Largely out-performing HSI. Given its high yield and defensive nature,NWS has out-performed the Hang Seng Index most of the time in 2012.
From the market highs recorded on 29 Feb 2012 (HSI closed at 21,680pts), NWS declined by 7.0%, out-performing HSI by 2.6ppt. From therecent market lows on 5 Jun 2012, NWS rose 10.0%, out-performing HSIby 2.7ppt. We estimate NWS to pay final dividend of HK$0.35 per share inFY12E. Total dividend payout may reach HK$0.85 in FY12E, based onour EPS forecast of HK$1.68. FY12 results will be announced in Sep 12.
Expect satisfactory segmental profits. We expect Roads andFacilities Management to be the major profit drivers in FY12E. Weforecast Roads to report segmental profits of HK$1.3bn, up 19% YoY;
and Facilities Management to report profits of HK$1.1bn, up 25% YoY.
Also, per our forecast, Ports & Logistics and Construction & Transportwill also record profit growth of 10% and 18% YoY, respectively in FY12E.
These will be the main catalysts for 23.3% YoY profit (HK$5.7bn) growthfor the group.
Maintain OVERWEIGHT and TP. We maintain our target price (TP, or'fair value') for NWS at HK$13.46, a 20% discount to our FY12E NAV ofHK$16.83. We regard the company as one of the best defensive plays inthe market, with a prospective dividend yield of 6-7% in FY13E andFY14E. Our TP is equivalent to a projected FY12E: (i) PER of 8.0x; (ii)P/B of 1.2x; and (iii) dividend yield of 6.3%. In our opinion, NWS is still anundervalued yield play with stable fundamentals. Our TP represents12.8% upside potential from the current share price of HK$11.94.
Therefore, we maintain our OVERWEIGHT rating on NWS.