Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a>'s A-share listing progresses in response to an intention from US regulators to delist its ADSs. </li>
<li>Shareholders have approved the listing and the prospectus has been accepted by the CSRC. </li>
<li>Cashed-Up CNOOC is trading cheap to domestic and international peers, together with a 7% yield, one that may increase significantly with a higher payout ratio. </li>
</ul>



CNOOC Ltd (883 HK)'s A-share listing progresses in response to an intention from US regulators to delist its ADSs. 
Shareholders have approved the listing and the prospectus has been accepted by the CSRC. 
Cashed-Up CNOOC is trading cheap to domestic and international peers, together with a 7% yield, one that may increase significantly with a higher payout ratio. 


Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. 
Companies mentioned this week:
<a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/pax-global-technology-ltd" target="_blank" data-smartkarma-citation="entities:7514:1" rel="noopener">Pax Global Technology (327 HK)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. 
Companies mentioned this week:
China Telecom (H) (728 HK), Pax Global Technology (327 HK), SK Hynix (000660 KS)

Global Emerging Markets Weekly: 29 October 2021

Travis Lundy

Event-Driven

<a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a> has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0806/2021080600069.pdf" target="_blank" rel="noopener">priced</a> its US$7.3bn offering of A-shares at RMB 4.53/share. That is not far from what I suggested might be an appropriate pricing in <a href="https://www.smartkarma.com/insights/china-mobile-941-hk-it-could-have-been-done-better-but-it-ain-t-bad-for-hs" target="_blank" data-smartkarma-citation="insights:52018" rel="noopener">China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs</a> and <a href="https://www.smartkarma.com/insights/china-telecom-728-hk-ups-div-payout-policy-there-s-a-plan-here-expect-china-mobile-to-follow" target="_blank" data-smartkarma-citation="insights:53355" rel="noopener">China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow</a>.It was also an 87% premium to the current H-share price. As discussed in those previous insights, there are obligations on the China Telecom parent, and a promise of a higher payout ratio NOW and even higher payout ratio LATER. Normally, I would suggest taking profits on an H-share which had rallied in the run-up to an A-share offering. But....... There is more below the fold.

China Telecom Corp Ltd (H) (728 HK) has priced its US$7.3bn offering of A-shares at RMB 4.53/share. That is not far from what I suggested might be an appropriate pricing in China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs and China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow.It was also an 87% premium to the current H-share price. As discussed in those previous insights, there are obligations on the China Telecom parent, and a promise of a higher payout ratio NOW and even higher payout ratio LATER. Normally, I would suggest taking profits on an H-share which had rallied in the run-up to an A-share offering. But....... There is more below the fold.

China Telecom A-Share IPO Prices; H-Share Discount Wide; Buy China Mobile

As fallout from the Trump Executive Order on Chinese military companies, the NYSE decided to delist the ADRs of <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> and <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a> and US Persons were obliged to cease investment into the stocks wherever they were listed. The H-Shares of both fell, then rose sharply one what was seen as "National Team buying." Southbound investment in the two names increased, and almost immediately the two companies set to work to "find alternative capital markets opportunities."The idea that <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a> and <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> would eventually list their shares in the mainland was deemed an almost foregone conclusion when China introduced the idea of China Depositary Receipts with a <a href="https://www.smartkarma.com/insights/pilot-program-on-china-depositary-receipts-launched-expect-the-big-5-to-prep-quickly" target="_blank" rel="noopener">Pilot Programme announced in April 2018</a>.In mid-March, China Telecom announced its <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0317/2021031700304.pdf" target="_blank" rel="noopener">proposal</a>, and in late April announced that it had applied and the CSRC had accepted its application for an A-Share listing. In late May, China Mobile announced its intention to apply shortly, as discussed in <a href="https://www.smartkarma.com/insights/china-mobile-941-hk-it-could-have-been-done-better-but-it-ain-t-bad-for-hs" target="_blank" data-smartkarma-citation="insights:52018" rel="noopener">China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs</a>.In that piece, I noted my objection to the way the planned capital raise was presented, but also noted that the details were bullish for H-share investors for both stocks. The market hasn't reacted that well to the proposals (the blue lines in the charts below). <section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/186/original/Screenshot+2021-06-21+at+9.48.55+AM.png?1624240150" class="editor-image img-responsive" data-smartkarma-image-id="214186"></figure></section></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/175/original/Screenshot+2021-06-21+at+9.45.38+AM.png?1624239961" class="editor-image img-responsive" data-smartkarma-image-id="214175"></figure></section>One of the reasons was hidden in the back of the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0524/2021052400195.pdf" target="_blank" rel="noopener">Circular</a> for China Mobile, which was almost word-for-word the same as the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0317/2021031700304.pdf" target="_blank" rel="noopener">Announcement</a> for China Telecom.It was a combination of Shareholder Return and Price Stabilization Obligation. <div class="content-highlight">This morning, China Telecom has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0621/2021062100289.pdf" target="_blank" rel="noopener">announced</a> that it will adjust the Dividend Policy to a 60% payout ratio, lifting it later to 70%. </div>

