Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2023/1106/2023110601778.pdf" target="_blank" rel="noopener">6 November 2023</a>, <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> announced its rights offering on both its H-Shares and its A-Shares, previously mooted on <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0523/2023052301097.pdf" target="_blank" rel="noopener">23 May</a>.</li>
<li>The rights were discussed by <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> in <a href="https://skr.ma/gt9ra" target="_blank" rel="noopener">Zhejiang Expressway (576 HK) Rights Offering - The Dynamics May Be Interesting</a>. He liked the stock.  That was a good call. </li>
<li>The current implied stub - net of Expressway's 40.3% look-through stake in <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities (601878 CH)</a> - is back to pre-Covid levels.  I'd be looking to unwind the stub here. </li>
</ul>


On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering - The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
The current implied stub - net of Expressway's 40.3% look-through stake in Zheshang Securities (601878 CH) - is back to pre-Covid levels.  I'd be looking to unwind the stub here. 


Zhejiang Expressway (576 HK): Life In The (Too) Fast Lane

Travis Lundy

<ul>
<li>Last week, <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.</li>
<li>The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It's probably unneeded, but it's there. </li>
<li>The stock is cheap. The company will boost its payout ratio. And it isn't that "heavy" a deal. The Rights Trading Dynamics may be interesting.</li>
</ul>


Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It's probably unneeded, but it's there. 
The stock is cheap. The company will boost its payout ratio. And it isn't that "heavy" a deal. The Rights Trading Dynamics may be interesting.


Zhejiang Expressway (576 HK) Rights Offering - The Dynamics May Be Interesting

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

China Communications Construction / Event-Driven

<ul>
<li>The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.</li>
<li>We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.</li>
<li>The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.</li>
</ul>


The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.


CSI REITs Index: An Investable Benchmark Launches Today

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Zhejiang Expressway Co H / Equity Bottom-Up

<ul>
<li>We believe there is room for <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> to raise dividend payout ratio moderately, following that of <a href="https://www.smartkarma.com/entities/anhui-expressway-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5236:1" rel="noopener">Anhui Expressway (995 HK)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a>. </li>
<li>It has a comparable gearing with SZEX, positive earnings outlook, improved operating cash flow and manageable capex which all are supportive to raise payout ratio.</li>
<li>If it increases to 55% payout, versus an average of 45.6% previously, we estimate the stock is trading on attractive dividend yield of 11.3% and 12.4%, respectively for FY21-22.</li>
</ul>


We believe there is room for Zhejiang Expressway Co H (576 HK) to raise dividend payout ratio moderately, following that of Anhui Expressway (995 HK) and Shenzhen Expressway (548 HK). 
It has a comparable gearing with SZEX, positive earnings outlook, improved operating cash flow and manageable capex which all are supportive to raise payout ratio.
If it increases to 55% payout, versus an average of 45.6% previously, we estimate the stock is trading on attractive dividend yield of 11.3% and 12.4%, respectively for FY21-22.


Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

Thematic (Sector/Industry)

<ul>
<li>China's toll road sector has gone up by 47.4% since 2022, but it remains an excellent yield play with an average yield of 7.2% and 7.8% in FY24 and FY25.</li>
<li>1Q24 profit is solid, with 3-year forecast earnings CAGR at a healthy 6.5%. <a href="https://www.smartkarma.com/entities/anhui-expressway-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5236:1" rel="noopener">Anhui Expressway H (995 HK)</a> and <a href="https://www.smartkarma.com/entities/jiangsu-express-co-ltd-h" target="_blank" data-smartkarma-citation="entities:9956:1" rel="noopener">Jiangsu Expressway (H) (177 HK)</a> have the most consistent DPS trend.</li>
<li>We like <a href="https://www.smartkarma.com/entities/jiangsu-express-co-ltd-h" target="_blank" data-smartkarma-citation="entities:9956:1" rel="noopener">Jiangsu Expressway (H) (177 HK)</a> for its track record and growth prospects. As a relative underperformer in the sector, it is poised to catch up.</li>
</ul>


China's toll road sector has gone up by 47.4% since 2022, but it remains an excellent yield play with an average yield of 7.2% and 7.8% in FY24 and FY25.
1Q24 profit is solid, with 3-year forecast earnings CAGR at a healthy 6.5%. Anhui Expressway H (995 HK) and Jiangsu Expressway (H) (177 HK) have the most consistent DPS trend.
We like Jiangsu Expressway (H) (177 HK) for its track record and growth prospects. As a relative underperformer in the sector, it is poised to catch up.


China Toll Road Sector: Higher for Longer......Yields

China

Zhejiang Expressway Co., Ltd., through its subsidiaries, designs, constructs, operates, and manages high grade roads, as well as develops and operates certain ancillary services, such as technical consultation, advertising, automobile servicing, and fuel facilities.

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Zhejiang Expressway Co H (576 HK)

Zhejiang Expressway (576 HK): Life In The (Too) Fast Lane

I'd be looking to unwind this set-up and take the other side - short Zhejiang Expressway (576 HK), long Zheshang Securities (601878 CH) here.

David Blennerhassett

Zhejiang Expressway (576 HK) Rights Offering - The Dynamics May Be Interesting

The rights traded down on the open as some long-holders sold, then traded up, helping the stock to trade up. Far more rights than shares traded....

Travis Lundy

CSI REITs Index: An Investable Benchmark Launches Today

CSI launches the CSI REITs Index today with 14 constituents. ETFs should be launched in the near future. Given the huge oversubscription on the...

Brian Freitas

Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

Higher dividend payout is a possibility and its financial profile can support such increase. At 55% payout (historical average at 45.6%), FY21-22...

Osbert Tang, CFA

China Toll Road Sector: Higher for Longer......Yields

China's toll road sector has performed solidly since 2022, but is still offering attractive yields and healthy profit. Jiangsu Expressway stands...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zhejiang Expressway (576 HK): Life In The (Too) Fast Lane

I'd be looking to unwind this set-up and take the other side - short Zhejiang Expressway (576 HK), long Zheshang Securities (601878 CH) here.

David Blennerhassett

Zhejiang Expressway (576 HK) Rights Offering - The Dynamics May Be Interesting

The rights traded down on the open as some long-holders sold, then traded up, helping the stock to trade up. Far more rights than shares traded....

Travis Lundy

CSI REITs Index: An Investable Benchmark Launches Today

CSI launches the CSI REITs Index today with 14 constituents. ETFs should be launched in the near future. Given the huge oversubscription on the...

Brian Freitas

Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

Higher dividend payout is a possibility and its financial profile can support such increase. At 55% payout (historical average at 45.6%), FY21-22...

Osbert Tang, CFA

China Toll Road Sector: Higher for Longer......Yields

​China's toll road sector has performed solidly since 2022, but is still offering attractive yields and healthy profit. Jiangsu Expressway stands...

Osbert Tang, CFA

China's toll road sector has performed solidly since 2022, but is still offering attractive yields and healthy profit. Jiangsu Expressway stands...