Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Merchants China Direct Investments / Event-Driven

<ul>
<li>Argyle Street Management (ASM), a 9.01% shareholder in <a href="https://www.smartkarma.com/entities/china-merchants-china-direct-investments" target="_blank" data-smartkarma-citation="entities:6862:1" rel="noopener">China Merchants China Direct Investments (133 HK)</a>, has been (very) publicly angling for change in this closed-end fund. <a href="https://unlockvaluechinamerchants.com/" target="_blank" rel="noopener">Here</a> is their website.</li>
<li>The core issue is CMCDI's P/NAV ratio of 0.41x compared to closed-end fund peers of 0.8x-0.9x. </li>
<li>CMCDI has finally responded to ASM's overtures with the prospect of a share buyback and a special dividend. But details are thin on the ground. </li>
</ul>


Argyle Street Management (ASM), a 9.01% shareholder in China Merchants China Direct Investments (133 HK), has been (very) publicly angling for change in this closed-end fund. Here is their website.
The core issue is CMCDI's P/NAV ratio of 0.41x compared to closed-end fund peers of 0.8x-0.9x. 
CMCDI has finally responded to ASM's overtures with the prospect of a share buyback and a special dividend. But details are thin on the ground. 


CMCDI (133 HK)'s Proposals Light On Detail

Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

China Merchants China Direct Investments / Equity Bottom-Up

<ul>
<li>ASM is a hedge fund with a strong track record of investor activism in taking over distressed assets and closed-end funds. </li>
<li>Lazard, the second largest CMCDI shareholder, bought shares last week at a multi-year high sending a strong message to the market.</li>
<li>CMCDI can also explore announcing a discount management program besides agreeing to ASM's claim to sell assets to pay dividends and offer a share buyback to reduce the NAV discount.</li>
</ul>


ASM is a hedge fund with a strong track record of investor activism in taking over distressed assets and closed-end funds. 
Lazard, the second largest CMCDI shareholder, bought shares last week at a multi-year high sending a strong message to the market.
CMCDI can also explore announcing a discount management program besides agreeing to ASM's claim to sell assets to pay dividends and offer a share buyback to reduce the NAV discount.


The Battle of CMCDI: What Is the Endgame?

<ul>
<li>While Elizabeth Kan barely survived the AGM vote, ASM has effectively mobilized minority shareholders.</li>
<li>Lazard (owns 15% of CMCDI) probably voted alongside ASM (owns 9%). Other than China Merchants Group and Victor Chu, almost no "outside shareholders" voted in favor of Kan, .</li>
<li>The next battleground is a vote in November when CMCDI needs to renew its investment management agreement. Intense behind-the-scene negotiations are expected, given the bargaining power ASM now demonstrated.</li>
</ul>


While Elizabeth Kan barely survived the AGM vote, ASM has effectively mobilized minority shareholders.
Lazard (owns 15% of CMCDI) probably voted alongside ASM (owns 9%). Other than China Merchants Group and Victor Chu, almost no "outside shareholders" voted in favor of Kan, .
The next battleground is a vote in November when CMCDI needs to renew its investment management agreement. Intense behind-the-scene negotiations are expected, given the bargaining power ASM now demonstrated.


CMCDI Update: Warning Shot Fired At AGM Despite Kan’s Successful Re-Election

<ul>
<li>Activist Argyle Street's approach to closed-end investment company <a href="https://www.smartkarma.com/entities/china-merchants-china-direct-investments" target="_blank" data-smartkarma-citation="entities:6862:1" rel="noopener">China Merchants China Direct Investments (133 HK)</a> (CMCDI) has a certain David Webb-like quality.</li>
<li>Apart from the deep value angle, the analysis of director Elizabeth Kan's potential conflict of interest is particularly insightful. Argle will vote against Kan's re-election at the 20th June AGM</li>
<li>Given this upcoming vote, as I've done with <a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano (709 HK)</a> and <a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a> previously, it's useful to investigate the lesser-known shareholder register, a byproduct of investigative disclosure reports.</li>
</ul>


Activist Argyle Street's approach to closed-end investment company China Merchants China Direct Investments (133 HK) (CMCDI) has a certain David Webb-like quality.
Apart from the deep value angle, the analysis of director Elizabeth Kan's potential conflict of interest is particularly insightful. Argle will vote against Kan's re-election at the 20th June AGM
Given this upcoming vote, as I've done with Giordano (709 HK) and L'Occitane (973 HK) previously, it's useful to investigate the lesser-known shareholder register, a byproduct of investigative disclosure reports.


