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March 9, 2015
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SEE PAGE 22 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Cheung Kong Infrastructure (1038 HK)
Growing M&A story & dividend play Initiate BUY, SOTP-based TP HKD75 for possible M&A catalyst,
steady DPS growth trend and improved stock liquidity.
Potential merger with PA a likely medium-term driver.
CKI could acquire overseas projects at a faster pace to build
a diversified portfolio. Recent depreciation of foreign
currencies could also provide advantage for M&A.
We believe number of M&A targets could exceed market
expectations and NPV upside potential is likely judging by
CKI’s project investment track record.
A better M&A play; Share-price performance tied to M&A news
We prefer CKI over Power Assets (6 HK, BUY, TP HKD87). Unlike PA,
CKI is not confined to just acquiring utilities. CKI can also explore
non-utilities projects, so long as they offer a predictable cash flow
and at least low teens return in regions with low regulatory risk.
We are optimistic CKI can acquire more overseas projects and the
number of targets could exceed market expectations. (Refer to Fig
6-7 for the proposed deals, as reported by Bloomberg.)
Strong M&A track record; A weaker EUR & AUD helps
Depreciation of the EUR and AUD could speed up CKI’s overseas
expansion and make acquisitions more attractive. CKI has a track
record of buying projects at reasonable prices to boost its NPV.
Assuming CKI places new shares (10% of existing shares at 5% price
discount) to invest in projects with a 12% ROE, we estimate FY16
EPS could increase by 4.5% and NPV/share could rise by HKD2.92.
BUY CKI for capital-gains potential and dividend pay
In short, we think CKI’s attractiveness stems from its capital-gains
potential from overseas expansion and attractive dividend, giving a
good total return. CKI achieved 10% DPS CAGR over the past 10
years. We think the recently announced new share issue could
increase CKI’s free float and improve its market liquidity. Its
possible merger with PA could be a medium-term catalyst.
Key Data
Share Price Performance
Maybank vs Market
Share Price: HKD66.95 MCap (USD): 21.7B Hong Kong
Target Price: HKD75.00 (+12%) ADTV (USD): 25M Utilities (New)BUY
85
95
105
115
125
135
45.0
50.0
55.0
60.0
65.0
70.0
Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14
CKI Holdings - (LHS, HKD) CKI Holdings / Hang Seng Index - (RHS, %)
1 Mth 3 Mth 12 Mth
Absolute(%) 5.2 17.6 34.3
Relative to index (%) 7.4 16.8 26.2
Positive Neutral Negative
Market Recs 6 2 1
Maybank Consensus % +/-
Target Price (HKD) 75.00 67.00 11.9
'15 PATMI (HKDm) 11,921 10,761 10.8
'16 PATMI (HKDm) 12,368 10,969 12.8
Source: FactSet; Maybank
FYE Dec (HKD m) FY13A FY14A FY15E FY16E FY17E
Revenue 5,018.0 6,100.0 6,141.8 6,337.0 6,540.7
EBITDA 1,193.0 2,290.7 2,354.9 2,516.4 2,686.4
Core net profit 11,639.0 10,563.1 11,920.6 12,368.4 12,799.6
Core EPS (HKD) 4.77 4.33 4.73 4.91 5.08
Core EPS growth (%) 21.4 (9.2) 9.3 3.8 3.5
Net DPS (HKD) 1.86 2.00 2.18 2.26 2.34
Core P/E (x) 14.0 15.5 14.2 13.6 13.2
P/BV (x) 2.3 1.7 1.6 1.5 1.4
Net dividend yield (%) 2.8 3.0 3.3 3.4 3.5
ROAE (%) 17.5 12.9 12.0 11.4 11.1
ROAA (%) 12.4 9.3 8.9 8.5 8.3
EV/EBITDA (x) 106.1 66.2 80.4 75.3 70.6
Net debt/equity (%) 10.1 12.3 19.5 18.5 17.5
Ricky WK Ng, CFA
(852) 2268 0689
52w high/low (HKD)
3m avg turnover (USDm) Free float (%)
Issued shares (m)
Market capitalization Major shareholders: -Hutchison Whampoa Ltd. 75.7% -Capital Research & Management 2.0% -Capital Guardian Trust Co. 0.6%
66.95/47.60
2,520
24.1
HKD168.7B
24.7
March 9, 2015 2
Cheung Kong Infrastructure
Important charts and tables Figure 1: Proposed deal examples in the UK and Australia from Bloomberg (the past 12 months)
Announce date Possible targets Country
Target sector Sector/business Possible acquirer Possible seller
Announced total value (USDm)
Deal status
17/02/2015 Waste management business/UK UK Waste management Potential buyer Viking Consortium Holdings 1074.99 Proposed 12/02/2015 Gas-fired power plants UK Gas Gas Generation Unnamed buyer Centrica PLC 769.1 Proposed 02/02/2015 Port of Melbourne Corp Australia Industrial Infrastructure Potential buyer N/A Proposed 19/01/2015 Electricity assets/Queensland &
New South Wales Australia Power generation and
distribution Potential buyer N/A Proposed
19/01/2015 Redbank Energy Ltd Australia Utilities Power generation Potential buyer TPG Capital Management LP N/A Proposed 10/12/2014 Waste services unit UK Waste management Rutland Partners Serco Group PLC N/A Proposed 08/12/2014 UGL Rail Pty Ltd Australia Industrial Infrastructure CSR Corp Ltd UGL Ltd 373.01 Proposed 01/12/2014 Mouchel Group PLC UK Infrastructure Kier Group PLC N/A Proposed 07/11/2014 Ximax Environmental Solutions
PLC,Ximax Oil & Gas Solutions Ltd UK Water treatment Emmit PLC N/A Proposed
13/10/2014 Ainscough Crane Hire Ltd UK Infrastructure Potential buyer TPG Capital Management LP,Goldman Sachs Private Equity Group
N/A Proposed
09/10/2014 Environmental services & leisure units
UK Environmental services
Potential buyer Serco Group PLC N/A Proposed
17/09/2014 Bullock Construction Ltd UK Infrastructure United House Ltd N/A Proposed 12/08/2014 Potential target UK Infrastructure Chigwell
Construction London Ltd
N/A Proposed
05/06/2014 Australian assets/GDF Australia Power distribution Potential buyer GDF Suez 373.24 Proposed 02/06/2014 Tenix Pty LTd Australia Industrial Infrastructure Potential buyer 400 Proposed 07/04/2014 Merseylink bridge concession UK Infrastructure 3i Infrastructure
PLC Fomento de Construcciones y Contratas SA
N/A Proposed
Source: Bloomberg
Figure 2: Upside potential from new project investment Figure 3: Share price performance with acquisitions
Our analysis of the upside potential from new projects if assuming using equity financing
