[ET Net News Agency, 17 December 2019] China Railway Group (CRG)(00390) said its
wholly-owned subsidiary CRGTI has signed a contract with China Merchant Highway and ICBC
Financial Investment to sell to them a 51% stake in CRGTI subsidiary along with RMB3.3bn
in creditors' rights for a price of RMB9.945bn.
CRG is to receive cash of RMB9.559bn after paying a tax of RMB386mn. CRG's net debt will
decrease RMB28.86bn, resulting in CRG's net gearing falling to 58% from 72% in 3Q, and its
asset to liability ratio will edge down 0.82ppt to 76.46%.
Morgan Stanley said CRG is trading at 4.2x 2020 P/E, below its average P/E of 8.7x for
the past five years. The research house expects the market to re-rate the stock as CRG's
net gearing declines and its asset quality improves. It maintained its "overweight" rating
on CRG, with a target price of HK$6.8. (KL)