China Merchants Pacific: CIMB highlights CMPH being the only toll company with exposure to multiple provinces, CMHP can be more selective in choosing its investment targets, contrasting provincial SOE peers confined to home provinces.
CMHP also has the flexibility to adopt a longer investment horizon and capitalize the opportunities when private investors who are under financial stress decide to sell off their toll investments at bargain prices.
CMHP should also continue to see strong support from China Merchant Group.
Although there would be higher interest costs ahead, this should be comfortably managed, given FY16-18 interest coverage of more than 6x.
CIMB keeps its TP at $1.02, but upgrades to Add from Hold, citing the negative sentiment from rising interest cost have been priced in, as well as highlighting a 6.6% yield.
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