Share price (HKD) 65 Placing discount 5.00% Placing price (HKD) 62 Number of shares (m) 2520 Issue number of shares 10% Number of new shares (m) 252 Total proceeds (HKDm) 15,561 Net proceeds (assume 1% placing fee) 15405 ROE 12% Net profit (additional) 1,849 FY16E Net profit (before) (HKDm) 12,368 FY16E Net profit (after) (HKDm) 14,217 EPS (before) (HKD) 4.91 EPS (after) (HKD) 5.13 EPS (accretive,+ /dilution,-) 4.5% NPV increment /share (HKD) 2.92
Source: Maybank Kim Eng Source: Maybank Kim Eng
Figure 4: CKI dividend per share
Source: Bloomberg, Maybank Kim Eng
0
10
20
30
40
50
60
70
Jan10
May10
Sep10
Jan11
May11
Sep11
Jan12
May12
Sep12
Jan13
May13
Sep13
Jan14
May14
Sep14
Jan15
HKD
Seabank Power (together with PA)
Northumbrian Water (together with CKH & LKFS)
UK Power Networks (together with PA & LKFS)
Wales & West Utilities (together with CKH, PA & LKFS)
EnviroWaste (wholly owned by CKI)
AVR (together with CKH, PA & LKSF)
Envestra (together with CKH and PA)
Park'N Fly (together with CKH)
Transmission Opreations Australia (together with PA)
Meridian Cogeneration (together with PA)
Proposed Eversholt with CKH
0.5
1.0
1.5
2.0
2.5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
HKD
CAGR 2004-2014: 10%
BUY on CKI with TP of HKD75 given potential M&A catalysts and steady growth of DPS.
March 9, 2015 3
Cheung Kong Infrastructure
No. of targets could exceed expectations
Whenever the subject of potential CKI acquisition targets is discussed, the
market usually just focuses on regulated utilities projects, such as power
grids in Australia or in North Europe. But we think CKI’s recent
acquisitions, such as Park’N Fly and Eversholt (proposed), show that it is
opened to exploring other opportunities, as long as the project provides
stable and predictable income, have low regulatory and political risks, and
offers at least low-teens return.
What are the preferences for the overseas expansion? Judging by CKI’s previous acquisitions, we believe it prefers targets with
these common characteristics:
1) Geographical preference: in a developed market with lower
regulatory and political risks
CKI’s major businesses are in developed markets, such as the UK and
Australia. The infrastructure industry in those regions should have lower
regulatory risk. In fact, most of the projects were acquired from listed
companies or infrastructure funds that had provided a track record for
CKI to evaluate the regulatory risk.
2) Stable and predictable cash flow
CKI prefers regulated returns to ensure stable cash flow. Regulated
businesses will be the best option as the risks will be lower. Recently, it
appears CKI is also more willing to expand its radar to include non-
regulated businesses, such as Eversholt and Park N’ Fly. Having said
that, the earnings visibility of these businesses is still very high.
For the UK power networks and the Australian electricity distribution
assets, their earnings models are similar to Hong Kong’s regime, i.e. the
rate of return x fixed assets or rate base. The key difference versus the
Hong Kong regime is the rate of return in both the Australian and the
UK markets are inflation linked.
The rate of return in the UK and Australia is based on the WACC
assumption by the government. We estimate the nominal rate of return
in the UK should be in the mid-teens and high teens in Australia. The
higher rate of return in Australia is due to the higher cost of debt.
However, the rate of return in Hong Kong is fixed at 9.99%.
3) Diversified business nature
Infrastructure projects could include power grids, gas utilities, toll
roads, rolling stocks leasing, parking, water utilities and waste to power
projects etc. We think airports, power utilities, rail and road
concessions will be a higher priority for CKI as the revenue is more
predictable, and especially for power, roads and rail projects, the
revenues could be long term and regulated. On the other hand, seaport
is less popular as it is more reliant on GDP.
The advantage of CKI over PA is CKI is not confined to utilities projects as it can buy any projects that provide a predictable cash flow and stable return.
March 9, 2015 4
Cheung Kong Infrastructure
Sources of targets We believe there are five sources of possible targets:
1) Privatization of listed utilities (such as Envestra).
2) Utilities/infrastructure companies selling non-core assets (such as UK
Power Network).
3) Infrastructure fund selling investment (such as Eversholt).
4) Privatisation of government-owned assets (such as the power grid in
New South Wales, Australia).
5) Unbundling/deregulation of vertically integrated infrastructure assets.
What could be the possible targets in the near term? In the near term, we think possible acquisition targets could include the
power grid in New South Wales, Australia. We understand the Australian
government is considering privatising the transmission grids of some states,
such as New South Wales.
According to media reports, New South Wales Premier Mike Baird
announced he will seek a mandate during the 2015 state elections to lease
out 49% of the New South Wales-owned electricity transmission and
distribution businesses. We believe the 99-year lease of 49% of the
government-owned electricity distribution and transmission businesses
could raise as much as AUD20b.
Originally, the Queensland government led by Campbell Newman had
planned to raise USD28b through a long-term lease of its electricity
transmission networks. However, Newman lost his seat and the new leader
signalled her party will not proceed with the plan. We think Queensland
will not privatise its grid business in the near term.
Figure 5: Potential Australian opportunities
Projects Potential opportunities in Australia for acquisition of private companies
Roads 53 projects listed including Bruce Highway upgrade, the Pacific Highway works
and the AUD11.5b WestConnex project.
Rail The government is proceeding with plans for the AUD4.7b Melbourne-to-
Brisbane inland rail projects, committing AUD300m for pre-construction work,
in the 2014 federal budget.
Seaports Infrastructure Australia has identified up to AUD11b of seaport assets with
privatisation potential.
