 Good day, fellow investors. As said yesterday, I'm here again with Yao Kai, and today we're going to discuss a very, very interesting Chinese stock traded on the New York Stock Exchange. So the ticker is GSH, so everybody can buy it. And it's a railway in China. And it's one of Yao Kai's favorite stocks. I looked at the company last year. Since then, the stock has really declined significantly. Last year, it was an okay investment for me. I think the expected return from the business was 7% without counting in the reforms, some land they own, and what are the future developments where Yao Kai will discuss that more in detail. But let's first start with Yao Kai. Say hi and give us an overview of the company. Hi, this is Yao Kai. And then GSH is quite simple. It's a railway connecting Guangzhou and Shenzhen. And those are two out of the tier one cities in China. And they also own a bunch of land along the way. And that's about it. So pretty simple. Two cities, a lot of people, a lot of concentration of moving people to there. We have the finances down, as you said. And then we have the manufacturing in the other city. If you connect those cities, then you should make money, right? Right, except it's run by the government. So it's not that efficient. So, I mean, on the good side, you've got the Zhujiang Delta, where you have Guangzhou, Shenzhen, and Hong Kong. They are all there. So the finances is in Hong Kong, you got the tech in Shenzhen, and then you have manufacturing in Guangzhou. And that area, it's, I would say, one of the two most vibrant, economically most vibrant regions. The other one being the the Yangtze River Delta. It's very funny. Both are river deltas, and they all do pretty well. It's like the Netherlands, also river delta, and they are all doing okay. Yeah, it's kind of weird how that happens. Yeah, the deltas are all do pretty well. You got a river, you got a sea, and then somehow you do fine. That's it, because you do trade from the sea, and you have the background of the country signed, and that's it. Always river deltas has been always like that, since they could drive on those rivers or float or boat ride on those rivers. So, one thing people, one thing that really broke down the stock was the completion of, well, not just the completion, there was a whole high speed rail going all the way from Beijing to Hong Kong now. So, one part of that essentially overlaps with what GSH has. So, that's been done. So, the competition already happened. So, what you see is the passenger revenue actually did not decline for GSH, but slowed down. The growth slowed down. So, that's, I think, that is the extent of the effect. And the reason why people wouldn't take high speed rail, it's really that between Guangzhou and Shenzhen, which is where this railway service is, the distance is just not that much. It's not that far, and you don't really care if you saved 50 minutes or 20 minutes when you're traveling between those two cities. And I've got a colleague that comes from Guangzhou, not Guangzhou, but the Guangdong province, and she's like, yeah, I'll take either. I don't really care as long as it gets me there. Neither is, the pricing isn't, they're not sensitive to pricing. They're not sensitive to time in either case, because it's a, you don't travel between those two cities every day. So, you know, it takes slightly longer. You don't really care that much. So, what we can say, okay, the revenue decline didn't happen. So, it just slowed down. So, there is still people going up and down. It's a lot of people. So, even two railroads can coexist and still do well. Now, if I remember well, there were some reforms coming in where they could perhaps increase the price by 20%. When you increase the price on something like that, your costs are fixed. So, you make a lot of more money. What are the news? What are the new things? Yeah, so that's still in the air. You don't really know when that's going to happen, but it will happen. At some point, there are two political themes that's going on with this railroad. One is called, damn it, I don't know how to say it in English. Taking Chinese, which we understand. Chinese, what's it called? So, essentially, Oh, yeah, that I know it. I know it. Yeah, yeah, yeah, yeah. Of course. It's introducing more private capital into state-owned enterprises and this thing being one of them. So, essentially, turning these things to be state-controlled to be non-state-controlled. That's an initiative that's going on at the moment. It's already happened with China Unicom. So, China Unicom used to be state-controlled, but somewhat private-owned because you got like a minority whole to be private owners. Now, they introduced 10 cents and a bunch of other guys and probably Alibaba as well. So, to make sure that the state maintains a certain amount of ownership because they want the money, but they are not in the driving seat. So, that's one thing that's going