HNA Infrastructure Company Ltd (0357.HK) operates the aeronautical and non-aeronautical businesses at the Haikou Meilan International Airport on Hainan Island. Hainan is China’s largest tropical island and a popular tourist destination in Asia. Visitors to the island increased by 12 percent last year to more than 67m. Non-Chinese tourists increased by even 50 percent and passed the one million mark last December.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]
HNA Infrastructure Company’s aviation business consists of the provision of terminal facilities, ground handling, and passenger services and generates more than half of the company’s revenues. The non-aeronautical business includes leasing of commercial and retail outlets at Meilan Airport, franchising of airport-related business, leasing of advertising spaces and parking lots, provision of cargo handling services and sales of consumable goods. Ground handling services and franchise income grew by almost 30 percent in 2017.
HNA Infrastructure Company was founded in 2000 and is headquartered in Haikou, China. The shares are listed on the main board of Hong Kong’s stock exchange since 2002. The company’s shares can also be traded in Germany and the US. HNA Infrastructure Company is a subsidiary of Haikou Meilan International Airport Company Ltd. Major shareholder is Oriental Patron Financial Group Ltd, a Hong Kong-based financial service group, with an ownership of around 42 percent. 48 percent of the shares are in public hand.
With a workforce of 933 employees, HNA Infrastructure Company reported revenues of 1.5bn RMB (232m USD) and an EBITDA of 933m RMB (147m USD) in 2017. This is an increase of 22 and 19 percent respectively compared to the same period a year ago. In 2016, revenues and EBITDA increased 14 and 4 percent respectively. The operating margin of 44 percent is well above industry average. HNA Infrastructure Company’s cash reserves decreased by 11 percent to 673m RMB (106m USD) at the end of 2017. The equity ratio is at 45 percent and the gearing, defined here as total liabilities to total equity, at still acceptable 124 percent. Next results will be announced in August.
HNA Infrastructure Company’s shares are in an uptrend since August last year and gained more than 60 percent in value since, 34 percent alone this year. The company is priced at nine times earnings. The shares trade at book value and at four times cash flow only. The latest dividend yielded around two percent. Only one analyst is currently covering the company and recommends buying the shares.
China’s One-Belt-One-Road-Strategy, the promotion of the island as the Hawaii of the East, and the liberalization of the tax-free policy has boosted the number of arriving passengers and residents on the island. Property prices soared. Beijing plans to transform the resort island into a hub for gambling and foreign investments. 59 countries have already been granted visa-free access. Until now, Hainan has 56 international direct flights and is expected to see 100 international air routes by the year of 2020. HNA Infrastructure Company will strongly benefit from this development.
HNA Infrastructure Company shows a healthy balance sheet with good profitability and financial strength. The valuation is reasonable. Revenues and profits grew on average by more than 10 percent annually over the last three years. Assuming a stable global economy, we expect the share price to increase at least 20 percent until the end of this year.
AIS Rating: ★★★★☆
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|---|
| EPS (RMB) | 0.6 | 0.7 | 0.7 | 0.9 | 0.8 | 1.0 |
| Change | 3% | 14% | -1% | 31% | -11% | 23% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | LIAB./ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 9 | 25 | 1 | 4 | 45% | 13% | 122% | 2.3% |
* Equity / Total Assets, ** Total Liabilities / Equity
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