China Merchants Holdings Pacific

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I already expected this question...

They are basically instilling confidence by their under-taking...

Of course, that will be dependent on their views on CMP and if you share their confidence...

To me, non renounceable, non under-written means that they have a low costs funding exercise - perhaps can save as much as 1.5% investment banker fees and hence their commitment to mop up everything @ $1.00 which is a 1.5% discount.

CM HJ came up with the deal, they are taking up every share... nothing more that I can ask.

My speculative view is as follows:

i) CCP is undertaking one of the most controversial and tedious exercise in middle kingdom's financial market history. There are so many that can't wait for them to implode.

ii) I remain confident that CCP given time will stabilise the capital markets.

iii) CM HJ's move is inline with the big picture strategies. In the very likely event, they will end up with a high stake in CMP again possibly close to 80% (yet to calculate). In the same spirit, Liu Qiang - vendor of Honest Queen (Jiurui) will be holding on to his remaining stake even post moratorium.

iv) At the right time, CM HJ will dilute its stake on HKSE via whatever method to satisfy investors' demand there and then.

CMP's interims y'day has somewhat mitigated fears of China's widely reported slowdown and its impact on traffic volumes. YTW's growth remains very strong in mid teens. Beilun turned in some surprise growth notwithstanding construction works for expansion and while Jiurui appears an expensive acquisition currently is still a post 2017 growth story.

The pending acquisitions will open up a new virgin ground for CMP - also inline with CCP's plans for the inner west...

Whilst this is an unexpected diversion due to unforeseen circumstances, its remains part of the very strong backing script.

GG

(31-07-2015, 08:57 AM)Bibi Wrote: Interesting. For knowledge sake, can i ask, does it make more sense to buy from open market now if one does not wants his holdings to be diluted instead of subscribing to the new shares? Buying now also entitled to the 3.5 cts dividends.
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Thanks for the insight GG.
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(31-07-2015, 09:10 AM)greengiraffe Wrote: I already expected this question...


To me, non renounceable, non under-written means that they have a low costs funding exercise - perhaps can save as much as 1.5% investment banker fees and hence their commitment to mop up everything @ $1.00 which is a 1.5% discount.

i thought technically it's a premium? since the 1 buck u pay for new shares are not entitled to dividends.
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Will you take up the allocation @$1, GG?

I am yet to read the offer doc. How about other fellow shareholders?

(vested, and at a glance, the offer isn't attractive at all to OPMI)
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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Paradox isn't it?

As of speaking, it is trading at 1.00. I might as well buy directly from the market right since technically I will be paying 0.965 after dividend?

The PO isn't enticing. Neither is the acquisition.

I hope they do a Jiurui - walk away and come back later.
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(31-07-2015, 10:09 AM)marandaz Wrote: Paradox isn't it?

As of speaking, it is trading at 1.00. I might as well buy directly from the market right since technically I will be paying 0.965 after dividend?

The PO isn't enticing. Neither is the acquisition.

I hope they do a Jiurui - walk away and come back later.

I think the irony is that some MI would rather the management issue 1 for 1 rights at 50 cents a shares...Big Grin
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(31-07-2015, 10:09 AM)marandaz Wrote: Paradox isn't it?

As of speaking, it is trading at 1.00. I might as well buy directly from the market right since technically I will be paying 0.965 after dividend?

The PO isn't enticing. Neither is the acquisition.

I hope they do a Jiurui - walk away and come back later.

Absolutely agree with you, might as well buy from market. But for OPMI, in essence if you agree with the deals they r doing. this is in essence a premium funding provided by their parent co, since they are willing to undertake all other such rights not taken up.
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Our Comrades want our commitment with them for the long (wrong term). They are not welcoming short term traders or arbitragers.

As I always say we must never under-estimate our Comrades.

CMP to me is like reading Arabian Nights... it remains a work in progress.

The re-assuring part is the defensive business that it is in. MIIF under a astute, seen it all global investment banker tried it in China and we know the results.

In Rome, do what the Romans do. In the middle kingdom if anyone choose to, we will have to pick the right Comrades. Whether they treat us as one of their kind is dependent on which stage of the drama we are in.

For me, they are raising their stakes in building a bigger concept that is inline with Chinese incepted initiatives AIIB. It is the beginning rather than the end.

How buddies would like to play along with this theme is dependent on each's risk appetite.

I m convinced of their intentions but to maintain my exposure in an enlarged entity will elevate my risk profile beyond what i think is the overall mkt risks that I can bear.

Vested
Core
GG

(31-07-2015, 10:00 AM)CityFarmer Wrote: Will you take up the allocation @$1, GG?

