机构:德意志银行
评级:买入
目标价:10.4港元
Doubts reduced by Court’s decision on AM’s lawsuit
After market close on Sept. 17, 2018, China Oriental (the company) announced that the potential litigation from ArcelorMittal (AM, the top shareholder in the company) was without merit and thus dismissed by the Court. The company is therefore not required to disclose or to allow inspection of documents specified in AM’s application. We believe that the Court’s decision will largely help to reduce investors’ doubts about corporate governance at the company and to remove the major obstacle for the stock to rerate. Also, during its NDR in early September, management described the continued positive interactions with AM, which we believe will further align the interests of AM and China Oriental.
Pending production cut articulation, Deep value, Buy reiterated
While the company is awaiting local government articulation of the differentiated production cut requirements in the coming winter, we consider the dismissal of AM’s potential litigation and more communications between the company and AM as important positive share price catalysts. China Oriental is currently trading at 1.1x 2018DBe PBx and 4.7x 2018DBe PEx while 2018DBe ROAE is c.26%. Factoring in NDR updates and a high YTD steel market spread, we maintain that China Oriental should easily achieve 2018DBe NPAT (c.RMB4bn). With 76% upside potential to our TP at HKD10.4, we reiterate our Buy rating.