China Merchants Hldgs (Pacific) -
STI : 3,202.10
Price Target : 12-Month S$ 1.07
Results ahead of expectations
• 3Q net profit rose 46% y-o-y to HK$146m, ahead of expectations
• 9M13 earnings of HK$450m made up 91% of our full year forecast, which is likely to be revised
• We continue to like the company for its firm earnings growth and strong cash flows
• Maintain BUY and TP of S$1.07 for now
CMHP reported results that were ahead of expectations. 3Q13 net earnings rose 46% y-o-y to HK$145.8m as revenue rose 37% to HK$486m, due to contribution of newly acquired Ningbo-Beilun Port E'way. Contribution from JV roads also rose 12% y-o-y to HK$68.7m in the quarter.
For 9M13, net earnings rose 40% y-o-y to HK$450m on 34% top line growth to HK$1.4bn, as JVs also contributed 23% more at HK$207.8m.
9M earnings forms over 91% of our FY forecast. This is a strong set of results against our FY earnings forecast of 489m and we will be looking to revise our earnings estimates in a full note to be issued at a later date. Top line is roughly in line with our FY estimate of HK$1.83bn.
The outperformance is due to stronger than expected traffic growth on all roads while costs (finance and operating) were also lower than projected. Year-to-date, the company has generated free cash flows of nearly HK$1.1bn, and over HK$1.3bn if we include dividends from associates.
Steady organic outlook complemented by potential for more M&A transactions. Whilst the Group’s current portfolio of roads should provide steady earnings growth, we believe CMHP continues to look for more acquisitions to further boost its prospects. This will be aided by the impending completion of the sale of its non-core New Zealand property businesses, which will further strengthen its balance sheet.
Maintain BUY and TP of S$1.07 for now.