Churchill China Share Price (CHH)

Good to see an initiation note out from Panmure yesterday. Target price 700p. Think the main argument is a) quality company, b) cheap rating, c) strong balance sheet / cash generation, d) trough earnings with recovery potential.

You can always reinvest your dividend, albeit at a tax-deducted amount, if you don't get a buyback.

I agree that a buyback represents an excellent investment.

I don't think it will happen due to a wish to maintain share liquidity and the very significant holdings of the controlling family.

Agree with you Edward, this is a quality company at a cheap price. I do wonder how much / when growth will return but think its well run and well capitalised and should be able to wait out the current market malaise. Hospitality sales will come back in time and they are well positioned to take share and should rebound strongly when they do. What sort of rating should this trade at? I dunno, 10-12x PE seems fairly conservative.

11x PE would be 450p on depressed earnings, probably 20% higher with a bit of help from end market improving. 450-550p is where I want to see this get to. That would be 3.5% to 4.5% dividend yield which is the normal yield for a decent company. And actually dividend will rise when growth returns.

My only criticism is I would like to see them do a 5-10% buy back, as I think £11m cash on the balance sheet is too much for a £40m mcap company that is generating profit and cash each year. 10% buyback would cost £4m and would still leave them with £7m on the BS which is plenty. I don't think they should be looking at M&A given the market. Buy back or a special dividend, but my pref is a buy back given the cheap rating atm.

You talk of falling knives, and this is certainly a time of uncertainty. But it is also the case the CHH is now up 28% on two weeks ago.