STI : 3,172.85
Price Target: 12-Month S$1.20 (Prev S$1.07)
• Raise FY13 and FY14 estimates by 10% and 11% respectively, to factor in better traffic numbers and lower finance costs
• Steady traffic growth and early repayment of loans to drive firm organic earnings expansion
• Sale of NZ property business to further strengthen the Group’s balance sheet
• Maintain BUY, TP raised to S$1.20
Strong earnings performance thus far. For 9M13, CMH’s net profit improved by 40% y-o-y to HK$450m, driven by better earnings from all its roads, as well as new contribution from Ningbo-Beilun Port E’way, which was acquired in 2H12. Factoring in better-thanexpected traffic numbers and lower-than-expected finance costs thus far, we raised our FY13 and FY14 estimates by 10% and 11% respectively.
Prospects remain bright. We believe that traffic on the Group’s toll roads will grow at a mid to high singledigit pace over the next few years, and with lower finance costs from the swift repayment of loans, core earnings is poised to improve steadily in FY14. Profit in FY15, however, is expected to flatten out due to a lower share of profit from Guihuang Highway and cessation of subsidy income. Completion of the sale of the Group’s NZ property business will also further boost its coffers, and allow room for potentially more acquisitions.
TP raised to S$1.20; Maintain BUY. We increase our DCF-based (WACC 9.1%) target price to S$1.20 due to our higher earnings estimates and lower WACC assumptions. The stock offers an attractive dividend yield of 6.3% and is trading at just 8.8x core fullydiluted FY13 PE, or 7.7x FY14 PE.