Post for: #China H-Shares ^{(19 Posts)}

On the morning of September 24, 2024, the Chinese government unveiled a series of economic measures aimed at boosting growth in sectors like the property market and stock market. The announcement was made at a State Council press conference attended…

Earlier this year, President Xi Jinping outlined the plan to transform China into a "financial superpower" that is based on strong economic principles and different from Western models. In response to this transformation roadmap, the State Council released policy guidelines…

On May 10, 2024, the H-shares of the China Banks rose substantially. The four largest state-owned banks in China ended the day with the following closing prices: News reports that the China authorities are considering the the City's proposals to…

Four of China's largest state-owned banks: Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC) and Agricultural Bank of China (ABC), have recently announced plans to pay interim dividends (half-yearly) beginning in 2024. This…

Summary

This article looks at the valuation of Chongqing Rural Commercial Bank shares listed on the Stock Exchange of Hong Kong (Ticker: 03618.HK). The Dividend Discount Model is used to estimate the share's Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction to Chongqing Rural Commercial Bank

Chongqing Rural Commercial Bank Co., Ltd., formerly Chongqing Rural Credit Cooperative, was founded in 1951 and has a 70-year history. Chongqing was selected as one of the first batch of pilot provinces and cities for the nationwide rural credit cooperative reform in 2003.

The rural commercial bank was established in 2008 as a limited liability joint stock company to acquire all assets and liabilities of 38 County (District) Rural Credit Cooperative Unions.

The bank's H-share was successfully listed on the Main Board of the Hong Kong Stock Exchange in 2010, making it the first listed rural commercial bank in China as well as the first listed bank in western China.

The bank successfully listed on the main board of the Shanghai Stock Exchange in 2019, becoming China's first rural commercial bank with A+H dual listing and the first bank with A+H dual listing in western China.

The main businesses of the bank are corporate finance, inclusive finance, retail finance, and financial markets:

• The corporate finance business primarily offers a wide range of corporate finance products and services to businesses and public institutions, government agencies, and financial institutions, such as corporate loans and deposits, trade financing loans, bills, and guarantees.
• The primary business of Inclusive Finance is to provide financial services to new agricultural business entities such as small and micro enterprises, farmers, and farmers' professional cooperatives.
• The retail finance business consists of personal loan and deposit business, bank card business, and intermediary business.
• The financial market business consists primarily of capital operation, investment banking, and asset custody.

Dividend Discount Model

The Dividend Discount Model is one of several methods for determining stock value. The procedure is similar to the Discounted Cash Flow model, except that dividends are substituted for free cash flow as the cash flowing to the investor. One advantage of this method is that dividend information is easily accessible from the company's financial reports. It is also my preferred method for valuing dividend-paying stocks. Dividends are tangible income for the investor and represent the return of investment and return on investment. Dividend cash allows the investor to reinvest the proceeds in the same stock or in other more appealing stocks, achieving the all-important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of Chongqing Rural Commercial Bank (03618.HK) shares listed on the Stock Exchange of Hong Kong.

China Construction Bank (CCB) is one of the big four State-owned Banks and its H-shares, trading on the Hong Kong Stock Exchange, currently offer some of the best values in the market. An earlier article on CCB provided an estimate…

The Industrial and Commercial Bank of China (ICBC) is one of the mainland China Bank stocks which I keep in my Dividend Income Portfolio. An earlier article on ICBC provided an estimate of the Intrinsic Value, Margin of Safety and…

I have previously published estimates of the intrinsic values of the H-shares of Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and China Citic Bank. In their latest quarterly financial reports, all…

Summary

This article looks at the valuation of China Telecom shares trading on the Stock Exchange of Hong Kong (Ticker: 00728.HK). The Dividend Discount Model is used to estimate the share's Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction

China Telecom is one of the 3 giant state-owned companies which dominate the telecommunications industry in China, the other two being China Mobile and China Unicom. On November 12, 2020, Trump issued Executive Order 13959 prohibiting US investors from owning securities of Chinese companies which have been tagged by the US as being Chinese military companies, including China Telecom. ADRs of China Telecom trading on the New York Stock Exchange were suspended on January 11, 2021 and were subsequently delisted.

Following the US action against its ADRs, China Telecom successfully applied for secondary listing on the Shanghai Stock Exchange and its A-shares began trading in August 2021, raising over 54 billion RMB for the company. The IPO was a resounding success, attracting 20 strategic investors, including Huawei Technologies and Bilibili.

As part of the requirement for its secondary listing on the Shanghai Stock Exchange, China Telecom made some important changes to its dividend policy:

Three important points to note here with regards to the new dividend policy.

• • China Telecom to its increase dividend payout ratio for FY2021 to not less than 60%.

• • China Telecom also committed "that within three years after the A Share Offering and Listing, the profit to be distributed by the Company in cash for each year will gradually increase to 70% or above of the profit attributable to equity holders of the Company for that year." (Source: Company announcement 21 June 2021)

• • In contrast to the current policy of annual payouts, dividends shall be paid on an interim basis starting from FY 2022.

The new dividend policy is important in the sense that it increases the frequency of cash flow for investors, and it also serves to reduce the amount of surplus cash held on China Telecom's books and will potentially boost the Return on Equity.

Dividend Discount Model is one of many methods for valuing stocks. The procedure is similar to the Discounted Cash Flow model, with the free cash flow being substituted dividends as the cash flowing to the investor. One advantage of using this method is that dividends data are easily available from the company's financial reports. It is also my preferred valuation method for dividend-paying stocks. The reason being that dividends are tangible income to the investor and it represents the return of investment and return on investment. The cash from dividends allows the investor to reinvest the proceeds into the same stock or into other more attractive stocks to achieve the all important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of China Telecom (00728.HK) shares trading on the Stock Exchange of Hong Kong.

Ping An Insurance is a Chinese insurance stock which I hold in my Dividend Income Portfolio. I have previously published an article on Ping An in which I gave an estimate of Ping An's Intrinsic Value, Margin of Safety and…