WHAT THE BROKER SAYS
Core Pacific-Yamaichi maintains a 'buy'' recommendation on toll-road operator Anhui Expressway. The broker set a target price of HK$3.60 on the share, which represents 15.5 times forecast 2004 price/earnings, and an upside of more than 17 per cent on its June 25 price of $3.075.
All of the company's road projects achieved double-digit growth in traffic and toll revenue in May, ranging from 11 per cent to 111 per cent. The upbeat results were due to a robust economy, the improved road network in Anhui province, and the low comparison base last year due to Sars.
Although maintenance work on its flagship Hening Expressway will slow the growth in traffic for several months, three other expressways will take up the slack as the company's major earners. The outlook for next year and onwards is positive as the Hening Expressway should recover on the completion of maintenance work.
The broker says Anhui is trading at a price/earnings of 13.2 times for 2004 and 10.9 times for 2005, which are attractive, considering the company's earnings prospects for the next two years. The counter closed at $3.225 on Friday.