SHUN Tak Holdings remains the major listed beneficiary of the booming economies of Macau and neighbouring Zhuhai. Yet its share price has so far failed to match its dynamic earnings outlook, making it a highly attractive investment.
The company continues to make the majority of its earnings from its jetfoil service between Hongkong and Macau, but property development profits will start to flood the company this year.
As of April, a government-approved nine per cent increase in jetfoil fares will help shore earnings growth for the next year.
In addition, Shun Tak is expanding capacity in its jetfoils by a further nine per cent, by installing extra seats.
HG Asia is forecasting $556 million net profit for last year, putting the shares on an undemanding price-earnings multiple of 12.5, based on yesterday's closing price of $5.55. But it is in the current year that the earnings growth will start to kick in.
The majority of earnings from property development this year are already secured, and given the dependable nature of the jetfoil business, current year earnings can be forecast with an unusual degree of confidence.
The major contributors are an already pre-sold site in Seymour Terrace and several property lots in Macau. In addition, cash will start to flow in from the massive Nova Taipa residential project in Macau.