CHINA MERCHANTS HLDGS(PACIFIC)
C22.SI
China Merchants Hldgs (Pacific) - Growing Greatness
Acquisitions to drive bottom line expansion.
- The recently completed acquisitions of Jiurui Expressway and three toll roads in Guangxi Zhuang Autonomous Region should propel the group’s top and bottom lines in the medium to long term.
- We project CMHP’s core earnings will grow by nearly 50% from HK$675m in 2014 to HK$1,004m by 2017F, driven by contribution from these recent acquisitions.
Value-accretive acquisitions a potential catalyst.
- Over the last four years, the group has acquired six expressways, disposed off a Class 1 highway (Yuyao Highway), and its property development business in New Zealand, which have streamlined and expanded its core expressway business.
- We believe the group will continue to look for expressway acquisitions to expand its business, which could be a catalyst for a re-rating of its share price.
Consistent and attractive dividend yields.
- CMHP has been consistently paying attractive dividends to its shareholders (7Scts per share per annum in the last two years).
- We project CMHP will maintain 7Scts payout for FY15 and FY16 (< 85% payout), translating into an attractive dividend yield of > 8.5%.
Valuation:
- Our 12-month target price of S$1.45 is based on DCF valuation with WACC of 9.8%, and offers > 80% upside. We see the stock re-rating as it delivers earnings growth.
Key Risks to Our View:
Exposure to Chinese economy and regulatory risks.
- Key risks for the group are
- its 100% exposure to the Chinese economy and Rmb,
- its earnings would be negatively impacted if toll rate tariffs are revised downwards.
Paul YONG CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-02-04
DBS Vickers
SGX Stock
Analyst Report
1.45
Same
1.45
