[ET Net News Agency, 3 December 2018] Goldman Sachs initiated coverage on China
Communications Construction Co. (CCCC)(01800) with a "neutral" rating and a target price
of HK$7.2.
Given less favorable exposure to construction end-markets (versus peers) and
uncertainties around overseas market exposure, the research house expects CCCC to record a
2% CAGR for new orders over 2018-20, the lowest within its coverage.
Moreover, Goldman expects its heavy involvement in build-operate-transfer (BOT) tollroad
projects will continue to weigh on its cash returns. Margin expansion, therefore, will
likely be offset by slow asset turnover and a long cash conversion cycle, making CROCI
hover around the current level going forward.
That said, CCCC's investment-heavy model already appears to have been reflected in its
hefty valuation discount to peers. (KL)