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

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

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

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

Smartkarma AI Primers, Smartkarma

αSK Primers

Smartkarma AI Primers

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<ul>
 <li>
<a href="https://smartkarma.com/entities/zhejiang-expressway-co-ltd-class-h">Zhejiang Expressway</a> operates a dual-business model, combining stable, cash-generative toll road assets in the economically robust Zhejiang province with a more volatile but high-growth securities business.</li>
 <li>The company is characterized by its attractive dividend yield and strong value proposition, supported by a low price-to-book ratio and high scores on Value and Dividend metrics. However, recent financial performance shows a concerning decline in operating and free cash flow.</li>
 <li>Future growth is tied to the economic trajectory of the Yangtze River Delta, while the performance of its securities arm introduces a significant element of market risk and earnings volatility.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  
Zhejiang Expressway operates a dual-business model, combining stable, cash-generative toll road assets in the economically robust Zhejiang province with a more volatile but high-growth securities business.
  The company is characterized by its attractive dividend yield and strong value proposition, supported by a low price-to-book ratio and high scores on Value and Dividend metrics. However, recent financial performance shows a concerning decline in operating and free cash flow.
  Future growth is tied to the economic trajectory of the Yangtze River Delta, while the performance of its securities arm introduces a significant element of market risk and earnings volatility.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Primer: Zhejiang Expressway (576 HK) - May 2026

China

Zhejiang Expressway Co., Ltd. is an investment holding company primarily engaged in the design, construction, operation, maintenance, and management of high-grade roads. It also operates a securities business offering broking, asset management, and other financial services. The company was founded on March 1, 1997, and is headquartered in Hangzhou, China.

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Zhejiang Expressway (576 HK)