Gralliance September 27th | China Merchants China Fund (00133.HK) announced that the company and the company's board of directors from time to time consider and evaluate strategic plans to enhance shareholder value. Therefore, the company has hired Howdeep to analyze and review a series of measures that the company may take in the future.
The board of directors considered Howdeep's suggestions and, after full discussion and consideration, decided on the following actions aimed at narrowing the discount of the company's share trading price to its net asset value per share without reducing the size of the group.
The board of directors is reviewing the main terms of the existing investment management agreement between the company and China Merchants China Investment Management Co., Ltd. signed on October 18, 2021. The purpose is to revise the fee rates to competitive market rates when submitting a revised investment management agreement proposal to shareholders, and the existing investment management agreement will expire on December 31, 2024.
In addition, the board of directors has considered the group's working capital. As of June 30, 2024, the group had approximately $42.32 million in cash and cash equivalents. Of which, approximately $6.09 million will be used to distribute a mid-year dividend of 4 cents per share (0.312 Hong Kong dollars) for the six months ended June 30, 2024. The remaining amount of such cash and cash equivalents, about 45%, is held by the group's subsidiaries in mainland China, and must comply with relevant laws, rules, and regulations when remitted back to Hong Kong; about 46% is earmarked for new investments and general operations of the group. Overall, the board of directors will continue to actively manage the cash allocation of the group to effectively meet the company's distribution requirements and frequency, and await future proceeds from investment realization.
In the longer term, the board of directors noted the need to take discount mitigation measures to enhance shareholder value. Therefore, the board of directors plans to take the following actions to achieve this goal.
First, the company may launch a share buyback tender offer in 2025, depending on the proceeds available for investment realization and compliance with all applicable laws, rules, and regulations. Secondly, after 2025, the company may consider returning realized profits to its shareholders through special dividends or on-market share buybacks. The choice between dividend distribution and on-market share buybacks will depend on market conditions at the time, particularly focusing on narrowing the discount of the company's share price to its net asset value per share.