CMCDI (133 HK): AGM Outcome May Provide Another Leg-Up

<ul>
<li>The recent news on <a href="https://www.smartkarma.com/entities/china-merchants-china-direct-investments" target="_blank" data-smartkarma-citation="entities:6862:1" rel="noopener">China Merchants China Direct Investments (133 HK)</a> was director Elizabeth Kan narrowly getting re-elected. Of interest, ISS recommended shareholders vote AGAINST. Glass Lewis was FOR re-election.</li>
<li>The key takeaway here is that the majority of the minorities want change. The next development may occur in the lead up to the management agreement renewal in November. </li>
<li>In addition, Argyle Street Management, CMSCI's key shareholder activist, is also requesting the company buy back 20% of shares outstanding at 90% of NAV. </li>
</ul>


The recent news on China Merchants China Direct Investments (133 HK) was director Elizabeth Kan narrowly getting re-elected. Of interest, ISS recommended shareholders vote AGAINST. Glass Lewis was FOR re-election.
The key takeaway here is that the majority of the minorities want change. The next development may occur in the lead up to the management agreement renewal in November. 
In addition, Argyle Street Management, CMSCI's key shareholder activist, is also requesting the company buy back 20% of shares outstanding at 90% of NAV. 


CMCDI (133 HK): Buybacks And Management Fees Into Focus

Hong Kong

China Merchants China Direct Investments Limited is a close-ended investment company. It invests principally in unlisted enterprises in China. It also invests in hi-tech projects, including initial public offerings and/or pre-listing placements and any shares listed in Hong Kong.

China Merchants China Direct Investments (133 HK)

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52-week Range	0.00 - 0.00
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China Merchants China Direct Investments (133 HK)

CMCDI (133 HK)'s Proposals Light On Detail

If small, illiquid names, with a activism angle are your bag, get involved. Expect the investment management fee vote later this year to get voted...

David Blennerhassett

The Battle of CMCDI: What Is the Endgame?

CMCDI's AGM was held yesterday, where Elizabeth Kan survived the vote with a razor-thin margin. The outcome demonstrated ASM's ability to mobilize...

Alec Tseung

CMCDI Update: Warning Shot Fired At AGM Despite Kan’s Successful Re-Election

ASM successfully demonstrated its ability to mobilize other minority shareholders and its bargaining power at the AGM, although Director Elizabeth...

Alec Tseung

CMCDI (133 HK): AGM Outcome May Provide Another Leg-Up

CMCDI is cheap. If small, illiquid names, with a activism angle are your thing, pick up shares here. Keep an eye on the AGM. If Kan is booted, this...

David Blennerhassett

CMCDI (133 HK): Buybacks And Management Fees Into Focus

CMCDI remains cheap. I think a buyback is a distinct possibility. And changes to the management agreement have to occur within the next few months.

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CMCDI (133 HK)'s Proposals Light On Detail

If small, illiquid names, with a activism angle are your bag, get involved. Expect the investment management fee vote later this year to get voted...

David Blennerhassett

The Battle of CMCDI: What Is the Endgame?

CMCDI's AGM was held yesterday, where Elizabeth Kan survived the vote with a razor-thin margin. The outcome demonstrated ASM's ability to mobilize...

Alec Tseung

CMCDI Update: Warning Shot Fired At AGM Despite Kan’s Successful Re-Election

​ASM successfully demonstrated its ability to mobilize other minority shareholders and its bargaining power at the AGM, although Director Elizabeth...

Alec Tseung

CMCDI (133 HK): AGM Outcome May Provide Another Leg-Up

CMCDI is cheap. If small, illiquid names, with a activism angle are your thing, pick up shares here. Keep an eye on the AGM. If Kan is booted, this...

David Blennerhassett

CMCDI (133 HK): Buybacks And Management Fees Into Focus

CMCDI remains cheap. I think a buyback is a distinct possibility. And changes to the management agreement have to occur within the next few months.

David Blennerhassett

ASM successfully demonstrated its ability to mobilize other minority shareholders and its bargaining power at the AGM, although Director Elizabeth...