长和(00001.HK):FY17 results in line; growth sustained

机构:交通银行评级:BUYSolid 2017: FY17 reported EBITDA rose 10% YoY to HK$104.3bn. Adjusted for oneoffs, EBITDA was HK$100.4bn,

机构:交通银行

评级:BUY

Solid 2017: FY17 reported EBITDA rose 10% YoY to HK$104.3bn. Adjusted for oneoffs, EBITDA was HK$100.4bn, on 28% YoY growth in 3 Group’s EBITDA. Reported core profit rose 6% YoY to HK$35.1bn. Adjusted for deferred tax and other one-offs, core profit was HK$33.9bn, in line with consensus/our forecast. 2H17 DPS was HK$2.07 (FY17: HK$2.85); FY17 dividend yield came to 2.9%, based on last close.   

Synergy from merger: 3 Italy’s EBITDA jumped by HK$5.1bn, on full-year contribution from Wind Tre merger, in line with our forecast. EBITDA margin grew from 27% to 43%, given higher operating efficiency. EBITDA from the rest of 3 Group was flattish YoY. While we expect the growth from 3 Group to moderate in 2018, management expects another €270m (attributable: ~HK$1.3bn) interest savings following Wind Tre's refinancing, which will come below the EBITDA line.  

Benefiting from oil price recovery: Adjusted for disposal gain in 2016, Husky’s EBITDA surged 88% YoY to HK$9.0bn in FY17 (+22% HoH in 2H17), helped by oil price recovery. With YTD Brent average at US$63/bbl, 21% above 2017 level, we expect extra HK$1bn EBITDA contribution (+11% YoY) from the segment in 2018.  

Next growth driver: We see infrastructure as another key earnings driver in 2018E. We estimate the newly-acquired DUET, Reliance and ista combined for HK$2.3bn addition to 2017 EBITDA, with annualized investment yield at 8.6% on average. With their full-year contributions, we expect HK$1.8bn addition to 2018 infrastructure EBITDA. While management highlighted new technology investment, we believe it is still early to monetize it. On the other hand, we expect a steady 23% YoY growth for remaining segments, similar to 2017.  

Little impact from chairman change: Victor Li will become group chairman after Li Kashing retires by mid-May. We see muted impact from the change, as Victor Li has >30 years’ experience with the group, and the rest of the management team also stays, at least for now. We maintain our view that CKH will see steady growth in both earnings and dividend. Reaffirm Buy and TP of HK$124.50, based on a 20% discount (unchanged) to NAV of HK$155.70. 

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