[ET Net News Agency, 12 February 2019] BofA Merrill Lynch raised its target price for
Guangdong Investment (GDI)(00270) to HK$18.4 from HK$16.3 and maintained its "buy" rating.
The research house reckoned that GDI will likely accelerate acquisition of large water
projects (more than Rmb1bn each) starting 2019 due to funding difficulties faced by its
competitors.
BofAML estimated GDI can buy over HK$67bn of water projects, or 16MT/day capacity,
without raising external equity. This could add around HK$4bn profit or 70% of GDI's
FY2017 net profit over 5-6 years.
With strong recurring operating cash flow, management incentives aligned with
shareholders, net cash higher than HK$10bn, cost of debt lower than 3%, BofAML thinks GDI
will deliver positive surprise by acquiring projects in & outside of Guangdong. It
forecast 20.2% 2018-20 EPS CAGR. (KL)