CITIC Securities Co., Ltd. second largest shareholder announcement: plans to reduce holdings by no more than 1% of shares!

On November 12, Yuexiu Capital announced that its board of directors approved a proposal to sell no more than 1.00% of CITIC Securities' total share capital through the secondary market. The announcement also indicated that as of November 12, Yuexiu Capital had already sold 28 million shares of CITIC Securities.

In Yuexiu Capital's development strategy, investing in CITIC Securities has brought considerable returns over the years. In the first half of 2024 alone, the confirmed investment income was 903 million yuan, while the net profit attributable to the parent company for the same period was 1.016 billion yuan. In this regard, Yuexiu Capital stated that the transaction plan could yield good investment returns, and the recovered funds would help the company optimize its asset structure and promote green transformation.

Planned Reduction of 1% Equity

According to the details of the transaction plan disclosed in the announcement, the target of Yuexiu Capital's sale this time is CITIC Securities' A-shares or H-shares, primarily conducted through secondary market transactions, with the number of shares sold not exceeding 1.00% of CITIC Securities' total share capital (including the number of shares sold before November 12, 2024), and the net profit generated from the sale of CITIC Securities shares not exceeding 50% of the company's audited net profit attributable to the parent company for the most recent accounting year (including the net profit generated from shares sold before November 12, 2024).

It is noteworthy that before November 12, Yuexiu Capital had already sold 28 million shares of CITIC Securities. According to Yuexiu Asset's announcement, in line with the company's own development strategy and financial arrangements, and in accordance with the "Interim Measures for the Administration of Share Reduction by Shareholders of Listed Companies" and other relevant regulations, the company's management agreed to the sale of part of CITIC Securities shares by the company and its subsidiaries, with a cumulative total of 28 million shares sold as of November 12, 2024, accounting for 0.19% of CITIC Securities' total share capital.

According to Yuexiu Capital's announcement, as of October 30, 2024, the company and its subsidiaries directly and indirectly held a total of 1.325 billion shares of CITIC Securities, accounting for 8.94% of CITIC Securities' total share capital. Among them, 931 million shares were A-shares, accounting for 6.28% of CITIC Securities' total share capital; 394 million shares were H-shares, accounting for 2.66% of CITIC Securities' total share capital.

The above shareholding situation is consistent with the number of shares held by shareholders disclosed in CITIC Securities' semi-annual report. Based on this, it can be inferred that Yuexiu Capital completed the transaction of selling 0.19% equity of CITIC Securities between October 31 and November 12. Recently, it happens to be a time when CITIC Securities' stock price is "on the rise." Wind shows that during this period, the cumulative increase in CITIC Securities' stock price was 23.56%.

Previously Continued to Increase Holdings in CITIC Securities

Yuexiu Capital is a diversified financial listed platform under the Guangzhou State-owned Assets Supervision and Administration Commission, currently controlling multiple financial business platforms including Yuexiu Leasing, Guangzhou Assets, Yuexiu Industrial Fund, Yuexiu Industrial Investment, Yuexiu Guarantee, and Yuexiu Jinke. In Yuexiu Capital's development blueprint, CITIC Securities holds an important position Yuexiu Capital's connection with CITIC Securities originated from Guangzhou Securities. In 2020, CITIC Securities completed the acquisition of Guangzhou Securities, and as the seller, Yuexiu Capital received 810 million A-shares issued by CITIC Securities, accounting for 6.26% of CITIC Securities' total share capital at that time. Subsequently, Yuexiu Capital established a "3+1" core industrial structure of "financial leasing, non-performing asset management, investment management + strategic investment in CITIC Securities," and continuously consolidated its position as the second-largest shareholder of CITIC Securities through increasing holdings and participating in private placements.

According to Yuexiu Capital's disclosure, since 2021, the company and its subsidiaries have continuously increased their holdings in CITIC Securities through purchasing in the secondary market, participating in CITIC Securities' A-share rights issue, and H-share (06030.HK, hereinafter the same) subscription. In the first half of 2024, Yuexiu Capital also strategically increased its holdings in CITIC Securities' H-shares by 527 million yuan through Guangzhou Yuexiu Capital, raising its shareholding ratio in CITIC Securities by 0.26 percentage points compared to the beginning of the year.

In March of this year, Yuexiu Capital welcomed the lifting of restrictions on the shares obtained from the sale of Guangzhou Securities and participation in private placements, but the company chose to extend the lock-up period by 6 months, which will expire on September 10, 2024. At that time, Yuexiu Capital stated that this decision was mainly based on confidence in the continued development and value recognition of CITIC Securities, which can bring stable returns and support the healthy development of the capital market, protecting the interests of a wide range of public investors. Currently, with the new round of lock-up period expiring, the shares sold by Yuexiu Capital this time and the stocks currently held are all non-restricted circulating shares.

Investment in CITIC Securities Confirmed Earnings of 903 Million Yuan in the First Half of the Year

Regarding this transaction, Yuexiu Capital stated that it expects the sale of 1% equity in CITIC Securities to bring good investment returns, and the recovered funds will help the company optimize its asset structure and promote green transformation.

From a financial investment perspective, Yuexiu Capital has indeed achieved considerable returns from its previous investment in CITIC Securities. Yuexiu Capital's 2024 semi-annual report mentioned that it recognized investment income of 903 million yuan from holding CITIC Securities stock using the equity method during the reporting period.

From Yuexiu Capital's own performance perspective, the company achieved revenue of 6.747 billion yuan in the first half of the year, a year-on-year increase of 3.39%; it achieved a net profit attributable to the parent company of 1.016 billion yuan, a year-on-year decline of 30.55%. This means that the investment income from CITIC Securities has exceeded 80% of its own net profit attributable to the parent company.

In addition, as a shareholder of CITIC Securities, Yuexiu Capital can also steadily enjoy cash dividends as listed securities firms increase their dividend payouts. In the first half of the year alone, CITIC Securities announced a cash dividend plan of 3.557 billion yuan, proposing to distribute 2.4 yuan (including tax) for every 10 shares. According to the long-term equity investment report disclosed in Yuexiu Capital's semi-annual report, the cash dividends or profits obtained from CITIC Securities amounted to 630 million yuan.

Looking back at Yuexiu Capital itself, in the first half of the year, the performance of the company's three major business segments was unsatisfactory. Data shows that the revenue from financial leasing, non-performing asset management, and investment management businesses all declined compared to the same period last year, with decreases of 13.21%, 61.31%, and 11.14%, respectively In this announcement, Yuexiu Capital emphasized that after the sale of part of its shares in CITIC Securities, it will still hold more than 5% of CITIC Securities' shares, legally enjoying the rights of a CITIC Securities shareholder, and will continue to account for the investment income of the remaining shares using the equity method.

Author of this article: Ma Jing, source: Securities China, original title: "CITIC Securities Second Shareholder Announcement: Plans to Reduce Holdings by No More Than 1%!"