China Merchants Holdings Pacific

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Thank you for your kind words Jack !

I have been an investor for a couple of years now. Things has changed rapidly - once I was worried about Guihuang 100% profit sharing expiry in 2014 but after the YTW M&A, this has become an after thought. As a result, it is apparent that the Group fortunes (and ours) could change drastically over the coming years based on the Management performance ie poor execution could easily see a reversal in profits and dividends. This is why I try to continually keep abreast of their corporate developments. The AGM was an interesting session and a lot of valid points was raised by minority shareholders. I thought the electronic poll voting was pretty cool ! Drizzt kindly wrote a great summary of the AGM and FY results here - http://www.investmentmoats.com/money-man...q1-report/

On another note, DBSV released a report today -

Earnings growth of 14% in line

• 1QFY13 net profit of HK$128.4m (+14% y-o-y) is in
line with expectations; makes up 27% of full year
core profit

• Revenue growth of 27% y-o-y to HK$436m driven
largely by consolidation of Ningbo-Beilun Port
Expressway

• Positive on CMHP’s earnings growth prospects,
which are driven by both organic traffic growth in
China as well as acquisitions

• Maintain BUY and S$1.12 TP

Highlights

CMHP recorded 1Q13 numbers that were largely in line with
our expectations. Bottom line of HK$128.4m (+14% y-o-y),
makes up 27% of our full year forecast. Revenue rose by
27% y-o-y (excluding property development), which was
largely driven by the consolidation of Ningbo-Beilun Port
Expressway, acquired in Nov 12, while gross profit rose 17%
to HK$250.4m. With higher finance costs (+44% to
HK$51m), due to higher borrowings to fund the acquisition
of Ningbo-Beilun Port, and higher administrative costs of
HK$24.4m (+70%; includes some one-off acquisition
expenses), offset partially by higher contribution from JV toll
roads Guiliu and Guihuang Highways, PBT rose 10% y-o-y to
HK$252.m

Our View

We continue to like CMHP's prospects, which will be driven
by both organic growth of traffic on its toll roads, as well as
new acquisitions such as Ningbo-Beilun Port Expressway. The
completion of the Jiurui Expressway acquisition will also boost
the Group's longer term prospects, and will transform the
CMHP into a pure toll road player.

Recommendation

The stock is currently trading at fully diluted 10.7x FY13F PE,
declining to 9.6x in FY14F, and offers a prospective yield of
6.2%, which is attractive. It is also trading cum dividend of
2.75 Scts. Maintain BUY and S$1.12 TP.

(Vested)
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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Jacmar,Thanks for the reminder cannot anyhow shout in this forum.
And yup, I agree drizzt summary on cmph is great as well , in fact Valuebuddie and investmentmoat posting on cmhp is always the first I look out for after the result are out.

I had wanted to let go of this counter quite a few time(profit quite tempting) but it always surprise me to the upside and more things to look forward to. After ytw drive earning in 2011 and 2012, there is beilun in 2013. When guihuang < 100%, jiurui will probably drive earning, and my feeling is there could be a big upside to jiurui. I'm also quite surprise that that the toll-free policy did not affect cmph as much as I had expected and Guiliu is still growing after many years.
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The govt is firmly behind CM Pac - they have to ensure that CM Pac gets the best till they get off the truck eventually.

Even after the first placement to dilute the stake, they will have to ensure that the going remains good or else they will not be able to convince more placements to further dilute the stake.

CM Pac has the potential to be a big cap China infrastructure play. With eventual successful improvement in liquidity, one can expect CM Pac to be included in major indices leading to SorChais chasing the stock in the future. SGX lacks co diversifications and personally CM Pac will become one such key index component.

They have been in it for more than a decade and the returns must meet their holding period - bearing in mind real estate investments in China over the same period have returned handsomely due to massive asset inflation.

Roads are key strategic assets for any countries. Tolling it add a commercial angle for an essential service so that the economic benefits can be monetised.

If North-South Expressway can create substantial spinoffs for Renong-UEM when privatisation started in 1988/89, then there are massive wealth creation opportunities in a big and populated country like China. So far there are various provincial focused listed toll roads but CM Pac is shaping up to be a Pan-Chinese play. However, I should note that the exponential part of the growth curve for Chinese toll road has passed and hence the acquisition price for matured cash cow is high and hence the financial engineering that will be attached to such acquisitions to ensure that they are accretive to shareholders as and when they become available.

MIIF is a different case altogether - They are a bunch of angmo fund managers ever keen to push deals to meet their annual targets in order to ensure that they get their annual bonuses. Unfortunately, MIIF is also the last bit of Macquarie Bank's infrastructure history and is saddled with all sorts of rubbish at the tail end of the Macbank's infrastructure party pre GFC.

GG

(27-04-2013, 07:41 AM)Jack31 Wrote: Jacmar,Thanks for the reminder cannot anyhow shout in this forum.
And yup, I agree drizzt summary on cmph is great as well , in fact Valuebuddie and investmentmoat posting on cmhp is always the first I look out for after the result are out.

