Unlocking Value

At the annual general meeting of China Merchants China Direct Investments (CMCDI, 133 HK), a shareholder complained that he finds it difficult to judge the valuation of CMCDI’s non-listed assets.

We, Argyle Street Management, agree. Opaqueness of valuation is one reason why CMCDI trades at such large discount to net asset value.

How does CMCDI value non-listed investments?

Non-listed investments account for more than half of CMCDI’s portfolio.

CMCDI often hires third-party valuers/appraisers to value non-listed investments.

But many shareholders (including ASM ourselves) can’t really tell if the valuers/appraisers are really using sensible valuation method or assumptions.

CMCDI’s obscure disclosures do not help, either.

For example, non-listed China Credit Trust (CCT) is CMCDI’s second largest investment (after China Merchants Bank shares). As at 31 December 2023, CMCDI valued its 7% CCT at US$ 148m, or 21% of CMCDI’s total assets.

The following extract (from P. 125 in 2023 annual report) are the only data points we have on the valuation of CCT, which is lumped together with other non-listed assets. Not exactly useful.

Increasing transparency

CMCDI should increase transparency, by disclosing the valuation method and key assumptions, for each major investments that is, say, larger than 3% of the portfolio.

For example, in the case of CCT, we suggest CMCDI to disclose:

• What method is used? (price-to-book? price-to-earnings? discounted cash flow?)
• Which comparable companies (if any) are used?
• What is the weighting of each comparable company?

Increasing transparency will go a long way narrowing the discount to net asset value. Better yet, transparency costs nothing. CMCDI’s manager will not lose any management fees.

We are now on WeChat and Whatsapp. Chat with us.

💬 WeChat 微信: ASM_Argyle

💬 WhatsApp: +852 6317 6371

🖥️ UnlockValueChinaMerchants.com

📧 ChinaMerchants@asmhk.com

---

在招商局中国基金有限公 司（“中国基金”，股票代码133.HK）的年度股东大会上，一位股东抱怨他发现很难判断中国基金非上市资产的价值。

我们Argyle Street Management完全同意。估值的不透明性是中国基金交易价格远低于其净资产价值的原因之一。

中国基金如何对非上市资产进行估值呢？

非上市资产占据了中国基金投资组合的一半以上。

中国基金经常聘请第三方评估师对非上市投资进行估值。

但是，许多股东（包括我们自己）实际上无法确定评估师是否使用了正确的估值方法或假设。

中国基金模糊的披露也没有起到帮助的作用。

例如，非上市的中诚信托是中国基金的第二大投资（仅次于招商银行股票）。截至2023年12月31日，中国基金将其7%的中诚信托估值为1.48亿美元，占中国基金总资产的21%。

以下是我们可以找到的关于中诚信托估值情况的唯一数据（来自2023年年度报告第125页），它与其他非上市资产混在一起。且并不是非常有用。

提升透明度

我们，Argyle Street Management，认为中国基金应该通过公开披露每个重大投资（比如超过投资组合3%的投资）的估值方法和关键假设以增加透明度。

例如中诚信托投资，我们建议CMCDI披露：

• 使用了哪种方法？（市净率？市盈率？现金流贴现？）
• 参考了哪些可比公司？
• 每个可比公司的权重是多少？

增加透明度将大大缩小股价折价与净资产价值之间的差距。而且增加透明度几乎没有成本，不会影响投资经理的管理费用。

我们现在有了微信和WhatsApp，随时与我们联系：

💬 微信: ASM_Argyle

💬 WhatsApp: +852 6317 6371

🖥️ UnlockValueChinaMerchants.com

📧 ChinaMerchants@asmhk.com