UBS Global Research initiated coverage on Sinotrans Limited (00598) with a "buy" rating and a target price of HK$3.2.
The research house believes the discounted valuation has priced in the macro headwinds and recent disappointing performance, but not potential margin recovery, driven by further integration with China Merchants Logistics (CML) and Sinoair, which could re-rate the stock over time.
UBS forecast a 7% EPS CAGR in 2019-21, which is more conservative than consensus, but it believes the risk is skewed to the upside given its undervalued asset portfolio, 50% valuation discount to the A-share and a 4-5% dividend yield.
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