King of the road lifts a gear
Road King Infrastructure Recommendation: Buy Brokerage: Salomon Brothers Hong Kong-based Road King Infrastructure develops, operates, and manages toll roads on the mainland through joint ventures.
It has strong management flexibility and fund-raising capability and there is no geographical restriction for the company in seeking new projects. The company also has the best net asset value growth potential of the three expressway companies being covered.
The stock should trade at $11.80 in 12 months, representing 50 per cent upside on the company's current price.
First Pacific Co Recommendation: Undervalued Brokerage: Goldman Sachs First Pacific is a regional conglomerate with interests in banking, trading, property development and telecommunications.
Following the 35 per cent rise in the Hang Seng Index over the past 12 months, First Pacific is one of the few constituents that still looks attractive in growth and value.
The stock should benefit from above-average earnings per share growth of 18 per cent on average over the next four years. The shares also are trading at an historically steep discount of 24 per cent to estimated net asset value.
GZI Transport Recommendation: Buy Brokerage: Seapower Securities GZI Transport develops, operates and manages toll projects in Guangdong.
Shares have fallen by more than 30 per cent since last month on concerns over the Humen Bridge's disappointing traffic flow, accuracy of traffic forecasts and perceived oversupply of road stocks.
The correction offers buying opportunity as most of the company's toll roads are in prime locations with proven records and fundamentals driving traffic growth in Guangdong are positive. Traffic flow on the Humen Bridge has picked up from 7,600 vehicles a day to 16,000 since tolls were cut.
JCG Holdings Recommendation: Buy Brokerage: ABN Amro Hoare Govett Asia JCG Holdings is a financial services company engaged in deposit-taking, granting loans, issuing credit cards and stockbroking.
Its niche in the personal-loan market for low and middle-income individuals has not been threatened seriously by the licensed banks and it is on track to achieve personal loan growth of at least 18 per cent a year for the next two years.
Subsidiary Winton Holding, a 75 per cent-owned taxi financing business, is set for growth of more than 30 per cent this year and its market share should rise from 24 per cent to 30 per cent in the next few years.