COUNTER: CHINA MERCHANTS HLDGS (PACIFIC)
BUSINESS:
The counter is a leading toll road company focused on investing in and managing toll roads in People's Republic of China (PRC). It invests in and operates five toll roads located in Zhejiang, Jiangxi, Guangxi Zhuang Autonomous Region and Guizhou with total distance at 415 kilometres. Its mother company, China Merchants Group is state owned corporation of PRC which has broad business footprint such as banking, logistics, marine, real estate, etc.
BUSINESS:
The counter is a leading toll road company focused on investing in and managing toll roads in People's Republic of China (PRC). It invests in and operates five toll roads located in Zhejiang, Jiangxi, Guangxi Zhuang Autonomous Region and Guizhou with total distance at 415 kilometres. Its mother company, China Merchants Group is state owned corporation of PRC which has broad business footprint such as banking, logistics, marine, real estate, etc.
OVERVIEW:
Since 2011, the counter has been producing excellent financial results with steady growth in revenue and gross profit. Dividend used to be released bi-annually at total >6% for past 3 years. Current stock price is traded at attractive range with P/B ~1 and P/E~10. The room to grow is visible.
Refer to latest result for 1Q2015, total traffic volume and toll revenue were up 7% and 2% respectively over the same period in last year. The increase was contributed mainly from Jiurui Expressway which was acquired in September last year. This could be the catalyst for subsequent quarters this years as well.
With strong cash on hand, investors could expect the counter to expand its portfolio of toll roads thus increasing benefit return.
REASONS TO BUY:Refer to latest result for 1Q2015, total traffic volume and toll revenue were up 7% and 2% respectively over the same period in last year. The increase was contributed mainly from Jiurui Expressway which was acquired in September last year. This could be the catalyst for subsequent quarters this years as well.
With strong cash on hand, investors could expect the counter to expand its portfolio of toll roads thus increasing benefit return.
(1) Due to high dividend released and bonus shares issued, a gap down was seen in the price chart last week. It was gaining support ~1.07 which coincides with technical indicators, EMA100. The 3 years rising trend still looks intact, thus recent price correction actually presented opportunity as entry point
(2) Due to slowing down in domestic growth, state government has been dishing out policies to stimulate economy of mainland. Public Bank or China has cut interest rate 3 times over past 6 months. Investor could position in infrastructure related counters, such as CMPacific which could benefit from any rebound in mainland economy.
ENTRY PRICE:
Accumulate <$1.1 for both price gain and dividend on second half of 2015.
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