China Merchants Holdings Pacific

[Nick]

China Merchants Hldgs (Pacific)

BUY S$0.88 STI : 3,202.10
Price Target : 12-Month S$ 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

Highlights

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.

Recomendation

Maintain BUY and TP of S$1.07 for now.