Shenzhen Expressway Co Ltd (0548.HK) is the largest toll road operator in Shenzhen. The Company runs a total of 16 toll highways, with a combined length of 416km. Shenzhen Expressway provides furthermore construction and highway management services as well as project management, advertising business, construction consulting, and inter-network toll collection. The company has also expanded its coverage to the Guangdong province and other regions in China through acquisitions and participations. Shenzhen Expressway is a subsidiary of Shenzhen International Holdings Ltd., a Hong Kong-listed logistic and infrastructure company, which itself is owned by Shenzhen State-owned Assets Supervision and Administration Commission.
Shenzhen Expressway was founded in December 1996 and has its headquarter in Shenzhen/China. It has a dual listing on both the Shanghai and the Hong Kong Stock Exchange since March 1997. Its shares can be furthermore traded in the US and in Germany.
The whole Guangdong province has a population of more than 107m inhabitants of which Shenzhen city has a population of more than 10m inhabitants. The Guangdong province and Shenzhen city’s regional GDP grew by 7.4% and 8.6% respectively during the first six months of this year. This is above the national average of the PRC. Guangdong province has a well-developed infrastructure with more than 3,300 km of highways. Shenzhen’s Free Trade Zones are expected to become important business hubs that will boost further demand for transport and infrastructure projects.
With a staff of 4933 employees, Shenzhen Expressway generated revenues of 2,063m RMB and a profit before tax of 864m RMB for the first six months of this year. An increase of 38% and 23% compared to the same period a year ago. In 2015 revenues and profits have decreased by 6% and 44% respectively compared to the year before. While income from the toll business is relatively stable, Shenzhen Expressway’s other business have been more volatility.
Shenzhen’s government has announced to cancel toll collections on several major roads in return for upfront cash payment. This will limit recurring cash flows in the future and will force the company to establish new profitable businesses to deploy the cash proceeds. The government will on the other hand increase investments and promote PPP models to develop toll highways and roads as well as other city and transportation infrastructure. This could bring new opportunities for the company.
The company is priced at nine times its earning, well below its industry peers, and comes with a dividend yield of 5%. The shares are in an uptrend since August 2015 and gained more than 75% since. We expect further growth from a repositioning of the company and acquisitions of related businesses.
AIS Rating: ★★★☆☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 H1 only |
|
|---|---|---|---|---|---|---|
| EPS (RMB) | 0.4 | 0.3 | 0.3 | 1.0 | 0.7 | 0.3 |
| Change | 17% | -22% | 5% | 204% | -29% | 14% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 9 | 21 | 1.2 | 5.8 | 39% | 14% | 155% | 5% |
* Equity / Total Assets, ** Total Liabilities / Equity
