Damn the torpedoes and the long-term threat to the economy posed by a non-performing loan crisis! We’re back in the market, and we hope it’s full speed ahead for our purchase: Jiangsu Expressway (600377.SH), operator of, well, expressways. We bought 200 shares today at RMB6.63 (US$0.97) each.
Why this target and why this moment? Jiangsu’s H-shares (0177.HK) were recently the subject of an upgrade by Citi, which cited the company’s relatively weak performance to date this year. That’s certainly true compared to Sichuan Expressway (0107.HK, and soon to list in Shanghai), which has seen its Hong Kong-traded shares rise more than 125% this year; Jiangsu’s H-shares are up slightly more than 1% since January. The company’s A-shares have done rather better, rising more than 22% this year, but that’s not terribly surprising in and of itself.
But it’s not about underperformance to date. The company has a strong balance sheet that is being de-leveraged, capital expenditures are likely to be small (the company finished its major reconstruction projects some time ago) and earnings growth is expected to be positive.
Furthermore, we expect Jiangsu to benefit from the effects of overall investment in infrastructure, not to mention the huge growth in auto sales. Granted, those are not all new drivers – sales have been boosted by government subsidies encouraging people to upgrade their cars – but many of them are.
We also hope to take advantage of potential excitement around Sichuan Expressway’s expected Shanghai listing.
All in all, we’re glad to be back in the market. The Capitalist Roader is down 32.9% since we first bought in on June 3, 2008; the Shanghai Composite Index is down 10.3%. We’ve got a long fight ahead if we hope to beat the index again, but at least we’re back in the ring.