OVERVIEW:
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.
HIGHLIGHTS:
[1] On mid 2015, the counter announced acquisition of three tolls roads in Guangxi. The total distance amount to 160km. Together with existing portfolio, the counter would have an expressway network totalling 298km in Guangxi.
[2] By 16 Oct, the counter has completed the acquisition. It was mainly funded by rights issue ($598m) and loan (US$350m) from external bank loan. Due to new shares issued, the EPS (Earning Per Shares) is expected to shrink ~30% excluding earning from newly acquired toll roads. Gearing ratio (Debt over Equity) would be doubled up to ~60%.
INVESTMENT THEMES:
[1] Generally, the latest move has been welcomed by research firms with BUY rating at target price > $1.1. The acquisition shall contribute to earning from 4Q2015 onward. Projected earning is 30~40% improvement by 2016.
[2] The counter has proven itself as a well-growing counter with consistently increasing in earning and total asset over past 4 years. Its annual dividend is 0.068, equivalent to ~7% dividend yield.
[3] From the chart, price has been edging upward and breaking resistance ~0.93. Moving average of 10 and 20 days are crossing and pointing up. Buying interest could be gaining momentum.
ENTRY PRICE:
Accumulate now
*** Note: Same counter has been mentioned in May[2] ***
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