Broker Tips:Shenzhen Expressway

Downgrade Shenzhen Expressway to HOLD given AH share prices opening narrowed to 4%

Shenzhen Expressway (548, SZE, $4.58) outperformed HSI and HSCEI by 26% and 23% in past 3 months. Comment: Strong share cost opening was due to stronger-than-expected fee highway income expansion in 5M14 and AH share cost convergence, in a view. In 5M14, a counter’s altogether fee income (excluding Meilan-Guanlan territory of a Meiguan Expressway toll-free starting from 1st Apr 2014) increasing by 27% yoy. This increment is brazen of marketplace expectation, in a view, and if stream run rate continues in a rest of 2014, there is an upside risk on management’s annual income aim of not reduction than RMB2.9bn. We tentatively say a arrogance on a handling opening until government provides an updated superintendence post halt result. On repeated basis, a opposite is approaching to broach 10% EPS expansion in 2014, underpinned by 15% trade expansion (excluding Meilan-Guanlan territory of a Meiguan Expressway toll-free starting from 1st Apr 2014) and 16% of seductiveness saving form reduced borrowings.

In serve to glorious handling performance, a counter’s share cost opening was serve fueled by conjecture on AH share prices convergence. Since a process of by sight announced on 10th Apr 2014, a counter’s AH share cost reward has already narrowed from 21% to 4%. Further share cost upside from conjecture on AH cost joining is singular while stream share cost is tighten to a satisfactory value, we therefore hillside a opposite to HOLD with 3-month aim cost of $4.50, homogeneous to brazen division produce of 5.0%, or 10x 2014 PER.