China Merchants Holdings Pacific

[D.L]

Just took a brief look as I am outside, seems than Beilun is still not picking up and surprisingly, YTW revenue I still growing due to a new bridge opening up. Shall take a good look once I am back home.

(Vested)

[greengiraffe]

In line with GG's Garang Guni analysis...

Their $ printing machine has just been overhualed like reit so expect more accretive deals to flow

http://infopub.sgx.com/FileOpen/1H2014-P...eID=308740

Contribution to net profit attributable to shareholders by the Group’s toll road operations for 2Q2014 amounted to HK$183.2 million, an increase of 8% from the HK$169.7 million achieved a year ago.

Toll revenue registered by the Beilun Port Expressway was down 8% due to the change in road network arising from the opening of Jiaoshao Bridge and traffic diversion from a newly opened competing road.

Commenting on the outlook for the rest of the financial year, Executive Chairman and CEO Mr Luo Hui Lai said, “We remain positive on the outlook of the overall toll road industry in China and expect our toll road assets to continue to deliver positive results.”
“The disposal of our property development business which was completed in April this year is in line with our overall growth strategy to divest our non-core asset and focus on our core business of toll road business. The acquisition of the Jiurui Expresway continues our strategic focus on acquiring quality expressways in key regions in China to develop our toll road business to a sizable scale. Now that this focus on the toll road
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business is set in motion, we expect its growth to gain momentum steadily over the years to come through further acquisitions of quality expressways in China.” Mr Luo added.

[Jack31]

Yup, as expected, beilun profit dropped and the rest increase. Might take a few quarters to recover. Should see more conversion of CB giving pressure to the share price in the near term.
1 thing I don't understand. Guihuang traffic drop by 12% but revenue up 15% ??? toll increase?
Any1 can enlighten me the possible reasons?

[marandaz]

Yup, as expected, beilun profit dropped and the rest increase. Might take a few quarters to recover. Should see more conversion of CB giving pressure to the share price in the near term.
1 thing I don't understand. Guihuang traffic drop by 12% but revenue up 15% ??? toll increase?
Any1 can enlighten me the possible reasons?

I also think so...

anyway Capex of RMB ~230 Mil.

Upgrading works

[Jack31]

Don't really understand the benefits of the upgrading. Wonder why they spend so much to upgrade when beilun toll collection period is only for 9 more years ( with option to extend). Higher toll price maybe? Or able to increase the traffics after the upgrade? Not much info on the benefits. Just need to trust the management perhaps. They should have some good reasons for the upgrade.
On the other hand, Nice div of 3.5c!

Standby here waiting for Nick's comment.

[marandaz]

Don't really understand the benefits of the upgrading. Wonder why they spend so much to upgrade when beilun toll collection period is only for 9 more years ( with option to extend). Higher toll price maybe? Or able to increase the traffics after the upgrade? Not much info on the benefits. Just need to trust the management perhaps. They should have some good reasons for the upgrade.
On the other hand, Nice div of 3.5c!

Standby here waiting for Nick's comment.

A major work every few years is always welcome. I do not wish to see on the news that the bridge collapse although with proper year-year maintenance will be sufficient.

But, I believe that this can help them make case with the authority to extend the toll collection period. [or perhaps this is required by the authority]

I hope the Capex payment is spread across a number of years.

[Nick]

Two interesting points -

1) CMP paid HK$75 million to the JV roads as a loan. Could this be for capex at Giuhuang for the building of the new road ?

2) I suspect the bridge upgrading in Beilun could be contingent on raising the concession expiry from 2023 to 2027. Just my speculation. Could also be necessary to arrest the fall in traffic volume ie wider roads and smoother traffic.

Overall a fair result with 7 cents dividend likely to be maintained. YTW looks to be a shrewd acquisition while Beilun don't seem to be healthy at the moment. Bet debt to equity is low at 20% and the JV roads made its dividend payment of HK$340 million this year. Dividend payable to CMG has been reduced as well.

I continue to be vested and I hope organic growth in Jiurui would propel CMG towards further profit and dividend growth.

