CHINA MERCHANTS HLDGS(PACIFIC)
C22.SI
China Merchants Holdings Pacific Still a good dividend play
- FY15 core net profit was broadly in line at 97% of our forecast; headline net profit fell, mainly due to one-off items, while core net profit registered 0.6% yoy growth.
- Overall traffic volume rose 1.7% yoy, although toll revenue was largely flat yoy.
- FY16 will benefit from the full-year contribution of 3 newly-acquired toll roads.
- We cut our FY16-18F EPS by 6-8% to provide for a potentially weaker Rmb.
- Maintain Add; we project a dividend of 6 Scts for FY16, equivalent to a 7.9% yield.
■ FY15 results was not as bad as it looked
- FY15 headline net profit fell 19% yoy due mainly to the absence of the HK$64m gain from the disposal of a discontinued property development business in FY14.
- FY15 also saw lower negative goodwill of HK$8.4m arising from acquisitions (FY14: HK$23m) and an FX loss of HK$30m (FY14: HK$31m gain).
- Excluding all the one-off items, CMHP’s core net profit rose 0.6% yoy to HK$567m in FY15 (FY14: HK$563m).
■ Overall traffic growth but largely flat toll revenue
- The total traffic of CMHP’s 5 incumbent roads rose 1.7% yoy, led by the traffic growth at Yongtaiwen (+5.6% yoy) and Guihuang (+1.4%) and partly offset by slower traffic at Beilun (-0.4%), Jiurui (-0.8%) and Guiliu (-1.9%).
- Toll revenue was largely flat yoy as Jiurui, a young toll road acquired in Sep 14, saw a 13% yoy drop in per vehicle income due to a change of traffic mix - the percentage of goods vehicles (subject to higher tolls) declined against passenger vehicles in FY15, affected by the slower economy.
■ 3 new roads to make positive contribution in FY16
- Despite the completion of the acquisitions of Guixing, Guiyang and Yangping in Sep/Oct 15, CMHP’s bottomline did not benefit from any positive contribution in 4Q15 as the acquired toll companies incurred some one-off expenses related to post-takeover restructuring and adjustment.
- We expect the three roads to contribute positively in FY16, leading to single-digit growth in group bottomline (the 25% yoy drop in FY16 core EPS is due only to the dilution from the rights issue related to the acquisitions).
■ Cut FY16-18F EPS by 6-8% for a potentially weaker Rmb
- Our updated US$:Rmb assumption of 6.75 by end-16 is based on economists’ forecast on Bloomberg; this is compared to the current US$:Rmb FX rate of 6.55 and FY15’s average of 6.3.
- Our target price is lowered to S$0.84 (based on CY16 residual income valuation).
- We estimate that every 5% depreciation of Rmb against US$ will lower our FY16-18 EPS forecasts by c.6% and our target price by 4-5 Scts.
■ Still a good yield play; potential new M&A should not be dilutive
- Management’s maintenance of a 7 Scts DPS for FY15 was an encouraging sign.
- Even with our lower DPS forecast of 6 Scts for FY16, CMHP still provides a 7.9% yield. The 6 Scts DPS will be supported by the group’s strong operating cash flow.
- Management said the group was eyeing new M&A and any deal sealed would be backed by the group’s debt headroom (net gearing of 0.59x as at end-FY15).
Roy CHEN
CIMB Securities
|
William TNG CFA
CIMB Securities
|
http://research.itradecimb.com/
2016-02-29
CIMB Securities
SGX Stock
Analyst Report
0.84
Down
1.02
