On July 4th, Lanjing News learned (Reporter Wang Xiaonan) that CITIC Financial Assets has announced shareholding in Daqin Railway with a market cap of 100 billion.
On the evening of July 3, Daqin Railway announced that it had received a 'Brief Report on Equity Changes' from CITIC Financial Assets, informing it that in the form of convertible bonds, it would convert its holding of 30.01 million Daqin convertible bonds into Daqin Railway's A-share ordinary shares, with a conversion price of 6.22 yuan/share and a converted stock number of approximately 0.482 billion shares. After the conversion of the convertible bonds, CITIC Financial Assets will hold a total of 0.907 billion shares of Daqin Railway's A-share ordinary shares, accounting for 5% of the total number of shares issued by Daqin Railway.
Prior to this equity change, CITIC Financial Assets held 0.425 billion shares of Daqin Railway's common stock and 35.749 million Daqin convertible bonds (the convertible bonds entered the conversion period on June 18, 2021).
So when did CITIC Financial Assets start laying out the shareholding of Daqin Railway?
In the first quarter of 2024, CITIC Securities Asset Management-China CITIC Financial Asset Management Co., Ltd.-CITIC Securities Asset Management-Ternary Single Asset Management Plan (hereinafter referred to as 'CITIC Securities Asset Management') first entered the top ten shareholders list of Daqin Railway, holding 0.425 billion shares, or 2.42% of the total outstanding shares.
On June 28th, a block trade occurred on Daqin Railway, with a total transaction of 0.425 billion shares, a total transaction amount of 3.032 billion yuan, a fill price of 7.14 yuan/share, and a sell order from an institutional account. Daqin Railway's closing price that day was 7.16 yuan/share, up 0.85%, and a total transaction amount of 0.549 billion yuan; the block trade's transaction amount accounted for 551.94% of that day's total transaction amount, with a discount of 0.28%.
The buyer's branch of the aforementioned transaction was the CITIC Securities Beijing Business Center Institutional Securities Business Department, and the seller's branch was an institutional account. The number of shares involved in the transaction also corresponded to the amount held by CITIC Securities Asset Management. In the 'Brief Report on Equity Changes', Daqin Railway also disclosed that CITIC Financial Assets' ownership of 2.42% of its shares comes from the block trade. In other words, CITIC Financial Assets is laying out Daqin Railway in advance through CITIC Securities Asset Management.
According to the official website of CITIC Financial Assets, the company was formerly known as China Huarong Asset Management Company and was established in 1999, as one of China's four major state-owned asset management companies (AMCs) at the time. In January 2024, it was renamed China CITIC Financial Asset Management Co., Ltd. CITIC Financial Asset Management's major shareholders include CITIC Group, Ministry of Finance, ZhongBao Rongxin Private Equity Fund Co., Ltd., and China Life Insurance (Group) Company, among others. Among them, CITIC Group ranks first with a 26.46% shareholding.
Currently, CITIC Financial Assets' main business includes non-performing asset management, financial services business, as well as asset management and investment business. It also holds equity in five listed companies: CITIC Limited, China Everbright Bank, Zhongshan Public Utilities Group, China Merchants Expressway Network Technology Holdings, and Chongqing M&E.
Regarding the reason for the shareholding in Daqin Railway, CITIC Financial Assets stated that it is based on its optimism about its development prospects and recognition of its value. Currently, the company still holds 5.739 million Daqin convertible bonds, and may continue to increase its shareholding and/or implement conversion in the next twelve months. As of the close on July 4th, the fill price of Daqin convertible bonds was 120.842 yuan/share, and thus the market value of CITIC Financial Assets' holding of 5.739 million shares was approximately 0.693 billion yuan.
On December 14, 2020, Daqin Railway publicly issued a total face value of RMB 32 billion convertible bonds with a term of six years, and the funds raised were used for the acquisition of the state-owned authorized land use rights of the China Railway Taiyuan Bureau Group Co., Ltd. and the 51% equity interest in Taiyuan Railway Hub Southwest Loop Co., Ltd. held by the China Railway Taiyuan Bureau Group Co., Ltd. Subsequently, on January 15, 2021, the convertible bonds were listed for trading on the Shanghai Stock Exchange.
The large convertible bonds for equity swaps also brought the "butterfly effect" to Daqin Railway. The company's total share capital changed from 15.747 billion shares at the end of 2023 to 18.141 billion shares on July 2, 2024. According to the above share changes, Daqin Railway adjusted the per-share distribution amount of the 2023 profit distribution plan in accordance with the principle of unchanged total profit distribution amount. The cash dividend distributed per share was adjusted from 0.44 yuan (including tax) to 0.38193 yuan (including tax).
It should be pointed out that the dividend plan implemented by Daqin Railway in 2023 was to distribute 4.8 yuan for 10 shares, which obviously diluted the rights of stockholders.
Meanwhile, the initial conversion price of Daqin Railway's convertible bonds was 7.66 yuan/share, and it was adjusted according to the profit distribution plan in previous years. After adjusting the per-share distribution amount of the 2023 profit distribution plan accordingly, the conversion price of Daqin convertible bonds, which resumed trading on July 11, will be adjusted from 6.22 yuan/share to 5.84 yuan/share. As of July 4, the balance of unconverted Daqin convertible bonds was 11.486 billion yuan, and the proportion of unconverted bonds was 35.9%.
Information shows that Daqin Railway mainly operates railway passenger and freight transportation business, while also providing services to other domestic railway transportation companies. Among them, freight transportation business is the main source of the company's business income. In 2023, freight income accounted for 77.09% of the company's main operating income. The goods transported by the company are mainly thermal coal, and mainly undertake the task of transporting coal from provinces such as Shanxi, Inner Mongolia and Shaanxi to other regions.
In 2023, Daqin Railway achieved a new high in performance, with revenue of 81.02 billion yuan, a year-on-year increase of 6.95%; and a net profit attributable to shareholders of 11.93 billion yuan, a year-on-year increase of 6.55%. While the performance has been increasing year by year, Daqin Railway has also been "actively" rewarding shareholders. Since its listing in 2006, Daqin Railway has distributed dividends 18 times, making it a high dividend stock in the A-share market, with a cumulative cash dividend of 106.048 billion yuan and an average dividend rate of 54.42% since listing.
The optimistic outlook for the company is also the reason why CITIC Financial Assets continues to increase its holdings of Daqin Railway. However, the company's performance was weak in the first quarter of this year, with both revenue and net profit growth rate decreasing. In the first quarter of 2024, Daqin Railway achieved operating income of 18.268 billion yuan, a year-on-year decrease of 7.92%, and a net profit attributable to shareholders of 3.046 billion yuan, a year-on-year decrease of 16.65%.