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My brief comments -
The previous policy was a minimum of 50% of net profit to be distributed to shareholders. Historically, the payout ratio was approx 60 - 70% due to the low capex and being debt-free in both Group level and in the under-lying asset level. This gave it flexibility in declaring high payouts. However, with the debt-funded acquisition of YTW (which also carries debt in its books) coupled with the gains on disposal of Yuyao Highway, I believe the Management is being conservative by guiding a 5.5 cent payout for the next 2 years. A 50-60% payout policy may be too much for them to handle at this stage. An absolute dividend figure do have its advantages - I recall being shocked when they slashed the dividend to 2.0 cents due to impairment of Yuyao Highway in 2H 2009 despite a growth in the core profits.
Competition from toll-free roads and natural disasters. Possible asset dumping from CMG. Dilutive placements etc.
Since these assets are concession based assets, they do have a terminal life-span. Hence, it is imperative for CM Pacific to build up its cash hoard over the years to finance new acquisitions to extend the average concession period of its portfolio. If they are unable to purchase new toll roads (due to high prices) or lack of opportunities, they might end up with no revenue generating assets in the next 2 decades. Its small size also prevents it from engaging in BOT investments unlike its larger SEHK peers. I don't think debt is an issue here with its low gearing and consistent debt repayment. Its not self-liquidating as cash is being retained for asset replenishment.
Quote:Co has committed for the 1st time a clear dividend policy in years - at 5.5 cents for the next 2 years. It is trading at below NTA in excess of S$0.85.
The previous policy was a minimum of 50% of net profit to be distributed to shareholders. Historically, the payout ratio was approx 60 - 70% due to the low capex and being debt-free in both Group level and in the under-lying asset level. This gave it flexibility in declaring high payouts. However, with the debt-funded acquisition of YTW (which also carries debt in its books) coupled with the gains on disposal of Yuyao Highway, I believe the Management is being conservative by guiding a 5.5 cent payout for the next 2 years. A 50-60% payout policy may be too much for them to handle at this stage. An absolute dividend figure do have its advantages - I recall being shocked when they slashed the dividend to 2.0 cents due to impairment of Yuyao Highway in 2H 2009 despite a growth in the core profits.
Quote:What is the main risks in CM Pac given its defensive earnings from infrastructure ownership in high growth China.
Competition from toll-free roads and natural disasters. Possible asset dumping from CMG. Dilutive placements etc.
Since these assets are concession based assets, they do have a terminal life-span. Hence, it is imperative for CM Pacific to build up its cash hoard over the years to finance new acquisitions to extend the average concession period of its portfolio. If they are unable to purchase new toll roads (due to high prices) or lack of opportunities, they might end up with no revenue generating assets in the next 2 decades. Its small size also prevents it from engaging in BOT investments unlike its larger SEHK peers. I don't think debt is an issue here with its low gearing and consistent debt repayment. Its not self-liquidating as cash is being retained for asset replenishment.
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.