Citi released a research report stating that it gave Brilliance China (01114) a “buy” rating, and the target price was raised to HK$10.02. Brilliance's management also indicated that the company did not encounter regulatory barriers in the first two dividends, and believes that there are currently no problems with foreign exchange transfers. Management believes that the current dividend payout ratio will not be sustainable given the current huge cash balance. The company will determine a long-term regular dividend payment policy only after proper capital allocation.
The report quoted that the company's management confirmed that it will pay dividends at least once this year and promised that this year's total dividend will surpass last year's level. As to when the next dividend will be paid, management said it has not been determined, but the special dividend to be paid during the year is not limited by a specific frequency or time, and the amount of the dividend will be determined based on the company's cash balance and future operating needs.
Brilliance management said that most of the proceeds from selling 25% of BMW Brilliance's shares last year have been spent. Of this, about 7 billion yuan to 8 billion yuan (same below) was used to pay capital appreciation tax; over 9 billion yuan was used for last year's dividend distribution, of which an additional 5% withholding tax must be paid; about 1.36 billion yuan was used to invest in Brilliance Renault Jinbei cars; and 7 billion yuan was used to pay current dividends. Additionally, management is screening potentially profitable investment opportunities in the automotive parts and after-sales service sector. However, given the company's limited human resources, management plans to select a limited number of projects and maintain a moderate investment scale.