CSP's 2019 shareholders' profit missed our expectation. In 2019, draggedby relatively sluggish revenue contribution from mainland China, theCompany’s revenue was up 2.7% YoY, missing our expectation. CSP’s profitfor shareholders decreased by 5.1% YoY to US$308.0 mn, representing EPSof US$0.0982, missing our expectation. Excluding one-off impacts includingdilution effect of equity interest in QPI, the new lease reporting standard andfair value gain of Beibu Gulf Port, CSP's adjusted profit for shareholdersincreased by 2.5% YoY. A payout ratio of 40% was maintained in 2019.
CSP’s container throughput in 1Q20 was negatively affected by theCOVID-19 pandemic. China's active manufacturing resumption is likely tosupport CSP’s throughput but the extent might be limited by the globaloutbreak of the pandemic. On the bright side, the Sino-US first phase tradeagreement and speed-up of China's "New infrastructure" are expected tounderpin port throughput.
CSP’s profitability is expected to enhance as its terminals portfoliorestructuring. CSP completed the sale of its equity interests in three terminalsand has intention to further streamline its terminals portfolio. In addition, thestrong cash position of CSP may help seize future acquisition opportunities.CSP plans to implement the Navis N4 system to more terminals in 2020.Looking forward, higher ROE and operating profit margin are expected.
Maintain "Accumulate" rating but revise down TP to HK$6.30 to reflectpessimism under the threat of the coronavirus. We think the valuation ofCSP is attractive and expect it to rebound to some extent due to relief from thepandemic. Our new TP represents 8.4x, 7.4x and 6.8x 2020-2022 PER.