Airports In Apr’14, the Australian government approved the construction of a second
airport in Sydney at Badgerys Creek. The project potentially presents
investment and procurement opportunities for the private sector. As state and
local governments examine the possibility of privatizing regional airports or
seeking private investments to upgrade regional airports, further opportunities
may become available.
Energy Infrastructure Australia has identified up to AUD109b of energy assets with
privatisation potential. These assets are mainly in NSW, Queensland, Tasmania
and Western Australia.
Source: Infrastructure Australia, Australian Government Australian Trade Commission
The privatisation of NSW’s power grid could be a near-term catalyst if CKI successfully bids for the project.
March 9, 2015 5
Cheung Kong Infrastructure
Figure 6: Proposed deal examples in Australia from Bloomberg (the past 12 months)
Deal Type Announced Possible targets Country
Target sector
Target sub-group Sector/business
Possible acquirer Possible seller
Announced total value (USDm)
Deal status
M&A 2/2/2015 Port of Melbourne Corp
Australia Industrial Transport-Services
Infrastructure Potential Buyer
N/A Proposed
M&A 1/19/2015 Electricity assets/Queensland & New South Wales
Australia Electric-Integrated
Power generation and distribution
Potential Buyer
N/A Proposed
M&A 1/19/2015 Redbank Energy Ltd Australia Utilities Electric-Generation
Power generation
Potential Buyer
TPG Capital Management LP
N/A Proposed
M&A 12/8/2014 UGL Rail Pty Ltd Australia Industrial Engineering/ R&D Services
Infrastructure CSR Corp UGL Ltd 373.01 Proposed
M&A 6/5/2014 Australian assets/GDF Australia Electric-Distribution
Power distribution
Potential Buyer
GDF Suez 373.24 Proposed
M&A 6/2/2014 Tenix Pty LTd Australia Industrial Airport Development
Infrastructure Potential Buyer
400 Proposed
Source: Bloomberg
What opportunities could be found in Europe? Despite media reports CKI has pulled out of the bidding for Fortum’s
Swedish power grid after the asking price was raised, we expect there will
be more possible acquisition targets in Europe. Given the weak economy in
Europe, governments have the incentive to develop infrastructures to
stimulate the economy. Also, privatisation could be one way to help repay
some government debt and to develop more infrastructure. Other than
privatisation, we think corporate disposals could provide even better
opportunities. North Europe will remain the focus as it has a relatively
more stable regulatory, political and economic climate. We think the
source of investment opportunities could be some companies selling stakes
to repay debt, such as Fortum’s disposal of its power grid to reduce
gearing and focus more on its power generation business.
According to media reports in Nov 2014, the European Commission’s new
president launched a plan aimed at attracting investors to finance
infrastructure projects across the European Union. Officials from the EU
and national governments have been working to assemble a list of projects
that would be candidates for the fund. An EU official said they had already
identified EUR300b worth of projects. The fund should be up and running
in the middle of 2015, an EU official said. Although the plan may attract
pension or infrastructure funds, CKI may also benefit from co-operations in
the region.
Still a lot of proposed deals, as highlighted by Bloomberg. We believe the projects in the UK will be more preferred by CKI.
March 9, 2015 6
Cheung Kong Infrastructure
Figure 7: Proposed deal examples in Europe from Bloomberg (the past 12 months)
Announced Possible target Country Target sector Sector/business Possible acquirer Possible seller
Announced total value (USDm)
Deal status
17/02/2015 Waste management business/UK
UK Waste management Potential Buyer Viking Consortium Holdings Ltd
1074.99 Proposed
13/02/2015 Free market gas unit Hungary Gas Gas distribution MET Power Hungary kft GDF Suez N/A Proposed 12/02/2015 Enel SpA Italy Power, Gas Power and gas generation
and distribution Potential buyer 2277.6 Proposed
12/02/2015 Gas-fired power plants UK Gas Gas generation Unnamed buyer Centrica PLC 769.1 Proposed 09/02/2015 Power distribution
license/Moldova Republic of Moldova
Power Power distribution Societatea Comerciala de Distributie si Furnizare
Gas Natural SDG SA N/A Proposed
06/02/2015 Zinc chemicals & building-product operations
Europe Environmental services Potential buyer Umicore SA N/A Proposed
02/02/2015 Aquaporin A/S Denmark Water Water purification Danica Pension Livsforsikringsaktieselskab
N/A Proposed
31/01/2015 Madrilena Red de Gas SAU Spain Gas Gas distribution Potential buyer Morgan Stanley N/A Proposed 16/12/2014 Gas Natural SDG SA Spain Gas Gas generation and
distribution Potential buyer Repsol SA N/A Proposed
14/12/2014 Aeroporti di Roma SpA Italy Infrastructure Potential buyer Atlantia SpA N/A Proposed 10/12/2014 Waste services unit UK Waste management Rutland Partners LLP Serco Group PLC N/A Proposed 05/12/2014 Enemalta Corp Republic of
Malta Power, gas and water
Power, gas and water generation and distribution
Shanghai Electric Power 122.93 Proposed
01/12/2014 Mouchel Group PLC UK Infrastructure Kier Group PLC N/A Proposed 26/11/2014 Globalvia Inversiones SA Spain Infrastructure Potential buyer N/A Proposed 16/11/2014 RTE Reseau de Transport
d'Electricite SA France Power Power Transmission Potential buyer Electricite de France
SA N/A Proposed
