【公司研究】深圳高速公路 (548 HK) – 土地一二级联动开发卓有成效

INTRODUCTION. Incorporated in Shenzhen, the Company principally engages in the investment, construction, operation and management of toll expressways. As of 1H19, the Company operated and invested in a total of 16 toll expressway projects in Guangdong and other provinces. It also invested in environmental projects. In 1H19, revenue +0.81% YoY to RMB 2,699mn, net profit +62.79% YoY to RMB 1,577mn, due to use of unrecognized tax losses in previous periods.

 

  • What’s new? During the reverse roadshow held on 26 Sep, we visited (1) the construction site of Duohua Bridge. The Duohua Bridge Project is a municipal project invested by the government of Longli County, Guizhou. It is a road construction project in Longli County undertaken by the Company with BT model. We also visited the Company’s (2) real estate development project – the Interlaken Town. It is a high-end, quality real estate project with unique architectural style, beautiful landscape and nice living environment.

 

  • The integrated land development model brings more benefits than road construction. Longli County is located right next to Guiyang, the provincial capital of Guizhou. The Company expected the land in the area of Longli County will enjoy great appreciation potential. Since the Guilong Road Project, the Company has established long-term relationship with the local government of Longli County, and has successfully acquired peripheral land. As of 1H19, the Company has cumulatively won the bids for the land of Longli area of approximately 3,005 mu, including 235 mu for the Duohua Bridge Project. The integrated land development model – road construction + secondary development of residential projects – will bring investors more benefits than road construction.

 

  • Catalysts. (1) In August, the China Transportation Services Index (CTSI) increased 5.4% YoY to 177.3 points, indicating strong travel demand during the summer. (2) China aims to raise its global competitiveness in the transportation sector by setting up transport networks with wider coverage and higher speed, according to a document jointly released by the CCP Central Committee and the State Council (《交通强国建设纲要》).

 

  • Valuation. The stock is currently trading at 1.1x 2019E P/B, close to peer average of 1.1x, and historical average of 1.0x.
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