I am yet to read the offer doc. How about other fellow shareholders?

(vested, and at a glance, the offer isn't attractive at all to OPMI)
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China Merchants Hldgs (Pacific), BUY, Last Traded Price: S$1.02 (STI : 3,249.52)
Price Target : S$1.45 (43% upside) (Prev S$1.54)
By: Paul YONG CFA +65 6682 3712 paulyong@dbs.com

1-for-2 rights issue to fund Guangxi toll roads
• 2Q15 core earnings grew 6% y-o-y, in line with expectations; interim dividend of 3.5 Scts per share same as last year
• Proposed rights issue to raise S$583m-S$633m to help fund Guangxi toll road acquisitions
• EPS dilution will be larger than our previous expectations, but net gearing will be much lower than projected
• Maintain BUY with adjusted target price of S$1.45

Encouraging 2Q15 results. Earnings from its core toll road operation grew 6% y-o-y to HK$194.5m, as toll revenues grew 9% to HK536.8m. As last year included HK$68.3m gain from the disposal of the property business, net earnings fell 22% y-o-y to HK$195.1m.

Proposed 1-for-2 rights issue. The Group announced a 1-for-2 rights issue of up to 633.8m new shares at an issue price of S$1 per share, with an undertaking by parent shareholder China Merchants Group to take up their allotment and any excess new shares. With a current outstanding share capital of 1,167.3m shares and including outstanding convertible bonds and employee options that may be converted/exercised, the number of new shares to be issued would be between 583.6m and 633.8m, implying 46-50% dilution. The proceeds would be used to partially fund the recently announced acquisition of three toll roads in Guangxi.

Maintain BUY, TP adjusted to S$1.45. Although the potential dilution is higher than our previous expectations, the resultant net gearing will be much lower (0.6x vs 0.9x) with slightly better absolute earnings because of lower interest costs. However, EPS will be lower than what we projected previously. We assumed the group would maintain annual dividends at 7 S cts per share, implying 84% payout of FY15F and FY16F earnings, or about 7% dividend yield at current price. We assumed 600m new shares would be issued.


Attached Files
.pdf   cmp-rts-dbs.pdf (Size: 193.22 KB / Downloads: 28)
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Using Paul's 600m shares, about HK$161m of CB needed to be converted. Total enlarged share cap will be 1800m and assuming only CM HJ take up the entire PO, CM HJ will end up owning 1364.8m or 75.8% stake in the post PO share cap before remaining HK$321m worth of CBs are being converted.

(31-07-2015, 06:53 PM)greengiraffe Wrote: China Merchants Hldgs (Pacific), BUY, Last Traded Price: S$1.02 (STI : 3,249.52)
Price Target : S$1.45 (43% upside) (Prev S$1.54)
By: Paul YONG CFA +65 6682 3712 paulyong@dbs.com

1-for-2 rights issue to fund Guangxi toll roads
• 2Q15 core earnings grew 6% y-o-y, in line with expectations; interim dividend of 3.5 Scts per share same as last year
• Proposed rights issue to raise S$583m-S$633m to help fund Guangxi toll road acquisitions
• EPS dilution will be larger than our previous expectations, but net gearing will be much lower than projected
• Maintain BUY with adjusted target price of S$1.45

Encouraging 2Q15 results. Earnings from its core toll road operation grew 6% y-o-y to HK$194.5m, as toll revenues grew 9% to HK536.8m. As last year included HK$68.3m gain from the disposal of the property business, net earnings fell 22% y-o-y to HK$195.1m.

Proposed 1-for-2 rights issue. The Group announced a 1-for-2 rights issue of up to 633.8m new shares at an issue price of S$1 per share, with an undertaking by parent shareholder China Merchants Group to take up their allotment and any excess new shares. With a current outstanding share capital of 1,167.3m shares and including outstanding convertible bonds and employee options that may be converted/exercised, the number of new shares to be issued would be between 583.6m and 633.8m, implying 46-50% dilution. The proceeds would be used to partially fund the recently announced acquisition of three toll roads in Guangxi.

Maintain BUY, TP adjusted to S$1.45. Although the potential dilution is higher than our previous expectations, the resultant net gearing will be much lower (0.6x vs 0.9x) with slightly better absolute earnings because of lower interest costs. However, EPS will be lower than what we projected previously. We assumed the group would maintain annual dividends at 7 S cts per share, implying 84% payout of FY15F and FY16F earnings, or about 7% dividend yield at current price. We assumed 600m new shares would be issued.
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