on with a lot of the state-owned businesses and somewhat similar to that is the railroad reform. So, China Rail Company is the, it's almost like a department is a state-owned company that maintains ownership over almost all the railroads in China and this is like a subsidiary of them and they're running out of cash because they borrowed a lot of money to build a lot of high-speed rail because China built a lot of high-speed rail recently. They're leverage around, they're 60% debt to asset 65, which doesn't sound very high except who knows how accurate their accounting is. We know they're out of cash whether they're actually losing money is a different thing because you have depreciation charges that you can make, play games on. So, the rail, the high-speed rail that has never been public is going public. So, that is another theme that's like, there's a whole thing about railroad should get reformed, get introduced more private ownership and similar to what happened to Japan was the JR. JR used to be state-owned and then they are now completely privately owned, split into like four or five companies or something. So, it's going through that and then once you introduce more private ownership, you have to incentivize them to be in there. So, the price control may just be changed along the way to incentivize private ownership. So, that's essentially one thing. I know I said two things but that's actually one thing about the whole reform. The other one is the whole push on the Zhu Jiang Delta. They call it Zhu Gang. I forgot what the name was, but essentially they were saying, okay, Guangzhou Shenzhen and, or was it Zhu Jiang? Anyways, it was like that Delta should get more resources or have more autonomy. And the thing with China is if you give them more autonomy, they usually do pretty well. And if you take that away, they usually suffer and the difference can be seen between that and Beijing. Around Shenzhen and Guangzhou, you got lots of rich cities and rich people. And around Beijing, you have a lot of poor cities and poor people. The reason is around Beijing, they mess with you a lot. When Beijing is out of clean air, they shut down all your steel mills. When Beijing is out of water, they redirect, they divert all your water supply to Beijing. When Beijing is out of electricity, now you run out because your electricity is now Beijing's. But on the other side of China, you don't have that problem. So, by that push, you actually have a whole demographic, essentially a tailwind, because that mega city group is sucking in more and more population where you got population declines in other parts of China, especially in the northeast. And surprise, surprise, one of the more notable migrant groups in Guangzhou are the people from northeast China. So, I think a lot of things are in the play for Guangxian to do well. How fast these catalysts will actually start to get reflected in their earnings? I don't know, it's probably years, not months, but the value is there. And also, there's a bunch of real estate, which once they go... Let's talk about the real estate, because it's their hidden assets, we can call it. Yeah, it is a hidden asset play, like Peter Lynch once bought a farm or a ranch somewhere. They bought the ranch much more under the real estate value. This is a similar thing. They have a lot of land around the stations, and currently, I don't know how they manage it, essentially it's not making much money. But these stuff are carried on the books at the cost that they bought it, which is almost nothing. And they have to be depreciated every year. There's a thing, at least in Chinese accounting, it's called land usage, right? Because you never own these land. So there's a land user, right? You have to depreciate or amortize every year. So actually, the land price increased drastically since they got this stuff. But on the books, it's depreciating. So you get less and less value for something that's worth more and more. I think this plays very well with the whole Guo Qihong guy theme, where they're trying to introduce private investors, more private investors into these state-owned enterprises. Well, the first thing they're going to say, this is a piece of real estate that's not really part of the business of this railroad. The railroad is supposed to be in the business of carrying people from A to B. And it's not making that much money. Why don't we sell it off or something? Some event that unlocks this value should happen. Like, if the whole reform on state ownership, on these state-owned enterprises, actually... What would be the value of this land compared to the market capitalization? It's going to be more than half, at least. I'm making a very, very, very... I only roughly look at this land. For me, I was like, I'm already getting a, you know, almost half book value. It was not too much debt. Half book value, okay. So whatever happens... They don't have much debt. They don't