TC

18/09/2019 17:15

{I-bank focus}Yuexiu Transport buys good quality assets

[ET Net News Agency, 18 September 2019] Yuexiu Transport (01052) has announced an asset
injection deal with a total consideration of RMB5,998m. The expected project IRR is 9.4%,
higher than the company's 8% target.
HSBC Global Research said the transaction was reasonably priced at 1.3x PB, paid by
company cash (RMB1.5bn) and bank loan (RMB4.5bn). The three roads, with about 20 years
concession period, have passed the initial stage and have entered a strong traffic growth
period.
It believes the three projects should make a small contribution to earnings in the next
year. However, the deal may result in company net gearing returning to a historical high
at about 75% and potentially increase finance costs by RMB600m in 2020. It could also
weigh on the company bottom line in the short term.
HSBC maintained its "buy" rating and HK$8.8 target price. (KL)

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