Shun Tak Business Recovery Valued at 4 Yuan
On the 1st day of the rally, the market fell again. The issue of politics and interest rates has always plagued the market. Italy has become the new focus. When populist political parties from the far right come to power, will it trigger another Euro crisis? However, something happens every day. Every event is frightened so that investment can be controlled by risk.
Shun Tak Group (00242) reversed the strong market trend yesterday. The stock price rose by 4.7% once, and saw a high of 3.55 yuan, followed by a fall in the market. Shun Tak, once a constituent stock of the HSI, has been quiet for quite some time. The recent improvement has basically been a pattern of rampant consolidation. However, the trend has recently turned and the consolidation is nearing completion.
Last year, real estate business profits surged
The Shun Tak business includes real estate, transportation, hotel leisure and investment, the latter includes 11.5% of the actual shareholding in the company, while the company holds 54.12% interest in SJM (00880). Sindh has been forgotten by investors in recent years. It should be related to the flat performance. In 2015, net profit dropped 83%. In 2016, it even saw a red erosion of 587 million yuan. However, the worst of days has passed. The group returned to profit last year and earned 1.45 billion yuan, the second-best performance in five years.
The performance of Shun Tak was greatly affected by the real estate projects. The reason why we saw red in 2016 was mainly due to the fact that the fair value gains of investment properties dropped by 72%, and the development projects were not connected, resulting in a 68% drop in sales revenue. Last year, the real estate development business returned to normal. Hong Kong, Macao and Singapore all had properties for sale. The profits of the Shun Tak Property Department increased significantly to 1.189 billion yuan, which was 9.6 times of 2016. It is expected that there will be continued sales revenue for this year.
Sindh has projects under development in Tongzhou and Hengqin in China. The planned development projects include the Shanghai Qiantan Comprehensive Development Project and the South Bay Coast of Macau, which in the future will bring considerable benefits to the Group.
Attacking high-speed rail medical projects
It is worth mentioning that Sindh teamed up with Star and Thai Enterprises to enter the provincial real estate project in the capital city of the Mainland. These projects have high-speed rail links and are mainly used for medical and health purposes. The population in the Mainland is aging and the economic conditions are getting better. Medical care projects should have great potential.
The recovery of Shun Tak’s business is relatively cheap. Its track record P?E is only 7.17 times, dividend yield is 3.51 percent, net asset value per share is as high as 9.01 yuan, P?B is only 0.38 times, and stock price is trading at a discount of 60%. The risk is limited. Since the beginning of this year, the stock price trend has created a rectangular shape, which once rose to 3.55 yuan at the top of the form yesterday. However, the pressure on repatriation is quite large. It can only wait until 3.35 yuan before it absorbs and the target price is 4 yuan.