HK 第48b部分; Chinese People Holdings
Picking a fight with Mr Asian Century Stocks, over a net-net that is just too juicy to ignore... trading at just over 2x P/E, while holding >2x its market cap in net cash, and with insider buying
On most occasions, I would not go against the opinion of Mr Asian Century Stocks, Michael Fritzell, buuuttt… with this tweet 👇 I do!
Sure, I have also been predominantly avoiding stingy net-nets. The trick is - as is usually the case - to find the exceptions that are just too juicy to ignore. The good news is that I (hope 🤞 I) found another such stock. Yeah, Jam_invest is not so cocky as to say that this is the best risk-reward he has ever written up, like Archetype Capital…
… but…
…I’d say the risk-reward looks pretty juicy.
In this case, the main ingredients for my attraction to this stingy net-net are…
A boring (normally) profitable business with loads of repeat sales; GAS distribution. Face it, who wants to sit in the cold around X-mas? …
… or not being able to burn them cookies?
The valuation is absurd-cheap; I see multiple reasons why the stock is available at a P/E multiple of probably just over 2x for 2025 (and 4.4x 2025H1 reported earnings alone), while holding in excess of 2x the market cap in net cash, amongst which…
Earnings were depressed for several years, by the impacts of the covid pandemic, the spike in gas cost prices in the wake of the Ukraine invasion, the general weak demand environment due to malaise (for corporate customers) in several end-markets, and some other things, which triggered large (non-cash) impairments of fixed assets. This means that the underlying earnings power has been hidden from the public, … for years
Lack of natural buyers; The market cap has shriveled over time. That has shrunk the base of investors for who the shares offer sufficient liquidity to invest in it. Moreover, the reduced liquidity of the stock has inspired several western brokers to put Buy-restrictions on it for their customers residing in Canada, Europe or the U.S.
It’s NOT Nvdia; Nope sorry, it’s not Nvidia or another AI, space, crypto, data center, meme stock or whatever is trending at the moment. As such, NOBODY is looking into, let alone talking about this stock, and as such, it is not cool to talk about it at birthday parties (yet).
Perhaps I need to include some trending accounts like Capytal Management or Collyer Bridge or some BIG accounts such as Dave Waters or Michael Burry to get people talking about it, but… Jam_invest is just too classy for that. So, I won’t.
The main owner/operator likes to buy shares cheaply; That’s right, why would you make any fuzz, promoting a stock when you’re still not done buying shares yourself? When the chairman is done buying and fancies a higher stock price, it would be all too easy to commence dividends and cause a sticker shock for investors, putting the stock at a double digit % dividend yield, all of sudden. We’ve already seen how that turned out with Mexan Limited this year.
Mexan traded around HKD 0.08 at the start of the year and did not have a dividend trackrecord. That was until it all of a sudden paid out HKD 0.241 per share this year. A 300% investment return… in dividends alone. How cool is that?! And guess what?
The stock price is still almost a double from before the dividend announcements started, and that is after paying out 300% in dividends.
The company and its cash are real; Investing in stocks of (Chinese) companies without a solid trackrecord of cash distributions to shareholders often comes with elevated (fraud) risk. In this case, it was pretty easy (for me) to verify a considerable portion of the cash (flow)… because of the specific corporate structure. Within the Piped Natural Gas (PNG) or City Gas distribution industry it is quite common to have shared ownership of the local utility. The co-owners are usually other gas distributors or local government entitites. It is possible to trace dividend payments from several jointly-owned operating entities to large listed dividend-paying companies such as China Gas Holdings $384.hk.
Catalysts; Usually, a low-single-digits (lsd) earnings multiple is enough for a stock to do well. Nevertheless, it helps the stock return process enourmously if there are some upcoming catalysts. In this case, there are again several…
Earnings inflection; The stock trades at 4.4x earnings for just the first halfyear of 2025. In the absence of (more non-cash) unusual charges, it could be trading a just over 2x for the whole year… or perhaps even better. We’ll know by the end of March 2026. If I’m right there will likely be a Profit alert, first indicating a MASSIVE profit increase from the depressed CNY 0.0017 per share for 2024.
Insider buying; The main Owner/Operator and Chairman has been buying stock gradually for over a year. He can buy an incremental 2% interest per year without triggering a mandatory takeover offer. Sometime, investors get excited about insider buying. Crazy, isn’t it?
Dividends; If I am right about profitability for 2025, then a 50% payout ratio would create a 20% divi yield, just as an example.
Just for the record, the company does NOT have a record of divi payments (yet), but operates in an industry where that is very common. Moreover, ownership of the Chairman’s stake in the company has changed, to now also include his daughter. That may have also removed a reason NOT to distribute dividends before. Finally, the balance sheets of several Associates/JV’s have been swelling up with cash, causing…
An AVALANCHE of cash distributions from operating companies to the holding companies, equaling over two-thirds of the market cap of Chinese People Holdings Co. (CPHC) within a two year period. The Board may finally get the itch to let shareholders play with some of that cash.
