[ET Net News Agency, 4 May 2018] HSBC Global Research cut its target price for Zhejiang
Expressway (ZJE)(00576) to HK$10.7 from HK$10.8, and retained its "buy" rating.
The research house said ZJE's acquisition of a 4.9% stake of Shanghai Rural Commercial
Bank for RMB2,712m may increase its net gearing from 29% by the end of 2017 to about 33%.
The company said it may look for more acquisitions in the financial industry.
While the investment only accounts for 3.7% of ZJE's asset size and the financial impact
to earnings would be limited, HSBC thinks investors may continue to apply a valuation
discount to the stock due to risks surrounding potential acquisitions.
As the stock does not look expensive on valuation grounds, HSBC thinks the increased
investment in the financial industry may hold back the share price performance in the near
term. (KL)