I had wanted to let go of this counter quite a few time(profit quite tempting) but it always surprise me to the upside and more things to look forward to. After ytw drive earning in 2011 and 2012, there is beilun in 2013. When guihuang < 100%, jiurui will probably drive earning, and my feeling is there could be a big upside to jiurui. I'm also quite surprise that that the toll-free policy did not affect cmph as much as I had expected and Guiliu is still growing after many years.
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hi GG and Jacmar, i wouldn't call myself a sifu. I am pretty screwed up compared to most here. Majority of the tough work is done by Nick. Had we not dug in, we will just wholesale take this as a profitless business with insane amount of debt on top and underlying. He dug deep and stayed with it.

Jacmar, perhaps Nick and I saw you, but the beehoon and pastries was tempting. There were only 2 talking to Mr Jiang so perhaps we would know who you are haha.

Thanks for the insights.
Dividend Investing and More @ InvestmentMoats.com
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(28-04-2013, 08:12 PM)Drizzt Wrote: hi GG and Jacmar, i wouldn't call myself a sifu. I am pretty screwed up compared to most here. Majority of the tough work is done by Nick. Had we not dug in, we will just wholesale take this as a profitless business with insane amount of debt on top and underlying. He dug deep and stayed with it.

Jacmar, perhaps Nick and I saw you, but the beehoon and pastries was tempting. There were only 2 talking to Mr Jiang so perhaps we would know who you are haha.

Thanks for the insights.

Drizzt.....you are doing rather well, give urself some credit. Big Grin
My Dividend Investing Blog
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Oh no.. Jiurui acqusition not completed.. Might have a big pullback tml.. Hopefully I'm wrong since NZ property just turn black last quarter..
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(15-05-2013, 08:41 PM)Jack31 Wrote: Oh no.. Jiurui acqusition not completed.. Might have a big pullback tml.. Hopefully I'm wrong since NZ property just turn black last quarter..

http://info.sgx.com/webcoranncatth.nsf/V...C002E330D/$file/Non-completion_Announcement.pdf?openelement

No worries comrades. Inability to complete transactions likely to have its own reasons - perhaps there is hanky panky surrounding the toll road that they don't want to complete.

In fact, retaining the NZ prop is good as NZ prop mkt has turned around and apparently there is a bubble building in NZ prop mkt.

Sleep Easy
GG
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Most unfortunate that the acquisition did not pan out but I guess they have their reasons. Long time shareholders will not be surprised - prior the GFC, there were negotiations to acquire stakes in 2 BOT toll road projects. CM Pacific was supposed to invest RMB 1.21 billion for a 70% stake in Zhengshao Expressway and RMB 0.60 billion for a 60% stake in Denggong Expressway. Neither of the acquisitions were completed.

http://www.finanznachrichten.de/pdf/2007...F19A.1.pdf [M&A Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...9002CB924/$file/Termination_of_heads_of_agreement.pdf?openelement [Termination]

Lets see whether Mr Market will react to the news tomorrow.

(Vested)
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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Wow Nick, u can really dig out information, godfather of cmph indeed.
Lol, always nice to hear from u and gg.
Seems like holding really well till now, I was still preparing this morning to add slightly more as I expect it to come down! No chance till now, but I'm happy! Haaaaa. Smile
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DBS Group Research . Equity 16 May 2013
Singapore Company Focus
BUY S$0.895 STI : 3,441.53
Price Target : 12-Month S$ 1.07 (Prev S$ 1.12)

Jiurui E'way acquisition is off

• Proposed acquisition of Jiurui E’way for shares,
cash and NZ property ops has been called off
• FY13/FY14F EPS (fully diluted) lifted by
10%/13% as Jiurui was not expected to
contribute immediately
• DCF-based TP cut to S$1.07 as Jiurui would have
been value accretive
• Maintain BUY, stock offers yield of 6.2%

Jiurui deal called off. CMH (Pacific) announced
yesterday evening that its deal to acquire Jiurui
Expressway in exchange for its New Zealand property
business as well as cash and new shares has not been
completed, mainly due to failure to obtain approvals
from the New Zealand authorities to transfer its
property business to the sellers of Jiurui Expressway


CMH(Pacific) has to look for other ways to dispose
its non-core business and search for other
acquisitions. Taking into account that the deal is now
off, and that Jiurui E'way was not expected to be very
profitable initially and new shares will no longer be
issued, we lift our fully diluted EPS forecasts for FY13
and FY14 by 10.4% and 12.5% respectively to 9.2Scts
and 10.5Scts. However, CMH (Pacific) would have to
look for other avenues to dispose its non-core NZ
property business (which makes up 7Scts of our new
S$1.07 TP), as well as look for other acquisitions.

Maintain BUY, TP cut to S$1.07. Our TP is reduced to
S$1.07, reflecting the long term value that Jiurui E'way
would have brought to the table. Our TP assumes that
all the convertible bonds are converted (in the money,
with exercise price of S$0.84).

(Vested)
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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