Monday, March 2, 2015

CM Pacific Bonus Issue Proposal

China Merchants Holdings (Pacific) has declared a DPS of $0.035 and announced last Friday that they are proposing a 1:20 bonus issue. Based on 1B existing shares, about 50M bonus shares will be issued. The rationale for the proposed bonus issue (as announced) was to reflect the growth and expansion of its business and to reward its shareholders.

I don't know about you, but maybe due to the previous experience I had with UMS bonus issue, I don't have a good feeling about this. "To reflect the growth of business..." and "reward shareholders" were about the same words used for UMS bonus announcement, but post-bonus issue, the share price has suffered decline more with respect to the pre-bonus share price. Based on the chart, I expect the recent run-up in prices to be somewhat related to the bonus issue plan, and there is a possibility that it the prices post-bonus might not hold in the short-term (I could be wrong).

Anyway, the proposal is still subjected to the shareholders' approval at EGM, but will most likely be passed in my opinion. Based on my entry price of $0.93, my post-bonus average price will be about $0.8857.

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