20211005-招银国际-新创建集团-00659.HK-Waiting_for_multiple_catalysts_5页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content

NWS Holdings (659 HK) is a diversified conglomerate with a strong recovery in its core businesses, particularly in Roads and Insurance, leading to a significant increase in net profit to shareholders (+353% YoY for FY21). Despite the overall positive results, the company's performance in the Construction segment was weaker, contributing to a slight YoY decline in AOP. The company's dividend policy remains progressive, with the final DPS increasing by 3% to HK$0.59 in FY21, marking the first increase since FY18.

The report maintains a BUY rating, with the target price revised down to HK$11.48 from HK$13.70, reflecting a +57.9% upside from the current price of HK$7.27. The revised target price is based on a 45% discount to FY22E NAV, compared to a previous 35% discount on FY21E NAV. Valuations are considered attractive, with a trailing P/B ratio of 0.59x, which is 2 s.d. below the 10-year average, and a dividend yield of 8.1%, 2 s.d. above the 10-year average.

NWS's progressive DPS policy enhances its appeal as a stable yield play with high dividend visibility, making it an attractive option for income-focused investors. The report identifies several potential catalysts that could drive a re-rating of the stock:

• Recovery across business segments: All businesses, except Construction, recorded YoY improvements in AOP.
• Acquisitions: Potential acquisitions in toll roads and modern logistics at attractive valuations could boost earnings.
• HK-Mainland China border reopening: Expected to improve performance in FTLife and Facilities Management.
• Resumption of global travel: Beneficial for the Aviation segment following the vaccine rollout.
• China's protective policies: Could compensate for the toll-exemption in Roads during Feb-May 2020.
• Further disposals of non-core assets: Enhancing focus on core businesses and improving financial flexibility.

Earnings Summary

Key Financial Highlights

• Earnings Recovery: Strong recovery from an exceptionally low base, but partially offset by non-operating provisions and remeasurement losses.
• Dividend Policy: Maintained a progressive dividend policy, leading to a +2% increase in DPS to HK$0.59 in FY21.
• NAV and Valuation: FY22E NAV is revised down by -5%, and the target price is now HK$11.48, with a 45% discount to NAV.
• ROE and ROA: ROE improved to 7.8% (from 2.5% in FY21), while ROA increased to 2.8% (from 0.8% in FY21).
• Net Gearing: Reduced to -2.5% in FY24, indicating a strong balance sheet and financial flexibility.
• Capital Recycling: Ongoing efforts to streamline business and recycle capital are highlighted as a key strategy.

Share Performance and Market Position

• Market Cap: HK$28,434 million
• Avg 3 mths t/o (HK$ mn): 13.75
• 52w High/Low (HK$): 9.55 / 6.03
• Total Issued Shares (mn): 3,911.1
• Shareholding Structure: New World Development holds 60.86% of the shares.

Share Performance (Bloomberg)

Key Ratios

Conclusion

NWS Holdings (659 HK) is positioned as a BUY due to its attractive valuations, progressive dividend policy, and potential catalysts for re-rating. The company is expected to benefit from market recovery, strategic acquisitions, and policy changes in China. The dividend yield remains strong at 8.1%, while the P/B ratio is significantly below the 10-year average, indicating undervaluation. Investors are advised to consider these factors and consult with a financial advisor for personalized investment decisions.