Overall AOP up 8.4% YoY in FY11 ? The contribution from roads surged 44% even without the extra income from Tangjing due to the increasing traffic flow. ? Stable performance from HKCEC and Free Duty, as well as ports & logistics. ? Energy down due to disappointments at power plants. Contracting and transport profit declined due to restructuring and job cost provisions. ? Strategic investments realised profits from China Everbright and AIA share sales.
Increasing Infrastructure Exposure
NWS targets HK$7.2bn in capex for FY12, of which HK$2.8bn is earmarked for the acquisition of the remaining 31.5% stake in Hangzhou Ring Road. We assume the 90.16% stake will bring NWS an extra HK$500m in AOP for FY12.
Strong growth in the China Rail Container Terminals project will continue.
Newton expansion plan in progress and stake has already been diluted to 48%.
We expect infrastructure and services sectors to post 19.8% and 4.5% AOP CAGRs for FY10-14.
Valuation
Using sum-of-parts, we target NWS at HK$12.10 per share, implying 10.3x 2012 P/E and 1.17x 2012 P/B on the back of an 11.8% AOP CAGR for FY10-14 and ROE of 12%.
NWS has the highest dividend yield (5.7% for FY12E) in our coverage universe.