07/11/2014 Slovenske Elektrarne AS Slovakia Power Power generation Potential buyer Enel SpA N/A Proposed 07/11/2014 Ximax Environmental
Solutions PLC,Ximax Oil & Gas Solutions Ltd
UK Water treatment Emmit PLC N/A Proposed
05/11/2014 Swissgrid AG Switzerland Power Power transmission Potential buyer Alpiq Holding AG N/A Proposed 13/10/2014 Ainscough Crane Hire Ltd UK Infrastructure Potential buyer TPG Capital
Management LP,Goldman Sachs Private Equity Group
N/A Proposed
09/10/2014 Enviromental services & leisure units
UK Environmental services Potential buyer Serco Group PLC N/A Proposed
26/09/2014 Energa SA Poland Power Power distribution CEZ AS N/A Proposed 25/09/2014 Van Gansewinkel NV Belgium Waste management Potential Buyer KKR & Co LP,CVC
Capital Partners Ltd 573.34 Proposed
17/09/2014 Bullock Construction Ltd UK Infrastructure United House N/A Proposed 16/09/2014 Indaver NV Belgium Waste management Potential buyer Delta NV N/A Proposed 12/09/2014 LPG assets/Europe Europe Gas Gas transmission and
distribution Potential buyer Royal Dutch Shell PLC N/A Proposed
05/09/2014 E.On Italia Produzione Italy Power Power generation Potential buyer E.ON SE N/A Proposed 03/09/2014 PKP Energetyka SA Poland Power Power generation and
distribution Potential buyer PKP Cargo SA N/A Proposed
02/09/2014 Latvijas Gaze Latvia Gas Gas transmission and distribution
Potential buyer E.ON SE N/A Proposed
25/08/2014 Renewable energy assets/Spain
Spain Renewable energy Potential buyer ACS Actividades de Construccion y Servicios SA
N/A Proposed
12/08/2014 Potential Target UK Infrastructure Chigwell Construction London
N/A Proposed
31/07/2014 Endesa SA Spain Power Power generation Potential Buyer Enel SpA N/A Proposed 21/07/2014 Nove Eco Energy Ltd,MG
Solar Systems Ltd,2 Solar Power Plants/Romania
Romania Renewable Energy China Seven Star Holdings ReneSola Ltd N/A Proposed
17/07/2014 Madrilena Red de Gas Finance BV
Spain Gas Gas distribution Potential buyer Morgan Stanley N/A Proposed
10/07/2014 German gas operations Germany Gas Gas distribution EnBW Energie Baden-Wuerttemberg AG
Eni SpA 203.96 Proposed
30/06/2014 Athens International Airport SA
Greece Infrastructure China Investment & Finance Group Ltd,Shenzen Airport Group Co Ltd
Public Sector Pension Investment Board/The
N/A Proposed
12/06/2014 Fomento de Construcciones y Contratas SA
Spain Infrastructure Private Investor N/A Proposed
02/06/2014 Independent Power Transmission Operator SA
Greece Power Power transmission Potential buyer N/A Proposed
29/04/2014 Spain distribution unit Spain Power Power distribution Potential buyer Iberdrola SA N/A Proposed 29/04/2014 BESIX Group SA Belgium Infrastructure Potential buyer OCI NV N/A Proposed 08/04/2014 Sheremetyevo International
Airport OAO Russia Infrastructure Potential buyer Russian Federation N/A Proposed
07/04/2014 Merseylink bridge concession
UK Infrastructure 3i Infrastructure PLC Fomento de Construcciones y Contratas SA
N/A Proposed
04/04/2014 Slovenske Elektrarne AS Slovakia Power Power generation Potential buyer Enel SpA 3700.35 Proposed 04/04/2014 Certain Assets Germany Power Power generation Potential buyer E.ON SE N/A Proposed 01/04/2014 AWAS Aviation Capital Ltd Ireland Infrastructure Potential buyer Terra Firma Capital
Partners Ltd N/A Proposed
26/03/2014 Energy assets/SSE Plc Scotland Power, gas Power and gas generation, transmission and distribution
Potential buyer SSE PLC 1656.8 Proposed
20/03/2014 RusHydro JSC Russia Power Power generation Rosneftegaz OJSC N/A Proposed 12/03/2014 Swedish electricity grid Sweden Power Power transmission Potential buyer Fortum OYJ 5561.2 Proposed
Source: Bloomberg
March 9, 2015 7
Cheung Kong Infrastructure
Why buying more assets could add value
We believe whether an acquisition is value-accretive to NPV will depend on
the purchase price, especially as we expect future acquisitions are likely
to be financed by cash raised from new share issues. However, judging by
CKI’s track record, its acquisitions are in general value added for
shareholders. We think there are several reasons:
Shareholder loans
Other than project debt, CKI could provide shareholder loans for the JV or
associates. We estimate it could contribute around 30% to 40% of total
equity investment of a project and the interest rate could be around 10%.
The interest income from shareholder loans could provide additional
income for CKI. At the project level, the interest expense could help lower
the tax expense.
Project IRR > WACC
In the UK and Australia, the rate of return is set by the government based
on its WACC assumption. The efficiency improvement of a project could
lead to the actual operating expenditure being lower than the government
assumption. The actual interest expenses could also be smaller than the
assumed one. Therefore, we expect the project IRR > project WACC.
Alter the project capital structure
If projects are acquired from an infrastructure fund, CKI could deleverage
to lower the interest expenses to boost the net earnings.
Possibly buying tax loss from Hutchison in the UK
In past years, CKI could buy some surplus tax loss from Hutchison to lower
the tax expenses in the UK. Although we are unsure whether the tax loss
will still be available for buying in the future, it could be one of the
possible synergies benefiting infrastructure projects in the UK.
We believe new projects are very likely to be EPS accretive In our analysis, if we assume CKI places new shares (10% of existing shares)
to invest in projects with 12% ROE, FY16F EPS could increase by 4.5% and
NPV/share could rise by HKD2.9.
