Investors are overall positive on the deal
While the proposed plan is not earnings accretive for Sinotrans, most investorsfound it practical （in the sense that Sinotrans and Sinoair's interests would bebalanced）， hence it is acceptable and workable. In the long run, investors believethat the resolution of the current inefficient corporate structure will substantiallybenefit Sinotrans, which in turn should drive a continued re-rating of the stock.
　　Technically, some investors thought Sinotrans' A shares hold decent room to runup post-listing （priced at 14x P/E vs. avg 32x A share logistics peers）， which inturn would lift its H shares. Below, we address some of the frequent queries frominvestors, including the timeline of the deal, fairness of A share pricing/conversionratio, and Chalco's performance.
　　Potential timeline and required approvals
After the release of the preliminary plan, Sinoair is likely to resume trading in thecoming weeks. A detailed circular, which needs to be approved by the HK stockexchange and a Sinotrans' board meeting, will be released no later than April 30.
　　After the circular is released, Sinotrans and Sinoair's minority shareholders willvote （need 2/3 passing rates）， likely one month later. If minority shareholders fromboth parties give the green light, the next procedure is approval by the CSRC （forSinotrans' A share listing）， which could take several months （but likely faster thanthe normal IPO, per our understanding）。shows the indicative timelineand required approvals. In Chalco's case, the preliminary plan was rolled out onNovember 17, 2006 and the acquisition was completed on April 30, 2007.
　　About Sinotrans' A share pricing and conversion ratio
Sinotrans' A share pricing （ie RMB5.32/share, or 14x P/E） and conversion ratiowere mainly determined by looking at three factors: 1） A/H premium for peers,2） the premium offered to Sinoair, and 3） the earnings dilution/accretion （forboth Sinotrans and Sinoair）。 For the A/H premium, transportation peers （includingshipping and airline companies） on average stand at 56% currently （vs. 51% forSinotrans）。 As for the premium offered to Sinoair, the 19% is also in line withprevious cases （25% for Chalco's case）。 For the earnings dilution/accretion, ourcalculations show that the proposed A share pricing and conversion ratio caneffectively avoid EPS dilution for both Sinotrans and Sinoair 。 This is extremely important as excessiveearnings dilution from either party would result in the potential failure of this deal.
　　As Sinoair's 2017 earnings are likely to beat expectations, there is a chance thatSinotrans' EPS could be slightly enhanced after the deal。
　　Recap of Chalco's performance
　　Despite the earnings dilution （9%） and higher premium offered （25%）， Chalco's Hsharesrallied 50% （vs.+10% for HSCEI） from the preliminary plan announcement（on November 27, 2006） to the completion of the deal （on April 30, 2007）。 Postlisting on Shanghai Stock Exchange, Chalco's A-shares rose 32% in the next threemonths （vs. 12% for Shanghai composite index）。 During this period, Chalco's Hsharesmoved up 71% （vs. 14% for the market）。
　　To conclude…
　　We like this deal and expect it to strengthen Sinotrans' market positions, bring insynergies and drive a continued re-rating of the stock. Our target price is HK$6.60,or 144% potential upside based on yesterday's closing price. Risks: weaker-thanexpectedtrade flows and lower-than-expected synergies post recent deals.