Sinotrans Limited | February 23, 2016 MORGAN STANLEY RESEARCH February 23, 2016 MORGAN STANLEY ASIA LIMITED+ Edward H Xu, CFA Sinotrans Limited
[email protected] +852 2239-1521 Watson Lau Sinotrans – Negatives In The Price;
[email protected] +852 2239-1523 Victoria Wong, CFA Valuation Support From Sinoair
[email protected] +852 2239-7817 Yufei Wu Industry View Stock Rating Price Target
[email protected] +852 2239-7505 In-Line Overweight HK$5.11 Sinotrans Limited ( 0598.HK, 598 HK ) While we lower our earnings expectations amid sustained macro Hong Kong/China Transportation & Infrastructure / China headwinds, we think the negatives have been priced in by a Stock Rating Overweight Industry View In-Line significant stock correction in the last 3 months. We expect valuation Price target HK$5.11 support from a potential re-rating of Sinoair, which we are Up/downside to price target (%) 59 Shr price, close (Feb 22, 2016) HK$3.21 upgrading to OW. 52-Week Range HK$6.65-2.68 Sh out, dil, curr (mn) 4,406 What's Changed? From: To: Mkt cap, curr (mn) Rmb11,862 EV, curr (mn) Rmb14,276 Sinotrans Limited Avg daily trading value (mn) HK$75 Price Target HK$7.99 HK$5.11 2015e Net Profit Rmb1,606m Rmb1,460m Fiscal Year Ending 12/14 12/15e 12/16e 12/17e 2016e Net Profit Rmb1,721m Rmb1,423m ModelWare EPS (Rmb) 0.26 0.33 0.34 0.39 2017e Net Profit Rmb1,927m Rmb1,735m Consensus EPS (Rmb)§ 0.28 0.31 0.34 0.38 Revenue, net (Rmb 45,863 45,567 45,285 46,892 What has caused the dip: We think the -33% stock performance in the past mn) EBITDA (Rmb mn) 2,604 3,249 3,287 3,574 52 weeks has fully reflected market disappointment caused by: 1) weaker- ModelWare net inc 1,150 1,454 1,518 1,716 than-expected organic business led by a macro downturn; 2) delay in asset (Rmb mn) injections without clarity; and 3) a lack of management incentives with delays P/E 15.8 10.6 7.8 6.9 P/BV 1.4 1.1 0.8 0.7 in SOE reform.