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02718 DONGZHENG AFC
RTNominal unchange1.150 0.000 (0.000%)
Research Report

04/10/2019 18:01

{I-bank focus}Morgan cuts Dongzheng AFC (02718) to HK$1.49

[ET Net News Agency, 4 October 2019] Morgan Stanley lowered its target price for
Shanghai Dongzheng Automotive Finance (02718) to HK$1.49 from HK$4.44 and maintained its
"overweight" rating.
The research house expects Dongzheng's earnings growth to recover to 38% in 2020. It
expects Dognzheng to continue to replace high-cost existing debt with new funding at a
lower cost, which would result in a lower funding cost and RoA (Return on assets)
improvement to 3.9% in 2020, up 0.3ppt. Retail loan growth should recover given potential
recovery of auto sales in Zhengtong and improved loan sourcing from external dealers.
As its negative 1H results reset the loan growth outlook, management announced an
interim dividend of HK$0.08 per share, which implies a 7.6% interim dividend yield or 85%
payout ratio.
Morgan said it could be a rational move to optimize capital efficiency given its 1H CAR
ratio stood as high as 42%. The ex-dividend date is 24 October and could be a near-term
catalyst. (KL)

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