[ET Net News Agency, 16 November 2017] Deutsche Bank lowered its target price for
Guangdong Investment (GDI)(00270) to HK$13.2 from HK$13.5, and maintained its "buy"
rating.
The research house fine-tuned its earnings forecasts in 2017/19, but raised its forecast
by 10% in 2018, driven by higher earnings assumptions for Water Group HK, and a higher
profit contribution from Guangdong Land.
DB now factored in Guangdong Investment adding 500ktpd of water capacity in 2018 on the
back of the company's strong water capacity addition in the first 8 months of 2017.
It likes GDI for its defensive water business, growing dividends and strong balance
sheet. With more than 50% of earnings from water sales in HKD terms, GDI is the most
defensive among its environmental peers in relation to potential RMB depreciation.
DB expects GDI to deliver a recurring profit CAGR of 4% in 2017-19 and to increase its
dividend payout ratio by ~5 percentage points per annum, resulting in a DPS CAGR of 12% in
2017-19.
GDI is in a net cashposition (HK$10.8bn or HK$1.65 per share net cash after considering
available-for-sale investments by June 2017) and is trading at an attractive dividend
yield of 5.3% in 2019. (KL)