Chinney Alliance Group Ltd (0385.HK) operates as an investment holding, which engages in the trading of plastic and chemical products, the provision of building related contracting activities, foundation piling, sub-structure works, and building construction works for both the public and the private sector. The company distributes aviation system and hi-tech products furthermore. Almost 90% of the revenues are derived from construction contracts in Hong Kong.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]
Chinney Alliance was founded in 1993 and has its headquarter in Hong Kong. Shares were listed on the Hong Kong Stock Exchange at the same time. 25% of Chinney Alliance’s shares are in public hand and are also traded in Germany.
Many Asian countries are upgrading its core infrastructure. Road networks, port facilities, commercial, retail and residential projects are springing up in many of these developing countries. Hong Kong’s government has also increased its infrastructure investment over the past few years. Some of the mega infrastructure projects have driven up local construction activities. Government expenditures in large-scale infrastructure projects have exceeded 70bn HKD (9bn USD) annually in recent years and are expected to reach 79bn HKD (10bn USD) this fiscal year. Capital works expenditure in Hong Kong is supposed to remain at similar levels in the coming few years. It is also expected that some foreign contractors will leave Hong Kong after completing existing projects. Local enterprises will benefit from a less competitive environment.
With a workforce of around 1,530 employees, Chinney Alliance reported revenues of 2.227bn HKD (287m USD) and a profit before tax of 112m HKD (14m USD) for the first six months of 2016. An increase of 3% and 18% respectively compared to the same period a year ago. In 2015 revenues and profits were up 23% and 155% respectively on a year-on-year basis. Chinney Alliance had cash and equivalents of 810m HKD (104m USD) at the end of June 2016. The company has a good equity ratio of 43% but could do better regarding gearing ratio and operating margin, which are with only 5% well below industry average.
Chinney Alliance’s shares are, with some upwards outliers in 2015, in an uptrend since 2012 and have more than tripled in value since, 17% alone this year. The company is priced at only five times earnings, compared to 25 times in its peer industry. Furthermore, the company trades at only 60% of its book value and at only three times its cash flow. The dividend yield has been 4%. Chinney Alliance will benefit from continuous investments in infrastructure projects in the Pearl River Delta. We also expect improvements in the company’s profitability next. Chinney Alliance’s shares have a good chance to surpass old highs from 2015 at 1.40 HKD this year.
AIS Rating: ★★★★☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 H1 only |
|
|---|---|---|---|---|---|---|
| EPS (HKD) | 0.04 | 0.08 | 0.18 | 0.24 | 0.28 | 0.13 |
| Change | 0% | 100% | 125% | 33% | 17% | -4% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 5 | 25 | 0.6 | 3 | 43% | 15% | 133% | 4% |
* Equity / Total Assets, ** Total Liabilities / Equity
[/mepr-active]