Figure 8: Our estimate for the upside potential from new project investment
Our analysis to the upside from new projects if assuming using equity financing
Share price (HKD) 65
Placing discount 5.00%
Placing price (HKD) 62
Number of shares (m) 2520
Issue number of new shares 10%
Number of shares (m) 252
Total proceeds (HKDm) 15,561
Net proceeds (assume 1 % placing fee) 15,405
ROE 12%
Net profit (additional) 1,849
FY16F net profit (before) (HKDm) 12,368
FY16E net profit (after) (HKDm) 14,217
EPS (before) (HKD) 4.91
EPS (after) (HKD) 5.13
EPS (accretive, +/dilution, -) 4.5%
NPV increment /share (HKD) 2.92
Source: Maybank Kim Eng
New projects are very likely to be EPS accretive
March 9, 2015 8
Cheung Kong Infrastructure
Figure 9: Our sensitivity analysis: EPS changes, (placing discount vs ROE)
Placing discount
RO
E
3.5% 0.0% 2.5% 5.0% 7.5% 10.0%
14% 7.6% 7.2% 6.8% 6.3% 5.9%
12% 5.2% 4.9% 4.5% 4.1% 3.8%
10% 2.8% 2.5% 2.2% 1.9% 1.6%
8% 0.4% 0.2% 0.0% -0.3% -0.5%
6% -1.9% -2.1% -2.3% -2.5% -2.7%
Source: Maybank Kim Eng
Figure 10: Our sensitivity analysis: EPS changes, (new shares issuance, % vs
ROE)
New shares issuance (%)
RO
E
3.5% 5.0% 7.5% 10.0% 12.5% 15.0%
14% 3.5% 5.2% 6.8% 8.3% 9.7%
12% 2.4% 3.5% 4.5% 5.5% 6.5%
10% 1.2% 1.7% 2.2% 2.7% 3.2%
8% 0.0% 0.0% 0.0% 0.0% 0.0%
6% -1.2% -1.8% -2.3% -2.8% -3.3%
Source: Maybank Kim Eng
Figure 11: Our sensitivity analysis: NPV/share, (placing discount vs ROE)
Placing discount
RO
E
0.0% 2.5% 5.0% 7.5% 10.0%
14% 4.94 4.67 4.39 4.12 3.85
12% 3.39 3.16 2.92 2.69 2.46
10% 1.84 1.64 1.45 1.26 1.06
8% 0.29 0.13 (0.02) (0.18) (0.33)
6% (1.26) (1.38) (1.49) (1.61) (1.73)
Source: Maybank Kim Eng
Figure 12: Our sensitivity analysis: NPV/share, (new shares issuance, % vs ROE)
New shares issuance (%)
RO
E
227.9% 5.0% 7.5% 10.0% 12.5% 15.0%
14% 2.30 3.37 4.39 5.37 6.31
12% 1.53 2.24 2.92 3.57 4.19
10% 0.76 1.11 1.45 1.77 2.08
8% (0.01) (0.02) (0.02) (0.03) (0.03)
6% (0.78) (1.15) (1.49) (1.82) (2.14)
Source: Maybank Kim Eng
March 9, 2015 9
Cheung Kong Infrastructure
Currency depreciation to help speed up
overseas acquisitions
Weaker Euro: Tail wind
We believe the recent depreciation of foreign currencies will provide an
advantage for CKI’s overseas expansion. We expect CKI will be more
interested to explore assets in Europe, the UK and Australia as they have
similar regulatory regimes. Year to date, the EUR against the HKD has
declined by 9.5%, the GBP has depreciated by 2% while the AUD has fallen
by 4%. We expect the lower foreign currencies could benefit a HK-based
company buying assets overseas, especially when considering the bidding
price is denominated in a foreign currency.
Figure 13: Foreign currency change vs HKD
Source: Bloomberg, Maybank Kim Eng
Figure 14: Euro Figure 15: British pound
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
-20%
-15%
-10%
-5%
0%
5%
Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15
Euro British pound Australian dollar Canadian dollar
8
9
10
11
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
Jan15
EUR/HKD
10
11
12
13
14
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
Jan15
GBP/HKD
Foreign currency depreciations could be an advantage for overseas acquisitions, despite some near-term translation risks.
March 9, 2015 10
Cheung Kong Infrastructure
Figure 16: Australian dollar Figure 17: Canadian dollar
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
Figure 18: Macquarie Global Infrastructure Index
Source: Bloomberg, Maybank Kim Eng
Low currency risk: well hedged To minimize the currency risk exposure of overseas investments, CKI
borrows funds denominated in the local currency of that particular
country. CKI also enters into certain interest rate and currency swaps to
mitigate interest rate and other currency exposure risks. As end 1H14, the
notional amounts of these derivative instruments amounted to
HKD46,777m. Currency swap could help with shareholder loans for
overseas projects from CKI, in our view. Despite the low currency risk in
project financing, translation risk cannot be avoided as the reporting
currency is in HKD.
5
6
7
8
9
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
Jan15
AUD/HKD
5
6
7
8
9
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
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March 9, 2015 11
Cheung Kong Infrastructure
Potential merger with PA: medium-term catalyst
As CKI and PA jointly own some projects, the market is speculating the two
companies could merge, especially following the recent announcement of
the proposed restructuring of Cheung Kong Holdings and Hutchison.
We expect the merger between CKI and PA could happen in the medium
term, rather than the near term. We believe the current set up could
provide better flexibility for Li’s group to acquire overseas projects. If the
project is power and gas utilities related, CKI could form a JV with PA and
CKI could issue new shares to fund the acquisitions. With not more than
50% stake, CKI does not need to consolidate the debt onto its balance
sheet and it could be easier to provide shareholder loans to associates and
JVs to earn interest income, in our view. With PA as a standalone entity,
the Li family has two vehicles to seek acquisition opportunities. However,
we expect the chance of a merger will be higher after PA has spent most
of the cash to expand overseas as it’s less likely to need two investment
teams to explore for overseas opportunities, in our view.
Infrastructure – close to Victor’s heart
The chairman of CKI is Victor Li, Li Ka Shing’s eldest son, who has a strong
background in infrastructure and holds a bachelor of civil engineering and
a master degree in structural engineering. It appears the entire group,
including CKH, has recently put more effort on infrastructure
development. CKI’s Northumbrian Water, Park’N Fly and the proposed
Eversholt projects are jointly owned with CKH. We expect CKI will be one
of the most important members to drive growth in Li’s group.
Advantages of cooperation with PA and CKH CKI always jointly bids for infrastructure projects with PA or Cheung Kong
Holdings (1 HK). Examples are the UK Power Network, which is 40% owned
by CKI, 40% by PA and 20% by the Li Ka Shing Foundation. Another example
is the recently proposed acquisition of Eversholt, which will be 50% owned
by CKI and 50% held by Cheung Kong Holdings. For gas and power utilities
projects, CKI could cooperate with PA, while CKI could work with Cheung
Kong Holdings for other projects, such as Northumbrian Water and
Eversholt (rolling stock leasing).
We think the advantages for a JV are:
CKI could look for mega projects on the back of the strong balance
sheets of PA and Cheung Kong Holdings.
For some power utilities, CKI could leverage PA’s expertise to improve
the operating efficiency of projects.
Easier to provide shareholder loans to associates/JVs.
The only disadvantage is in terms of the stock analysis due to less
disclosure of financial numbers. The consolidated net debt to equity may
also not be able to incorporate the debts at the project levels.
