FY19 consolidated rev grew 59% yoy while legacy rev (pre- consolidation of hospital business) grew 15% yoy. Meanwhile, attributable net profit grew 19% yoy, in line with our estimates
We revised down our FY20E/21E earnings by 1%/1% to mainly reflect potential COVID-19 impacts in 1H20E
We trimmed SOTP-based TP to HKD8.5 from HKD8.7. Maintain BUY on strong SOE hospital execution, attractive valuation (0.6x FY20E P/B) and decent FY20/21E div yld (8%/10%)
Robust finance leasing growth
Legacy revenue grew +15% yoy, mainly driven by steady finance lease income (+14%)。 We noted that NIS expanded c.0.3ppt to 3.58%, thanks to lower average cost rate (down c.0.3ppt), while NIM largely unchanged as interest-earning asset (IEA) growth decelerated to 19% yoy (34% yoy in FY18)。 Mgmt. attributed the moderate IEA growth to its growth strategy of prudent expansions. We think Co. is still competitive with its rare AAA credit rating among domestic peers and its cautious expansion should further protect its asset quality to remain healthy in economic uncertainty.
SOE-hospitals consolidation continues
Co. has consolidated hospital revenue of c.RMB1.9bn in FY19. The consolidated assets included 24 SOE hospitals with c.7,400 beds. Besides, Co. has another 16 SOE hospitals with over c.7,500 beds waiting for onwards consolidation. Noting the 40 SOE hospitals together reached over RMB5bn revenue in FY19, we reckon the total earnings should potentially reach RMB200mn assuming at its 1H19 NPM level of 3.8%. Meanwhile, we noted the full year NPM for consolidated assets has improved to 5.3%, reflecting mgmt.’s effort and strong execution.
Maintain BUY on strong execution and decent div yld
We slightly revised down Co’s FY20E/21E earnings by 1%/1% to reflect the potential COVID-19 impacts across its business and therefore fine- tuned SOTP-based TP to HKD8.5 from HKD8.7. We maintain BUY on its unique two-engine mode across healthcare and leasing industry, continuing SOE hospital consolidation and attractive 8%/10% dividend yield in 2020E/21E.