have any debt. They don't have much debt. No. Really? Very low debt. Yeah, they have very low debt. So not much downside. You got a population tailwind. That means the demand for your service at least won't decline. So you got low downsides. And when good things happen, you really get good things happen to you. So it's an asymmetric bet. And they also still pay you a dividend. So you at least don't lose too much to inflation when you're sitting on it. What is the dividend yield now? I think it was six... Like two, three percent. So it's low, but... Yeah. And then, okay, three percent. It's same like Beijing airport, somewhere there in the line. Three percent. I would say this is valued, valuation-wise, this is more attractive than Beijing airport. So it's cheaper. But it's never a situation, though. You got a competitor coming in in a supposedly monopoly business. And then the valuation gets cut in half or something. So which one do you prefer, Beijing airport or this one? I would prefer... I prefer this one. I prefer this one. But that's more of a rational thought. But irrationally, I like Beijing airport. We know you love airports, brother. Yeah. So let's say that over the next five years, they will unlock the value of the land, which is half the book value currently, which is close... The whole thing, essentially. Now it's trading at book, right? No. Now it's trading at 0.5 book, I think, something like that. So practically, if they unlock the value of the land, that's the market cap. Right. Okay. And then we have the growth, a possible increase in price. I know if they increase the price is 20% profits. That's going to explode. No, more than double. At the moment, they're almost breaking even. They're just breaking even at the moment. All right. So... An infinite increase in profits. Okay. So that would be that. And then it's just... The problem is, as always, you never know when it's going to happen. We have seen the stock price declining, which means investors are losing patience, especially in Asia. In China, we know investors have patience zero. Yeah. They have trouble holding them for a month. No, no, across the weekend. Across the weekend. Yeah. So long-term investors, those who are building a portfolio of valuable assets across the world should really look into a company like GSH. Anything to add? Yeah. So in terms of pure quantitative, their PB is at around... Since their existence, their PB is at 16th percentile. I think PB is very good for something like this because it's an asset-heavy company. And then their PB is underneath is actually growing because of real estate and all that stuff. But assuming we take the book, the accounting book value, their PB is at the level that is 15th, 16th percentile of their entire existence. So they've existed since 2002 or something, 2001 to 2002. And you're getting this at when this is valued at the lowest. And there's nothing catastrophic that's going on with this company. So it's a very good place. It's just a boring business in a boring environment with a boring stock that will make you money over the long term. Right. I think this will make quite a good one. But you need to hold it or trade it on the volatility or something like that. It's highly unlikely that you will lose money with this. Right. I don't usually trade around positions. So I mean, the other metric that I was looking at is PS. Price to sale is less. It's at 0.5 percentile. So in a PS valuation, this has been the cheapest ever. This stock has ever been. So that's that. All right. So when something doesn't really change from a long term fundamental value, but the stock price gets 50 percent lower, which means that I estimated 7 percent long term, then it should mean we are now at 10 percent. And then if the reforms come in and everything changes, then we are looking at 15, 20. Actually, I'm wrong. So if it was 7 and it goes down 50 percent, it should be 14 percent. Yeah. And then we go higher and higher. So if this thing goes well, then maybe you were looking at 20, 30 percent when people start revaluing this on its new earnings power. Yeah. So this is something interesting. I also like the deal. So I'll probably write a report from my research platform to see the risks and put it on the watch list. And then we'll see when and what and how does it fit the portfolio. So thank you, Yao Kai, for sharing this. And I hope you're enjoying your work in China. I only work 12 hours. Well, no, sorry, 15 hours a day. 15 hours a day. So you have plenty of time to see what's. I have plenty of time to see this place. I only go to work at 9 and come back at 12. That's how you should do. 12 p.m., right? Not 8. Yeah. Yeah. Yeah. Yeah. 12. Well, zero. You can call it zero or like midnight, come back at midnight. Good. Good. All right. Thank you. And thank you. Thank everybody for listening and watching, looking forward to your comments. And we'll see you in the next video. See you.