<News Alert> China Mobile said to buy back H-shares after completion of A-share listing

  • CM said to buy back H-shares after expiration of A-share over-allotment option on 7 Feb 2022
  • The company had a Buy-back mandate for some long time, and it has not done any share buy back before
  • The news should be positive to share price in the near term
  • We expect that dividend hike is more likely, following China Telecom and China Unicom’s increase in payout ratio

What’s New

– China Mobile (CM, 941 HK) said to exercise its power under the Buy-back mandate to buy back H-shares, according to HKEx announcement today after market close.

– Note that the Buy-back mandate was approved at 2021 AGM, which allows the company to buy back up to 2,048m or 10% of H-shares.

– Given that HK listing rules do not permit share issuance within 30 days after share buy back, the company has not exercised its power to buy back shares following the A-share listing announcement on 17 May 2021.

– Now, the company plans to buy back H-shares after the expiration of the exercise period of the over-allotment option in relation to A-share issue on 7 February 2022.

Our View:

– The news, at the first glance, should be positive to share price in the near term.

– The 10% H-shares is equivalent to c.Rmb80bn at current share price of HK$48. This could be easily funded by its Rmb400bn+ net cash. 

– However, we noted that CM has been having Buy-back mandate for some long time, and it has not done any share buy back before. The actual amount that they will spend on share buy back is unknown, but unlikely to use up the 10% quota, in our view.

– We believe that dividend hike is more likely. We mentioned in our earlier note that we expect CM to raise its payout ratio to 70% (vs. currently 54%) following China Telecom and China Unicom’s dividend hike in 2021. This will translate into forward dividend yield of c.10%.

– We currently rate BUY on the counter with TP of HK$67.3.