20210301-招银国际-新创建集团-00659.HK-Recovery_on_track_post_COVID-19_5页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content

NWS Holdings (659 HK) has shown signs of recovery post-COVID-19, with its interim results for the six months ended 31 Dec 2020 indicating a 46% YoY increase in Attributable Operating Profit (AOP) and a 172% HoH rebound from a pandemic-hit low. The company's AOP growth was driven by strong performance in the Roads and Insurance segments, as well as significant revaluation gains from Strategic Investments. The Construction segment, however, experienced slower profit recognition.

Despite the strong AOP growth, Net Profit fell by 60% YoY due to non-operating, non-cash items totaling HK$1,874mn, including a remeasurement loss on reclassifying an investment to asset held-for-sale, provisions by Goshawk Aviation, and losses from the disposal of SUEZ NWS and Derun.

Key Financial Highlights

Earnings Summary (YE 30 Jun)

• Revenue: Increased from FY19A to FY21E, with a 76.7% YoY growth in FY21E.
• AOP: Rose from FY19A to FY21E, with a 13% YoY increase in FY21E.
• Profit to Shareholders: Showed a 1,678% YoY growth in FY21E.
• EPS: Increased by 14% in FY21E compared to previous estimates.
• Dividend Yield: Remained at 6.6%, close to pre-pandemic levels, with a progressive DPS policy.

Target Price

• Revised Target Price: HK$13.70 (up from HK$13.12).
• Upside Potential: +56.2% from the current price of HK$8.77.

Business Strategy & Portfolio

• Optimised Business Portfolio: NWS has exited the Environment and Transport segments, reducing the number of business segments from 9 to 7 and lowering net gearing from 31% to 26%.
• Focus on Core Businesses: The company is prioritising Roads, Insurance, and modern Logistics (warehouse, cold chain, technology & VAS in China GBA and Southeast Asia).
• Capital Position: Holds HK$11bn in cash and has HK$18bn in unutilised banking facilities, providing flexibility for acquisitions and growth.

Financial Summary

Income Statement

• Revenue: Increased in FY21E and FY22E, with a 76.7% YoY growth in FY21E.
• Operating Profit: Showed a significant increase in FY21E and FY22E.
• Net Profit to Shareholders: Rose from FY19A to FY21E, with a 14% YoY growth in FY21E.

Cash Flow

• Net cash from operations: Increased from FY19A to FY21E.
• Net cash from investing: Positive in FY21E due to strategic asset disposals.
• Net cash from financing: Positive in FY19A and FY20A, indicating strong capital raising.

Balance Sheet

• Non-current assets: Declined slightly in FY21E but remained stable.
• Current assets: Increased, with a rise in cash and bank balances.
• Net debt / equity ratio: Declined from 30.9% in FY20A to 0.3% in FY23E.
• Shareholders’ funds: Increased, showing improved equity position.

Key Ratios

• AOP Mix (%):
  • Roads: 34.4% (FY21E)
  • Insurance: 15.6% (FY21E)
  • Strategic Investments: 16.9% (FY21E)
• Operating Margin: Improved to 13.7% in FY21E.
• Net Margin: Remained at 15.1%.
• Current Ratio & Quick Ratio: Slightly improved in FY21E.
• ROE: Increased to 9.5% in FY21E.
• P/B Ratio: At 0.69x, a pre-pandemic low, indicating attractive valuations.

Analyst View

• Rating: BUY (Maintain)
• Reasoning: Strong recovery in core segments, progressive dividend policy, and attractive valuations.
• Potential Catalysts:
  1. Reopening of HK-Mainland China border, boosting FTLife and Facilities Management.
  2. Resumption of global travel post-vaccine rollout benefiting Aviation.
  3. Further disposals of non-core assets.
  4. Attractive acquisitions in Roads and modern Logistics.
  5. China's protective policies potentially compensating for toll exemptions in 2020.

Stock Data

• Market Cap: HK$34,301mn
• Avg 3 mths t/o: HK$33.29mn
• 52w High/Low: HK$9.93 / HK$5.77
• Total Issued Shares: 3,911.1mn
• Shareholding Structure: New World Development holds 60.86% of shares.

Share Performance

• 1-mth: +14.6%
• 3-mth: +13.0%
• 6-mth: +28.4%

Analyst Certification

• The research analyst certifies that the views expressed in the report reflect his or her personal views and no compensation is linked to the report's content.
• No trading activity in the stock covered within 30 days before the report was issued.
• The analyst does not serve as an officer of any covered company and has no financial interests in them.

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10% over next 12 months.
• SELL: Stock with potential loss of over 10% over next 12 months.
• NOT RATED: Stock not rated by CMBIS.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in-line with the market.
• UNDERPERFORM: Industry expected to underperform the market.

Disclaimer

• This report is for informational purposes only and not investment advice.
• CMBIS does not guarantee accuracy or completeness of the information.
• The value and returns of investments are uncertain and not guaranteed.
• The report is not an offer or solicitation to buy or sell any securities.
• No liability is assumed for any loss or damage incurred from relying on the report.
• Conflicts of interest may exist, and recipients are advised to consult a financial advisor before making investment decisions.