The company announced it intended to issue 1.38bn newA-shares at a price not less than RMB7.2 per share; at thatprice the total new issue size would be circa RMB9.9bn Share trading will resume on 17 December for both A- andH-shares We have a Neutral rating on the H-share (TP HKD9.20) andan Underweight rating on the A-share (TP RMB7.40) Potential 10% EPS dilution – After market closed today, the company announced moredetails regarding the proposed A-share private placement. Share trading will resume inboth the A- and H-shares tomorrow. The company will issue 1,380m new A-shares whichcould lead to 10% EPS dilution. The placement price will be no less than RMB7.2 pershare and the placement could raise up to Rmb9.936bn. The placement is subject toregulatory approval and an H-shareholder EGM is expected to be held on 5 February2015. The parent company, CRCC Group (unlisted), does not intend to participate in theplacement so its shareholding could be diluted from 61.3% to 55.2%. The use of proceedswill be existing Chinese BT (build-transfer)/BOT (build-operate-transfer) projects forsubways and expressways, repayment of bank loans and for general working capital. Catch 22 situation – The general feedback from A-share investors is that the proposedplacement could help the company to improve its balance sheet and help with future newcontract growth. Since October 2014, CRCC’s H-share price has strengthened by about30% and the A-share price by about 80%. We think this was driven by the expectationthat the company could benefit from government’s support for domestic infrastructuredevelopment in order to help economic growth, and the government policy to encouragethe export of infrastructure development expertise to overseas countries. While we haveconcerns over the profitability of the overseas construction projects, we think the potentialnewsflow on overseas projects may see the share price momentum remain positive in theshort-to-medium term.