M&A; A lot of local City Gas distributors are jointly-owned. In the past, when these businesses were still in heavy capex mode - like the AI, cloud, and datacenter boyz are today - there was a funding reason behind that. It’s obviously easier to have multiple partners share a combined investment burden than to do it alone. That funding reason no longer applies. The capex cycle is over, balance sheet have strengthened considerably… and dividends from the Operating Companies (OpCo’s) to their holding companies have been swelling up. What’s an easier way to re-accelerate growth, than buying out the other shareholders in the joint venture companies you already know intimately for years, if not decades?
Jaminvest resources
Some useful links to key resources on Jaminvest.
🏷️ - Financial models/templates/et cetera (f🔐)
🏷️ - Hong Kong (sub-)portfolio posts
🏷️ - Portfolio posts (f🔐)
» » - Stock/Company list, alphabetical lists of many of the stocks mentioned
🏷️ - Tutorials including Excel sheets
Please find the disclaimer for all @Jam_invest content » here.
Table of contents
Remember; the website version contains an interactive Table of contents accessible on the left side of the screen.
Intro
Abbreviations
Company description
CPHC
Fujian Anran Gas
Southwest Panva
Insider stock purchases
Gas market + Business (drivers)
Financials / Peers / Valuation titbits
History
KEL Holdings becomes Chinese People
Expansion phase
Side adventures
Shenzen Lottery operations
True Vanguard - Barreled water
Pure-play gas distributor
Risks
Questions
Further learning
Cross-checks
Fujian Anran Gas / 福建安然
Hunan Civigas / 湖南中民
Xi’an Civigas / 西安中民
The end…
Footnotes
1. Intro
Do you remember the sky pollution in China from about a decade ago?
Personally, I remember seeing only for a couple of meters when I visited Beijing, in 2012.
Coal to Gas replacement was one of the solutions to tackle the air pollution… with wonderful results, I experienced myself earlier this year! Chinese People Holdings has been one of the companies behind the smog reduction. It has been building out the gas distribution infrastructure to support the coal to gas replacement that currently connects over 2.5m households and businesses (including Associate and Joint venture companies, like Fujian Anran Gas).
In May (2018)... Fujian Anran dispatched a number of key personnel to support the work of replacing coal with gas in the enclave, helping “ win the battle to defend the blue sky.”
Quite fun to see positive change with my own eyes and now investing in an absurd-cheap HK 第部分 that has been part of the transition. My discovery of and attraction to $681.hk - Chinese People Holdings Co (CPHC) was strictly by coincidence. I had put the stock on my watchlist after screening for stocks with potential for considerable (hidden) asset value. From then on, I have become more and more excited, seeing…
the market cap covered by FAV multiple times over
the Owner/Operator continuously buying shares
the avalanche of dividends flowing from subsidiaries/associates/jv’s to the holding co.,
the likely upcoming earnings inflection
the ‘side-car’ investing/operating, some of which with much larger listed industry peers, such as $384.hk China Gas Holdings and $002267.sz Shaanxi Provincial Natural Gas, that also allowed me to pretty much rule out fraud risk, ….
… BUT….
Hong Kong being Hong Kong… Obviously this stock does not come without a considerable amount of hair on it as well.
There’ve been expensive hobby projects, big related party transactions with the Owner/Operator, Dr MO Shikang (莫世康)… Isn’t that pretty much the ‘usual’ for Hong Kong small/microcaps?
On top of that, the company operates in a heavily-regulated industry (Piped natural) gas (PNG) distribution. Usually, not my favorite, and… probably worst-of-all, CPHC has not paid out any dividends in its entire life as a listed enterprise. Usually, that’s a big no-no for me with Hong Kong stocks, in part due to higher fraud-related risks. The lack of divvies did trigger me to do more work on CPHC than usual. I got away comfortable that the stated cash and cash flows are real because CPHC’ larger and also listed business partners reported figures that matched the ones presented by CPHC.
Still, hopefully, the dearth of dividends is going to change, soon. Listed industry peers typically pay divies, and the financial health of CPHC and now also from its main associates and joint ventures certainly enables it to do so.
Valuation snapshot
RMB …284m Market cap, as of 2025/12/12 » share price: HKD 0.035
RMB 1,880m Financial assets value, as of 2025/06/30
RMB ..741m Cash
RMB …108m Equity instruments at FVTOCI
RMB …103m Investment properties
RMB …113m Interests in Associates
RMB 1,114m Interest in Joint ventures
RMB …..78m Borrowings
RMB …221m Non-controlling interests
Equity instruments
The above investments represent equity interests in certain private entities established in the PRC. These entities are mainly engaged in the manufacturing and sale of glass products, banking, sale and distribution of cylinder gas and gas appliances, sale and distribution of cookware and food ingredients supply and FMCG business. These investments are not held for trading, instead, they are held for long-term strategic purposes.
P/E multiple: 1.9x underlying average EPS for the past 4 years
In the past several years results have been depressed subsequently by the Covid pandemic, the Russia-Ukraine-led gas price spike, massive impairments of PP&E, ROU assets, and Intangible assets, and operating losses at the FMCG business. That makes it rather un-useful to look at the reported earnings. My sense of ‘underlying’ earnings is an average EPS of roughly RMB 0.014 or HKD 0.016 in the period 2021-2024, just stripping out the “one-offs”… not adjusting for the bleeding in the FMCG business that has now been stopped (almost) entirely due to a business model change (towards full outsourcing).