As fallout from the Trump Executive Order on Chinese military companies, the NYSE decided to delist the ADRs of China Mobile (941 HK) and China Telecom Corp Ltd (H) (728 HK) and US Persons were obliged to cease investment into the stocks wherever they were listed. The H-Shares of both fell, then rose sharply one what was seen as "National Team buying." Southbound investment in the two names increased, and almost immediately the two companies set to work to "find alternative capital markets opportunities."The idea that China Telecom Corp Ltd (H) (728 HK) and China Mobile (941 HK) would eventually list their shares in the mainland was deemed an almost foregone conclusion when China introduced the idea of China Depositary Receipts with a Pilot Programme announced in April 2018.In mid-March, China Telecom announced its proposal, and in late April announced that it had applied and the CSRC had accepted its application for an A-Share listing. In late May, China Mobile announced its intention to apply shortly, as discussed in China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs.In that piece, I noted my objection to the way the planned capital raise was presented, but also noted that the details were bullish for H-share investors for both stocks. The market hasn't reacted that well to the proposals (the blue lines in the charts below). One of the reasons was hidden in the back of the Circular for China Mobile, which was almost word-for-word the same as the Announcement for China Telecom.It was a combination of Shareholder Return and Price Stabilization Obligation. This morning, China Telecom has announced that it will adjust the Dividend Policy to a 60% payout ratio, lifting it later to 70%. 

China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow

In very early January, the NYSE decided that <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> ADRs needed to be delisted. Then they didn't need to be delisted. Then they again needed to be delisted and we are on a path to seeing that complete shortly.The stock was subject to Trump's Executive Order 13959 regarding Communist Chinese Military Companies as were the shares of other Chinese telcos and China Mobile shares were deleted from global indices. That event marked a local low in the first week of January and shares promptly rallied 30%, later settling at an easy 15-20% above the index deletion point. This, and the fact that China a couple of years ago created a method for overseas-jurisdiction Chinese companies to list in China - particularly for very high market cap "tech" companies aiming to take market share from the US for its high-trading value "exported tickers" meant that at some point, the Chinese telcos creating a secondary listing in China was not going to be a surprise. Taking the example of <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a> which received permission in April to list its shares in mainland markets, on 17 May China Mobile announced its board had decided to pursue a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0517/2021051701190.pdf" target="_blank" rel="noopener">Proposed RMB Share Issue</a>.A week later, and we have a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0524/2021052400195.pdf" target="_blank" rel="noopener">Circular</a>.China Mobile shareholders are being asked to accept that management issue some RMB 50+bn of shares for the stated purpose of investing in "the development of premium 5G networks, the development of new infrastructure for cloud resources, the development of gigabit broadband and smart home, the development of smart mid-end platform, the research and development of the next-generation information technology and digitalized and intelligent ecosystem."That sounds reasonable enough as a concept, but it ignores the fact that China Mobile has nine times that much money in available cash. and eight times that amount in net cash + securities holdings.If China Mobile shares were trading at a high multiple, this might be forgivable, but the shares are trading at a forward adjusted EV/EBITDA multiple of 1.6x and an ex-net cash &amp; securities PER of less than 4x. There are mitigants here. There is possible pricing at a premium to the Hs. There are "price stabilization measures". There are "shareholder return" measures. Some of these might be really worthwhile. The governance issues involved in this Circular and project remain problematic. But there are little stars here, twinkling in the darkness. More below the fold.