(Vested)

[greengiraffe]

Nothing new here from DBS Vickers as we cannot expect analysts to analyse conspiracy theories. However, we do need them to set target prices:

Interim dividend raised to Scts3.5
 Core earnings growth of 9.5% y-o-y in 1H14 is in line with
expectations, driven by growth in the toll road business
 Interim dividend raised to Scts3.5 from Scts2.75 a year
ago as the Group continues to generate firm cash flow
 Completion of Jiurui Expressway acquisition by year end
should help further drive long-term earnings growth
 Maintain BUY and S$1.32 TP
Highlights
Steady growth from toll road business. Excluding earnings from
discontinued operations, net earnings grew by 9.5% y-o-y to
HK$333m on higher toll revenue and lower interest costs.
Contribution from Yongtaiwen Expressway (+7% y-o-y to
HK$85.9m) was better than expected but offset by lower
contribution from Ningbo-Beilun Port Expressway (-38% y-o-y to
HK$19.8m). Meanwhile, both Guiliu (+4% y-o-y to HK$39.5m) and
Guihuang (+5% y-o-y to HK$37.2m) also grew their contributions.
Net one-off gains of HK$64.1m from disposed NZ property
business. CMH also booked a gain of HK$68.4m in the second
quarter to bring net contribution from the disposed NZ property
business to HK$64.1m. This brought total net profit growth for 1H14
to 31% y-o-y to HK$397.3m for CMH.
Our View
Organic growth to continue. We expect the Group’s existing toll
roads to continue to post mid to high single-digit earnings growth
over the medium-term, as traffic on China’s roads keeps climbing.
Meanwhile, the Group’s financial position continues to improve with
the strong cash flow generated from operations. Free cash flow in
1H14 (including dividends received from JVs) was over HK$900m.
Jiurui E’way acquisition to drive future growth. The proposed
acquisition of Jiurui E’way would help expand the Group’s business,
lengthen the average remaining concession of the road portfolio and
improve its future earnings prospects. While we await the
completion of the transaction before changing our estimates, we
expect this deal to be positive for shareholders, even after taking into
account the dilution from the issue of new shares as part
consideration for this acquisition.
Recommendation
Maintain BUY and S$1.32 TP. The higher interim DPS of Scts3.5
firmly signals the Group’s intention and capability to maintain a high
payout. The stock is trading at an attractive dividend yield of nearly
7.5% and is still below book value. Re-iterate BUY.

[Nick]

Surprisingly, no report from CIMB. It should be noted that if the 7 cents dividend is maintained this year, the CB conversion price will decrease further to around 80 cents hence greater dilution. The upcoming EGM will be interesting.

(Vested)

[greengiraffe]

Had a review of short selling on CMP to see if riskless arbitrage indeed took place between CBs and underlying shares. If professional arbitragers indeed conducted riskless arbitrage, the borrowed shares that they shorted ahead of the delivery of converted shares will have to be marked "short sell" and captured under the SGX data.

i) There are hardly any evidence for the past few weeks

http://www.sgx.com/wps/wcm/connect/sgx_e...140613.txt - 0

http://www.sgx.com/wps/wcm/connect/sgx_e...140620.txt - 4k

http://www.sgx.com/wps/wcm/connect/sgx_e...140627.txt - 75k

http://www.sgx.com/wps/wcm/connect/sgx_e...140704.txt - 67k

http://www.sgx.com/wps/wcm/connect/sgx_e...140711.txt - 8k

http://www.sgx.com/wps/wcm/connect/sgx_e...140718.txt - 3k

http://www.sgx.com/wps/wcm/connect/sgx_e...140725.txt - 4k

http://www.sgx.com/wps/wcm/connect/sgx_e...140801.txt - 5k

That means to say that the rise in share price post the revival of the Jiurui deal is the result of genuine buying and the clearance of overhang of converted shares from earlier conversion.

However, interestingly there has been a marked increase on 7 & 8 August:

http://www.sgx.com/wps/wcm/connect/sgx_e...140807.txt - 384307 shares

http://www.sgx.com/wps/wcm/connect/sgx_e...140808.txt -189k

Perhaps finally some professionals are finally at work in the light of rising liquidity due to recent conversion of CBs.

The continued conversion of CBs will continue to pose an overhang of CMP. However, with management's decision to lift interim dividends to 3.5 cents, it is indicative that the management remains confident that CMP's underlying cash generation strength will be able to meet the rising absolute dividend outlays as a result of steady stream of CBs conversion.

Vested
GG