highly likely that borrowers with inferior credit ratings are likely to have paid higher interest rates in order to roll over their loans.

Simply assuming a tax rate of 20%, every 1% savings on the latest net debt of HK$1.59bn will lift Jiurui net earnings by HK$12.7m. Assuming a conservative 5% savings on interest simply due to CM Pac credit standing, Jiurui would easily enjoy a HK$63.6m uplift in net earnings.

In the short term at least until further details on the targeted company are revealed in the EGM circular, the market and analysts can only guess. In the meantime, the ongoing conversion of the in-the-money CB is likely to provide explanation of the seemingly "never-ending" supply of CMP shares (assuming there are actively traders arbitraging between the CB and the mother shares).

Vested
GG

Hi GG,
Thank you for the analysis, agree with you mostly but why is 5% saving on interest conservative? I thought 5% should be a very very optimistic assumption. Even if we assume a high interest rate of 7% and cmp is able to pull it down to 3%, it's only 4%. (And I consider a 4% savings optimistic). Unless u r assuming interest rate now is 8-9% and cmp can easily down it to 2-3%. I highly doubt the interest rate they are paying now are so sky high at 8-9%? If we can take Beilun refinance as a gauge, the interest rate was abt 6% to 2.6% for a 3+% savings.

Times have changed for highly leveraged high risks borrowers. If you recollect, Trust Loans almost equal to that of Ah Long rates - never say never especially when this is a key asset that borrower can collateralised for other risky ventures like property developments or commodities trading...

Certainly hope you are right about this! Smile

Maybe we should cross check with YZJ's loan portfolio returns...

The average trust loan interest of YZJ, is around 10%. So a 8% interest on trust loan isn't unthinkable.

(vested both in YZJ and CMHP)
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
Reply
CMPac $0.935 - How To Grow A Dragon

CMPac is a China SOE backed cash generative defensive infrastructure business with exposure in China's toll roads. It is a Singapore incorporated company with no finanical engineering (non business trust) and boast of sustainable 7 cents dividends payable twice a year. At 93.5 cents and dividend yield of 7.5%, CMPac is rare Garang Guni Gem riding on the back of parent China Merchant Group's sharpened focus to drive growth in a unit that boast of a 10 year track record in China toll road industry. Concerns over its pure China based business have been overplayed given its strong cashflows and management track record in enhancing shareholders' wealth through consistently growing dividend stream.

Hidden Dragon

CM Pac was incorporated in Singapore as a private limited company under the name Hotel Tai-Pan Pte Ltd on 27 March 1981 and was converted to a public limited company on 11 May 1981. The Company was officially listed on the main board of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 17 August 1981. Upon the sale in 1989 of its flagship hotel, then known as Tai-Pan Ramada Hotel, the Company changed its name to HTP Holdings Limited.

China Everbright Holdings Co., Ltd took over the control of the Company in August 1993 and the Company’s name was changed to China Everbright Pacific Limited. In May 2001, China Merchants Holdings (International) Company Limited (“CMHI”) acquired a 23.9% stake in the Company from China Everbright Holdings Co., Ltd and became the single largest shareholder of the Company. The Company further changed its name to China Merchants Holdings (Pacific) Limited so as to directly identify the Company’s strong ties with the China Merchants Group. On 30 December 2004, the Company was transformed into a significant toll road player following the acquisition of equity interests in five toll roads in China from CMHI. - Annual Report

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

http://www.cmhp.com.sg/tollroad-overview.htm

Cash Generator Rich Dividend Yielder

Since FY2004, CM Pac has established an unbroken track record of rich dividends ranging from 4 cents (FY2011) to 7 cents (Fy2013). Currently, the Board has a long-term commitment to an annual dividend payout ratio of at least 50% of underlying net profit.

The Awakening

CMP share price has long been trading below its NAV of around mid S$0.80s - a major hindrance for the company to issue new shares to fund acquisitons (There is an guideline that Chinese State Owned Enterprises (SOEs) are not allowed to issue new shares below NAV). However, foundations being laid starting in 2011 to acquire 51% equity interest in Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd which owns and operates the Wenzhou Yongtaiwen Expressway (Wenzhou Section) from parent CMG set stage for the start of acceleration in earnings growth momentum.