Possible merge with PA could be a medium-term catalyst.
March 9, 2015 12
Cheung Kong Infrastructure
Figure 19: CKI and Power Asset’s portfolios
CKI
Power
Asset CKH LKSF
UK Power Networks Holdings Ltd 40% 40% 0% 20%
Northern Gas Networks 47% 41% 0% 0% Wales & West Utilities Ltd 30% 30% 30% 10%
Seabank Power Ltd 25% 25% 0% 0% SA Power Networks * 27% 28% 0% 0% Transmission Operations (Australia) Pty Ltd 50% 50% 0% 0% Wellington Electricity Lines 50% 50% 0% 0% AVR-Afvalverwerking B.V. 35% 20% 35% 10%
Canadian Power Holdings Inc. 50% 50% 0% 0% Northumbrian Water Group 40% 0% 40% 20%
Southern Water Services Ltd 5% 0% 0% 0% Spark Infrastructure Group 8% 0% 0% 0% Envestra 33% 33% 33% 0%
Enviro Waste Services Ltd 100% 0% 0% 0% Park'N Fly 50% 0% 50% 0%
Source: Maybank Kim Eng, Note: * Spark Infrastructure also owns 49% of SA Power Network. And CKI owns 7.7% of Spark Infrastructure therefore in addition to 23.1% stakes in SA Power, CKI owns a total of 27% of SA Power.
March 9, 2015 13
Cheung Kong Infrastructure
Decent dividend due to robust cash flow
Given CKI’s EPS growth trend, the dividend per share is also trending up.
The DPS increased by 10% CAGR from HKD0.79 in FY04 to HKD2.00 in FY14.
We forecast the dividend yield to be 3.3% for FY15, quite decent.
Figure 20: CKI dividend per share (FY04-14) Figure 21: CKI dividend yield
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
Robust cash flow from stable business CKI could receive robust and stable cash flow from its associates and JVs as
most utilities projects will enjoy a regulated permitted rate of return. In
the UK and Australia, the regulatory period is typically between five and
eight years. The regulated earnings will be the rate of return x rate base
or fixed assets. The returns are set based on WACC and are inflation
linked. Incorporating the nominal rate of return, we estimate the nominal
return in the UK will be about 6-7%, while in Australia will be around 9-
10%.
Figure 22: UK/Australia regulatory framework illustration
Source: Maybank Kim Eng
Interest rate impact is relatively small As the rate of return will depend on the government’s WACC assumption,
each time the Australian or the UK government resets the cost of debt
assumption, CKI could enter into an interest rate swap so that the actual
project WACC could be relatively stable despite the possible volatility of
spot interest rate. For Australian businesses, the government should only
reset the cost of debt assumption after the time interval of every
regulatory assumption reset (i.e. 5 years). However, for the UK business,
the government should reset it every year.
0.5
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
HKD
CAGR 2004-2014: 10%
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Regulated
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Regulated asset
base (RAB)WACC Depreciation
Operating
expenditureTax =+++x
CKI’s DPS increased by 10% CAGR over the past 10 years.
March 9, 2015 14
Cheung Kong Infrastructure
Initiate BUY, SOTP-based TP HKD75 Valuations Over the past 10 years, CKI’s share price performance has moved in sync
with the upward trend in its EPS. Over the past five years (2009 to 2014) in
particular, the EPS CAGR reached 10%. This was mainly driven by overseas
acquisitions. Secured by the regulated permitted project return schemes,
we think CKI’s earnings risks are relatively low, while its cooperation with
CKH and PA to acquire more projects could be the upside catalyst.
Figure 23: Share price performance with acquisitions
Source: Maybank Kim Eng
Based on a SOTP valuation basis, our target price for CKI is HKD75. The UK
business, mainly driven by the UK Power Network and Northumbrian
Water, contributed around 57% of the NPV of CKI. Power Assets made up
around 36% of the total NPV. We have also factored in the recently
announced proposed acquisition of Eversholt, the rolling stock leasing
business in the UK, into our model.
Figure 24: Our SOTP valuation
Value Per share (HKD) %
HK 67,321 26.7 36% UK 120,432 47.8 64% Australia 22,223 8.8 12% China 1,791 0.7 1% New Zealand 1,390 0.6 1% Canada and Netherlands 1,160 0.5 1% Infrastructure related 3,087 1.2 2% Less: Perpetual capital securities (7,933) -3.1 -4% Less: Net debt (20,500) -8.1 -11%
Equity value 188,971 75 100% No. shares (m) 2,520
Per share equity value (HKD) 75.0 Source: Maybank Kim Eng
Improved liquidity CKI has proposed to issue new shares for the acquisition of Eversholt. After
the issuance, CKI’s free float has increased from 21.6% to 24.1%. We
believe the higher free float will increase the liquidity of the stock. We
believe the stronger liquidity could attract more global institutional
investors to this global infrastructure company.
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Seabank Power (together with PA)
Northumbrian Water (together with CKH & LKFS)
UK Power Networks (together with PA & LKFS)
Wales & West Utilities (together with CKH, PA & LKFS)
EnviroWaste (wholly owned by CKI)
AVR (together with CKH, PA & LKSF)
Envestra (together with CKH and PA)
Park'N Fly (together with CKH)
Transmission Opreations Australia (together with PA)
Meridian Cogeneration (together with PA)
Proposed Eversholt with CKH
Initiate BUY, SOTP-based TP of HKD75 for possible M&A, steady growth of DPS and improved liquidity.
The public float has increased from 21.6% to 24.1%.
March 9, 2015 15
Cheung Kong Infrastructure
PER and P/BV CKI is trading at FY15F PER of 14x and P/BV of 1.6x. We forecast the
company’s ROE to be 12% for FY15, high compared to Hong Kong utilities.
We think CKI’s EPS CAGR could have upside potential depending on the
pace to acquisition of projects.
