[ET Net News Agency, 9 October 2019] HSBC Global Research initiated coverage on
Shanghai Industrial Holdings (SIHL)(00363) with a "buy" rating and a target price of
HK$18.3.
The research house sees SIHL as a defensive play compared to other Chinese
conglomerates, given 73% of net profit and 80% of GAV ( Gross Asset Value) in 2019 are
contributed by toll roads, environmental services and tobacco, which are resilient to
macro ups and downs.
Meanwhile, SIHL has demonstrated discipline in its expansion over the years, especially
in real estate and new business opportunities. With this, HSBC estimated SIHL to deliver
stable earnings in 2018-21.
Supported by its cash-cow businesses and prudent expansion approach, SIHL has kept its
net gearing below 40%. HSBC expects this to be around 30-40% in 2019-21, the lowest among
the Chinese conglomerates. For the dividend, HSBC estimated the potential effective yield
could be as high as 10% for 2019, as the company said it would distribute shares of SIUD
(00563) as an interim dividend.
HSBC expects SIHL to restore a stable cash dividend payout at 30-35% in 2020-21,
implying a 7% cash yield for 2020, versus 3-5% of peers, thanks to solid earnings in
defensive sectors and a good track record in its payout ratio (30-35% since 2011). (KL)