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

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Zhejiang Expressway Co H / Equity Bottom-Up

<ul>
<li>By way of its 54.79% ownership 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>, <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> is an attractive indirect vehicle to access the mainland securities sector.  </li>
<li>The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.</li>
<li>ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.</li>
</ul>


By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.  
The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.
ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.


Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

<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?

Haitong Securities Co Ltd (H) / Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a>/<a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> merger is a done deal.  The key risk, as with<a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">TCM (570 HK)</a>'s Offer, is one of timing.</li>
<li>IF you are an arbitrageur,  Buy <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> vs A Basket of FHC Peers (not including Taishin).</li>
<li>
<a href="https://www.smartkarma.com/entities/first-pacific-co-ltd" target="_blank" data-smartkarma-citation="entities:173:1" rel="noopener">First Pacific Co (142 HK)</a>'s 46.2% share of <a href="https://www.smartkarma.com/entities/metro-pacific-investments-co" target="_blank" data-smartkarma-citation="entities:1054:1" rel="noopener">Metro Pacific Investments Co (MPI PM)</a>at delisting last year was worth ~US$1.25bn. It is now potentially worth ~US$3.21bn. </li>
</ul>


The Guotai Junan Securities (2611 HK)/Haitong Securities Co Ltd (H) (6837 HK) merger is a done deal.  The key risk, as withTCM (570 HK)'s Offer, is one of timing.
IF you are an arbitrageur,  Buy Shin Kong Financial Holding (2888 TT) vs A Basket of FHC Peers (not including Taishin).

First Pacific Co (142 HK)'s 46.2% share of Metro Pacific Investments Co (MPI PM)at delisting last year was worth ~US$1.25bn. It is now potentially worth ~US$3.21bn. 


Last Week in Event SPACE: Guotai/Haitong, Shin Kong, China Conch Ventures, First Pac, Zhejiang E'way

<ul>
<li>Since <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> and <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> were suspended around a month ago, pending a merger, a basket of peers are up 37%. </li>
<li>The Shanghai Composite is up 21%. Volumes are up, commissions are up. <a href="https://www.smartkarma.com/entities/citic-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:164:1" rel="noopener">Citic Securities (600030 CH)</a>, the largest broker by market cap, is up 42% in the past month. </li>
<li>
<a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway (576 HK)</a> is also up ~45% in recent weeks due to its 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>.  The question: how much more in the tank?</li>
</ul>


Since Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) were suspended around a month ago, pending a merger, a basket of peers are up 37%. 
The Shanghai Composite is up 21%. Volumes are up, commissions are up. Citic Securities (600030 CH), the largest broker by market cap, is up 42% in the past month. 

Zhejiang Expressway (576 HK) is also up ~45% in recent weeks due to its 40.3% look-through stake in Zheshang Securities (601878 CH).  The question: how much more in the tank?


Zhejiang Expressway (576 HK): "Cheap" Access To Zheshang Securities

China

Zheshang Securities Co., Ltd. operates as a securities brokerage company. The Company offers securities brokerage, investment banking, asset management, investment advisory, securities dealing, and fund consignment services. Zheshang Securities also conducts financing and futures businesses.

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Zheshang Securities (601878 CH)

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): Cheap Access to the Roaring Securities Sector

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

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

Last Week in Event SPACE: Guotai/Haitong, Shin Kong, China Conch Ventures, First Pac, Zhejiang E'way

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Zhejiang Expressway (576 HK): "Cheap" Access To Zheshang Securities

I question the sustainabilty. Arguably, these brokerage stocks are not trading with any specific fundamental in mind; but one in which investors...

David Blennerhassett

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): Cheap Access to the Roaring Securities Sector

​Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

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

Last Week in Event SPACE: Guotai/Haitong, Shin Kong, China Conch Ventures, First Pac, Zhejiang E'way

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Zhejiang Expressway (576 HK): "Cheap" Access To Zheshang Securities

I question the sustainabilty. Arguably, these brokerage stocks are not trading with any specific fundamental in mind; but one in which investors...

David Blennerhassett

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...