Figure 25: CKI – forward PER band Figure 26: CKI – forward P/BV band
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
Figure 27: CKI dividend yield
Source: Bloomberg, Maybank Kim Eng
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March 9, 2015 16
Cheung Kong Infrastructure
Figure 28: Peer comparisons (comparing with other sub-sectors) (all based on Bloomberg consensus forecasts)
Bloomberg Mkt Cap Closing Target PER (x) P/BV (x) DY (%) ROE (%)
Company code (USDm) Price Rating price FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E
HK power utilities
CLP 2 HK 21,888 67.20 NR NR 15.8 14.9 1.8 1.7 4.0 4.1 11.4 11.5
Power Assets* 6 HK 20,939 76.10 Buy 87.00 18.1 18.5 1.3 1.2 3.5 3.5 7.1 6.8
CKI* 1038 HK 21,747 66.95 Buy 75.00 15.9 15.7 1.6 1.5 3.2 3.4 10.5 10.2
HKE Trust 2638 HK 5,981 5.25 NR NR 14.6 14.5 0.9 0.9 7.5 7.6 6.3 6.3
Average 16.1 15.9 1.4 1.3 4.6 4.7 8.8 8.7
Chinese IPPs Huaneng Power* 902 HK 17,006 9.05 Buy 11.00 8.3 7.9 1.5 1.3 6.2 6.5 18.1 17.1
China Resources Power* 836 HK 12,160 19.66 Buy 25.00 7.8 7.3 1.3 1.1 4.1 4.5 17.2 16.5
Datang Power* 991 HK 10,755 3.82 Hold 3.90 10.4 7.3 0.9 0.9 3.6 4.9 9.3 10.5
Huadian Power* 1071 HK 7,824 6.47 Hold 6.10 7.8 8.1 1.4 1.3 4.9 4.8 19.6 15.8
China Power International* 2380 HK 3,555 3.96 Buy 4.10 7.7 7.5 1.0 1.0 5.5 5.6 14.0 13.0
Average
8.4 7.6 1.2 1.1 4.8 5.3 15.6 14.6
Nuclear Power
CGN Power* 1816 HK 19,277 3.29 Buy 4.00 20.9 19.3 2.3 2.0 2.3 1.7 14.3 10.9
City gas distributors
HK & China Gas 3 HK 23,797 17.56 NR NR 25.3 23.4 3.3 3.1 2.0 2.2 13.9 14.0
Beijing Enterprise 392 HK 10,216 61.70 NR NR 15.9 13.2 1.4 1.3 1.7 2.0 8.6 9.4
China Gas* 384 HK 8,487 13.16 Buy 16.50 20.2 16.5 3.5 3.0 1.1 1.4 18.8 19.0
China Resources Gas* 1193 HK 6,093 21.25 Hold 24.00 18.7 16.1 2.9 2.5 1.1 1.4 16.3 16.3
ENN Energy* 2688 HK 6,562 47.00 Hold 51.00 18.3 16.3 3.6 3.0 1.5 1.7 20.9 20.0
Towngas China* 1083 HK 2,576 7.59 Hold 9.50 17.1 14.6 1.5 1.4 1.1 1.4 8.8 9.6
Average 19.3 16.7 2.7 2.4 1.4 1.7 14.5 14.7
Solar Power
GCL-Poly* 3800 HK 4,273 2.14 Buy 3.30 15.7 11.5 1.8 1.6 0.5 0.7 12.1 14.6
GCL New Energy 451 HK 1,878 1.05 NR NR N/A N/A N/A N/A N/A N/A -16.2 -24.5
Xinyi Solar 968 HK 1,975 2.52 NR NR 14.3 11.6 3.6 2.9 2.4 2.9 27.8 27.2
Singyes Solar 750 HK 1,036 11.54 NR NR 9.8 7.6 2.0 1.6 1.1 1.3 22.5 23.3
United PV 686 HK 611 1.00 NR NR 76.9 19.2 1.3 1.1 N/A N/A -11.6 16.5
Comtec Solar 712 HK 199 1.11 NR NR 30.9 15.2 0.7 0.7 1.1 1.8 2.4 4.5
Average 29.5 13.0 1.9 1.6 1.3 1.7 6.1 10.3
Wind Power
Longyuan Power* 916 HK 8,485 8.19 Buy 10.00 21.6 15.0 1.6 1.5 0.9 1.3 7.7 10.1
Goldwind 2208 HK 5,902 12.96 NR NR 16.1 13.6 1.9 1.7 1.9 2.2 12.3 12.6
Huadian Fuxin 816 HK 4,076 3.76 NR NR 12.7 9.4 1.7 1.5 1.6 2.1 14.2 16.1
Huaneng Renewables* 958 HK 3,411 2.72 Buy 3.50 18.9 12.1 1.3 1.2 1.1 1.7 7.3 10.5
Beijing Jineng Clean Energy 579 HK 2,808 3.17 NR NR 12.1 8.2 1.4 1.2 1.6 2.5 12.7 15.9
China High Speed Transmission 658 HK 1,111 5.27 NR NR 12.5 10.0 0.7 0.7 0.2 0.6 6.0 7.4
Datang Renewable* 1798 HK 994 1.06 Hold 1.00 N/A 19.9 0.7 0.6 0.0 0.8 0.0 3.3
China Wind Power 182 HK 611 0.53 NR NR 11.3 7.4 0.9 0.8 0.8 0.8 7.7 10.6
Average 15.0 12.0 1.3 1.1 1.0 1.5 8.5 10.8
Environmental protection and water utilities
China Everbright Int'l 257 HK 7,006 12.12 NR NR 31.3 23.2 3.6 3.2 0.8 1.0 12.2 14.7
Guangdong Investment 270 HK 8,112 10.06 NR NR 15.7 14.9 2.1 1.9 2.4 2.5 13.4 12.7
Beijing Water Enterprise 371 HK 5,681 5.06 NR NR 26.8 20.2 2.9 2.7 1.3 1.7 11.4 13.7
Guodian Science and Technology 1296 HK 899 1.15 NR NR N/A 9.3 0.6 0.6 1.1 0.3 -3.9 3.5
Tianjin Capital Environment 1065 HK 2,475 5.49 NR NR 21.3 19.3 1.5 1.4 1.7 1.9 7.8 6.8
CT Environmental 1363 HK 1,650 8.37 NR NR 31.8 22.4 6.9 5.2 0.5 0.7 25.3 26.0
Average 25.4 18.2 2.9 2.5 1.3 1.4 11.0 12.9
Power equipment
Shanghai Electric 2727 HK 17,647 4.50 NR NR 19.8 18.6 1.4 1.3 1.9 2.0 7.2 7.3
Dongfang Electric 1072 HK 7,033 15.64 NR NR 16.0 14.7 1.3 1.3 1.1 1.2 8.8 9.3
Harbin Electric 1133 HK 935 5.27 NR NR 10.4 12.7 0.4 0.4 1.6 1.6 5.5 3.4
Average 15.4 15.4 1.1 1.0 1.5 1.6 7.2 6.7
Note: *Covered by Kim Eng. NR=not-rated. (Closing price on 6 Mar) Source: Bloomberg, Maybank Kim Eng
March 9, 2015 17
Cheung Kong Infrastructure
Potential catalysts More possible project acquisitions overseas, such as in Europe and
Australia.