There were/are some headwinds to the business…
in 2025H1 results were weak due to the mild winter, resulting in weak gas heating demand
high gross profit-margin installation fee income has been very weak since 2024. That may be ‘normal’ saturation of the business. CPHC has probably come close to connecting 70% of households in its operating areas to its piped gas networks. That means there are simply fewer opportunities for further network connections left… without expanding into new operating areas. The weak construction market has been an headwind here as well.
For the past four years, I arrive at a rough average annual “underlying” Net income of…
RMB 123m or RMB 0.014 per share (with 8,934.6m shares outstanding), which breaks down into…
RMB 50m+ CPHC consolidated operations (assuming 20% tax rate)
RMB ..5m- Net finance expenses (net interest inc./cost + rental income)
RMB 20m+ Share of results of Associates
RMB 58m+ Share of results of Joint ventures
Dividend income yield: 40%
What’s rather fun about CPHC is that there are many partly-owned entities within the Group… and there’s quite a bit of financial data on several of these entitites. Just from adding up the dividend streams that I see, … I arrive at roughly RMB 100m in dividend distributions made by subsidiaries/associates/joint ventures to CPHC in 2024. Just to be clear… These dividends were paid to CPHC. CPHC has not started paying out dividends itself (yet).
Non-wholly owned subsidiaries paid RMB 18.5m to Non-controlling interest holders in 2024…
NB, The top total amount of “Dividends paid to Non Controlling Interests” comes from the Cash Flow Statement. In the bottom “Subtotal” of Dividends paid to NCI’s I excluded the dividends paid to NCI’s of Xupu Civigas, because I believe that causes double-counting. Xupu Civigas should already be reflected in the figures from Hunan Civigas which is its direct parent co, holding 51% ownership. …and as CPHC owns more than 50% in these entities, it’s easy to figure out that CPHC received more than RMB 18.5m. Remember, RMB 18.5m is already pretty significant on CPHC’s entire RMB 245m market cap, but… together these subsidiaries accounted for ONLY 24% of CPHC’s revenue in 2024 (and CPHC only receives just over 50% of the profits from these subsidiaries).
The big chunk of dividend payments that CPHC received in 2024 was from its Assocciates and Joint ventures… RMB 86.977m to be exact…
Q:» Aaahhhh. No mames, Jam.. but the Associates and Joint ventures did not pay out dividends in 2023!
That is very true indeed…
Associates/Joint ventures paid RMB 87m in dividends to CPHC in 2024…
Before 2024, there was a long dearth in dividend flows from the Associates (Southwest Panva Gas Co. Ltd, effectively), and particularly from the Joint ventures (Fujian Province An Ran Gas Investment Co., Ltd., effectively).
Further below, in the section “Gas market + Business (drivers)” I show that Fujian Anran’s investment spending has come down signficantly, leading to considerable balance sheet strengthening. I believe that is indicative of other gas distribution businesses within the CPHC group, as well… suggesting dramatically improved dividend distribution power. This improved dividend distribution power is supported by regulatory pricing reform in China, which I wrote more about here ($)…
Fun fact » CPHC 2024 disclosures say that its Associates/Joint ventures declared RMB 178.7m in dividends to CPHC. RMB 87m of that was received in 2024. I believe RMB 71m was paid in 2025H1, and another RMB 32m will come in, in 2025H2.
Another fun fact, that RMB 179m in divvies paid by the Associates/JV’s to CPHC equals about 73% of CPHC’s current RMB 245m market cap.
2. Abbreviations
CGH - China Gas Holdings
CPG - Chinese People Gas Holdings » this was the name of Chinese People Holdings before the company dropped “Gas” from it. I tried to use the CPHC abbreviation only. Company filings used CPG.
CPHC - Chinese People Holdings
NDRC - The National Development and Reform Commission is the third-ranked executive department of the State Council of the People’s Republic of China, which functions as a macroeconomic management agency.
PNG - Piped Natural Gas
3. Company description
I cut up the company description in a couple of sections, first on CPHC itself, and then seperate sections for some of the main (associate/joint venture) entities.
3.a. CPHC
CPHC is a gas 1 distributor, operating under the “Civigas” (CVG) brand name. Its two main activities are…
Piped gas
Urban Piped Natural Gas (PNG) distributors obtain exclusive rights to sell and distribute PNG and to construct an urban pipeline network in their operating area, for an initial term of up to 30 years, with a preferential right of renewal.
CPHC procures, transports, and sells natural gas (NG), liquefied petroleum gas (LPG) and dimethyl ether (DME) to households and commercial and industrial (C/I) customers, through CPHC’s urban (/city) gas pipeline network.
Diagram - Distribution flow typical PNG distributor…
Source: Huzhou Gas Cylinder gas
This business system is using tank containers (pressure or cryogenic) as carriers. CPHC sells liquefied petroleum gas (“LPG”) to household and commercial and industrial (C/I) customers by tank containers, including both residential households and commercial and industrial customers.
