Not vested.
Dalian Port riding the wave
Benjamin Scent
Friday, August 01, 2008
Dalian Port (2880) is a terminal operator in the mainland whose unique mixture of business will allow it to withstand a sharp slowdown in Chinese exports to the United States.
Citi has the operator of northeastern China's largest port on its "Fresh Money Ideas" list, saying it is the sole listed port exposed to China's ever-increasing thirst for oil. Dalian Port, which runs the mainland's fourth-largest oil port, handled 34.4 million tonnes of oil in 2007, accounting for 54 percent market share in northeast China.
The company is making good money on its oil business, earning an EBITDA margin of 75 percent on the segment in 2007.
Dalian Port is also a key beneficiary of the revitalization of northeast China, Citi said.
"We view Dalian Port as one of the most defensive plays in the Chinese port universe," Merrill Lynch analyst Haibo Tang said. "Dalian Port is well positioned to benefit from the revitalization of the regional economy and the northeast's increasing dependence on imported oil."
The company is well balanced between growth and defensiveness, he said.
Tang has a "buy" recommendation on the stock with a target price of HK$6.30, indicating 34 percent upside from the current price of HK$4.69.
Despite concerns that other mainland port operators will report sharp declines in earnings this year, Tang predicts Dalian Port will report 2008 net profit rising 48 percent to 902.7 million yuan (HK$1.03 billion), from 611.37 million yuan in 2007.
The Dalian port benefits from its hinterland's lower proportion of exports to the United States, as well as a structure geared toward exports of industrial products like machinery and transport infrastructure, analysts at China International Capital Corp wrote.
Goldman Sachs analyst Edward Chan said Dalian Port is attractively valued and is investors' best port pick amid the US slowdown. It has been trading recently at a 20 to 30 percent discount to Chan's 2009 estimated net asset value of HK$6.52.