WHAT THE BROKER SAID
About a year ago Core Pacific-Yamaichi maintained its 'buy' recommendation on toll-road operator Anhui Expressway. The broker set a target price of $3.60 per share, which represented 15.5 times its 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 last year, ranging from 11 to 111 per cent. The upbeat results were due to a robust economy, the improved road network in Anhui and the low comparison base of 2003 because of Sars.
Although maintenance work on its flagship Hening Expressway would slow the growth in traffic for several months, three other expressways would take up the slack as the company's major earners.
The outlook for this year and onwards was positive as the Hening Expressway should recover on the completion of maintenance work.
The broker said Anhui was trading at a price/earnings of 13.2 times for last year and 10.9 times for this year, which were attractive, considering the company's earnings prospects for the next two years. The counter was trading at $3.225 a year ago.
In March this year Anhui Expressway said strong economic growth helped propel net profit 39.31 per cent to 486.65 million yuan last year on turnover rising 38.22 per cent to 1.18 billion yuan.
The counter closed at $5.15 on Friday.