In very early January, the NYSE decided that China Mobile (941 HK) ADRs needed to be delisted. Then they didn't need to be delisted. Then they again needed to be delisted and we are on a path to seeing that complete shortly.The stock was subject to Trump's Executive Order 13959 regarding Communist Chinese Military Companies as were the shares of other Chinese telcos and China Mobile shares were deleted from global indices. That event marked a local low in the first week of January and shares promptly rallied 30%, later settling at an easy 15-20% above the index deletion point. This, and the fact that China a couple of years ago created a method for overseas-jurisdiction Chinese companies to list in China - particularly for very high market cap "tech" companies aiming to take market share from the US for its high-trading value "exported tickers" meant that at some point, the Chinese telcos creating a secondary listing in China was not going to be a surprise. Taking the example of China Telecom Corp Ltd (H) (728 HK) which received permission in April to list its shares in mainland markets, on 17 May China Mobile announced its board had decided to pursue a Proposed RMB Share Issue.A week later, and we have a Circular.China Mobile shareholders are being asked to accept that management issue some RMB 50+bn of shares for the stated purpose of investing in "the development of premium 5G networks, the development of new infrastructure for cloud resources, the development of gigabit broadband and smart home, the development of smart mid-end platform, the research and development of the next-generation information technology and digitalized and intelligent ecosystem."That sounds reasonable enough as a concept, but it ignores the fact that China Mobile has nine times that much money in available cash. and eight times that amount in net cash + securities holdings.If China Mobile shares were trading at a high multiple, this might be forgivable, but the shares are trading at a forward adjusted EV/EBITDA multiple of 1.6x and an ex-net cash &amp; securities PER of less than 4x. There are mitigants here. There is possible pricing at a premium to the Hs. There are "price stabilization measures". There are "shareholder return" measures. Some of these might be really worthwhile. The governance issues involved in this Circular and project remain problematic. But there are little stars here, twinkling in the darkness. More below the fold.

China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs

China

China Telecom Corporation Limited, through its subsidiaries, provides wireline telephone, data, and Internet, as well as leased line services in China.

Price Gauge
52-week Range	0.00 - 0.00
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China Telecom (H) (728 HK)

CNOOC (883 HK): This Is An Outright Buy

CNOOC is inexpensive versus its two domestic peers, its international peers, and to historical levels. I would expect the imminent A-share listing...

David Blennerhassett

Global Emerging Markets Weekly: 29 October 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow

China Telecom ups its dividend payout policy ahead of A-Share listing in order to support higher A-share valuation. The goal is to boost A-share...

Travis Lundy

China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs

China Mobile will follow China Telecom in issuing A-shares. The constructs are almost identical. Both suggest upside to the Hs, perhaps more for...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CNOOC (883 HK): This Is An Outright Buy

CNOOC is inexpensive versus its two domestic peers, its international peers, and to historical levels. I would expect the imminent A-share listing...

David Blennerhassett

Global Emerging Markets Weekly: 29 October 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

China Telecom A-Share IPO Prices; H-Share Discount Wide; Buy China Mobile

China Telecom has priced its A-share IPO at an 87% premium to the H. To get to the same 2021e DivYield, China Mobile will have to be 20+ higher,...

Travis Lundy

China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow

China Telecom ups its dividend payout policy ahead of A-Share listing in order to support higher A-share valuation. The goal is to boost A-share...

Travis Lundy

China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs

China Mobile will follow China Telecom in issuing A-shares. The constructs are almost identical. Both suggest upside to the Hs, perhaps more for...

Travis Lundy