NWS HOLDINGS(659.HK)：RECOVERY ON TRACK POST COVID-19-格隆汇

机构：招银国际
研究员：Daniel So

　　NWS’s interim results for the six months ended 31 Dec 2020 (AOP +46% / EPS-60% YoY) were in line with the profit warning announced on 29 Jan. Corebusinesses’ AOP +13%, thanks to recovery in Roads and full-period contributionby Insurance. We revised AOP estimates by +9%/-16% in FY21E/FY22E, andfine-tuned target price to HK$13.70. Maintain BUY. NWS remains a good yieldplay with dividend yield at 6.6% and a progressive DPS.
　　AOP +46% YoY, +172% HoH. With the exception of Construction which hada slower profit recognition in the period, all business segments were eitherstable or recovering strongly. Insurance made a full-period contribution vs. 2-month in 1H FY20. Roads enjoyed rapid traffic recovery. StrategicInvestments, boosted by revaluation gains due to improved market condition,contributed to three quarters of the increase in Group AOP. Sequentially, AOPrebounded by 172% HoH from a pandemic-hit low base.
　　Net Profit -60% YoY due to non-operating, non-cash items ofHK$1,874mn, including 1) remeasurement loss of HK$1,330mn onreclassifying an investment to asset held-for-sale (we believe is Wai Kee inConstruction segment); 2) provisions of HK$416mn by Goshawk Aviation, and3) remeasurement loss of HK$128mn in disposing SUEZ NWS and Derun.
　　Optimise business portfolio and recycle capital. NWS has exitedEnvironment and Transport segments through disposals, streamlining itsnumber of business segments from 9 to 7 and lowering net gearing from 31%to 26%. The Group continues to seek to unlock values in non-core assets.
　　Future growth plan focuses on Roads, Insurance, modern Logistics.
　　NWS had HK$11bn cash on hand and HK$18bn unutilised committed bankingfacilities. It targets to redeploy capital on acquiring Roads and modernLogistics assets (warehouse/cold chain/technology & VAS in China GBA andSoutheast Asia), and growing FTLife with focus in GBA (will apply for PRCinsurance license in near future).