CMP successfully issued an aggregate principal amount of HK$1,163,000,000 1.25 per cent. convertible bonds due 2017 (credit enhanced until 2015) to fund the purchase of another toll road - the entire issued ordinary share capital of Beilun (Hong Kong) Investment Limited (“Beilun HK”) from China Ping An Insurance Overseas (Holdings) Limited. Beilun HK is the holding company of Beilun Port Expressway Co which owns the rights to operate the Ningbo Beilun Port Expressway.

On the back of accelerating earnings momentum and rising dividends, CMP share price steadily rose above its NAV which help activated an important alternative avenue of fund raising for new acquisitions - issuance of new shares.

Sharpened Management Focus To Drive Growth

In Mar 2014, The Company has effected an organisational restructuring (the “Restructuring”) in March 2014 which involves, inter alia, certain senior managers of China Merchants Huajian Highway Investment Co., Ltd (“Huajian”) being appointed to the Board and forming part of the senior management team of the Company. Huajian is a wholly owned subsidiary of China Merchants Group Limited, the controlling shareholder of the Company.

The Restructuring forms part of the strategic direction of the Company, Huajian and the China Merchants Group to use the Company as the platform for the China Merchants Group to expand its toll road business and presence in the People’s Republic of China. The aim of the Restructuring is to streamline and optimize the human resources of both Huajian and the Company in order to focus on the growth of the Company’s business.

Jiurui Acquisition Reinforced Management's Deal Making Capability

Quick glance on the following announcements by CM Pac will reveal the shrewed and patient deal making ability by the management team within a year:

Old deal: http://infopub.sgx.com/FileOpen/Acquisit...leID=57001

New deal: http://infopub.sgx.com/FileOpen/Acquisit...eID=306007

Old deal: consideration RMB 891m (adjusted for comparable concession life), net debt HK$1.94bn

New deal: RMB 697m, net debt HK$1.59bn

Difference - 21.8% cheaper in consideration, 18% less net debt absolute certainty in concession life. New shares issued as consideration @ $0.98 is 16.7% dearer than previously indicated price of $0.84 (ie less dilution should same amount of shares are issued)

Vast Potential For Growth

At the end of 2013, the total length of the expressway network in China was 104,500 km, of which 8,260 km of expressways were built in 2013 alone. We will draw on our knowledge of the toll road industry and business connections in China to acquire quality toll road projects to enlarge our toll road portfolio and further accelerate the Group’s growth and development. - Annual Report 2013

1.25% Convertible Short Term Overhang, Enhance Trading Liquidity Over The Medium Term

As the 1.25% Convertible Bonds (CB) are in the money, professional traders who are arbitraging the mispricing between the CB and shares appears to be creating an overhang for share price in the short term. However, trading liquidity has been substantially enhanced by the conversion of CBs and over time any potential inclusion in major stock indices cannot be ruled out.
Reply
(24-07-2014, 01:46 PM)greengiraffe Wrote: CMPac $0.935 - How To Grow A Dragon

CMPac is a China SOE backed cash generative defensive infrastructure business with exposure in China's toll roads. It is a Singapore incorporated company with no finanical engineering (non business trust) and boast of sustainable 7 cents dividends payable twice a year. At 93.5 cents and dividend yield of 7.5%, CMPac is rare Garang Guni Gem riding on the back of parent China Merchant Group's sharpened focus to drive growth in a unit that boast of a 10 year track record in China toll road industry. Concerns over its pure China based business have been overplayed given its strong cashflows and management track record in enhancing shareholders' wealth through consistently growing dividend stream.
Where's the article from? Just wondering.
Reply
(24-07-2014, 06:43 PM)yourusualkid Wrote:
(24-07-2014, 01:46 PM)greengiraffe Wrote: CMPac $0.935 - How To Grow A Dragon

CMPac is a China SOE backed cash generative defensive infrastructure business with exposure in China's toll roads. It is a Singapore incorporated company with no finanical engineering (non business trust) and boast of sustainable 7 cents dividends payable twice a year. At 93.5 cents and dividend yield of 7.5%, CMPac is rare Garang Guni Gem riding on the back of parent China Merchant Group's sharpened focus to drive growth in a unit that boast of a 10 year track record in China toll road industry. Concerns over its pure China based business have been overplayed given its strong cashflows and management track record in enhancing shareholders' wealth through consistently growing dividend stream.
Where's the article from? Just wondering.

Authored by the poster Tongue
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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