Potential merger between CKI and PA.
Regulatory resets for the existing projects.
Currency depreciation (AUD & EUR) helping acquisitions but higher
translation risk.
Risks Potential overseas acquisitions could be later than we expect.
Possible new share placement for overseas expansion and it may
potentially cause EPS dilution.
Bidding for projects at a high price.
Interest rate and currency risk.
Figure 29: Our earnings Breakdown estimate (2015E)
Source: Maybank Kim Eng
HK 27.3%
UK 53.8%
Australia 11.0%
China 3.1%
New Zealand 1.1%
Canada and Netherland
0.9%
Infrastructure related
2.7%
March 9, 2015 18
Cheung Kong Infrastructure
CKI’s existing portfolio Figure 30: CKI current portfolio
Company name Location
Consumer coverage (million)
CKI's share-
holding Business
Power Asset International n/a 38.87% Power Assets has established diverse worldwide interests with investments in Hong Kong, the United Kingdom, Australia, New Zealand, Mainland China, Canada, Thailand and the Netherlands.
UK Power Networks Holdings Ltd
UK 8 40% One of the UK's largest power distributors; has three regional networks with a distribution area that covers London, South East England and the East of England; and non-regulated business comprising commercial contracts to distribute electricity to a number of privately owned sites
Northumbrian Water Group UK 4.5 40% One of the ten regulated water and sewerage companies in England and Wales. It supplies water and sewerage services in the North East of England and supplies water services to the South East of England
Northern Gas Networks UK 6.7 47.10% One of the eight major gas distribution networks in the United Kingdom
Wales & West Utilities Ltd UK 7.5 30% A gas distribution network that serves Wales and the South West of England
Seabank Power Ltd UK n/a 25% Owns and operates Seabank Power Station near Bristol. The electricity is sold under a long-term contract to SSE Energy Supply Ltd.
Southern Water Services Ltd UK 6.9 4.75% Supplies water and waste water services to the South East of England
SA Power Networks Australia 0.839 23.07% Primary electricity distribution business for the state of South Australia
Powercor Australia Ltd Australia 0.75 23.07% Operates a major electricity distribution network, covering an area of 150,000 sq km in the state of Victoria
CitiPower I Pty Ltd Australia 0.32 23.07% Operates the electricity distribution network in the CBD and inner suburban areas of Melbourne, Victoria
Transmission Operations (Australia) Pty Ltd
Australia n/a 50% A transmission link that transports renewable energy from Mt Mercer Wind Farm to Victoria's power grid
Australian Gas Networks Limited (aka "Envestra Ltd")
Australia 1.2 45% One of Australia's largest distributors of natural gas; About 22,500 km, consumer coverage is over 1.2m customers.
Spark Infrastructure Group Australia n/a 8.50% An infrastructure company listed in Australia with seed assets being a 49% stake in each of SA Power Networks, Powercor and CitiPower
Wellington Electricity Lines New Zealand 0.165 50% Operates the electricity distribution network in New Zealand’s capital city, Wellington, and the surrounding greater Wellington area
Enviro Waste Services Ltd New Zealand 0.5 100% A diversified, vertically integrated waste management business that has national coverage in New Zealand
AVR-Afvalverwerking B.V. Netherlands n/a 35% The largest energy-from-waste player in the Netherlands, operating 2 waste treatment plants, one in Rozenburg and another in Duiven; as well as 4 stations
Canadian Power Holdings Inc. Canada n/a 50% Owns 49.99% share of TransAlta Cogeneration, L.P, which operates five power plants in the provinces of Ontario and Alberta as well as 100% of the Meridian Cogeneration Plant in Saskatchewan
Park'N Fly Canada n/a 50% The largest off-airport car park company in Canada and the only national operator. The company provides off-airport car park solutions in Toronto, Vancouver, Montreal, Edmonton and Ottawa.
Shen-Shan Highway China n/a 33.50% Guangdong province, expressway
Shantou Bay Bridge China n/a 30% Guangdong province, bridge
Tangshan Tangle Road China n/a 51% Hebei province, bridge
Changsha Wujialing and Wuyilu China n/a 44.20% Hunan province, bridge
Jiangmen Chaolian Bridge China n/a 50% Guangdong province, bridge
Jiangmen Jiangsha Highway China n/a 50% Guangdong province, highway
Panyu Beidou Bridge China n/a 40% Guangdong province, bridge
Alliance Construction Materials Ltd
Hong Kong n/a 50% Hong Kong's largest concrete producer - 4 million cubic metres per annum, 2 quarries in Hong Kong and 1 quarry in China, with sole distribution rights for another quarry in China for sales into Hong Kong - 5 million tonnes per annum
Green Island Cement Company Hong Kong n/a 50% The only fully integrated cement producer in Hong Kong
Anderson Asphalt Limited Hong Kong n/a 100% Hong Kong's largest asphalt producer, pavement contractor and recycler - 4m tonnes per annum
Green Island Cement (Yunfu) Company Limited
China n/a 100% Guangdong province, fully operational during 4Q13 - 2.8m tonnes per annum
Guangdong Gitic Green Island Cement Co. Ltd.
China n/a 67% Cement production - 2.3m tonnes per annum
Siquijor Limestone Quarry Philippines n/a 40% Limestone quarry - 2m tonnes per annum
Source: Company websites, Maybank Kim Eng
March 9, 2015 19
Cheung Kong Infrastructure
FYE 31 Dec FY13A FY14A FY15E FY16E FY17E
Key Metrics
P/E (reported) (x) 14.0 5.1 14.2 13.6 13.2
Core P/E (x) 14.0 15.5 14.2 13.6 13.2
P/BV (x) 2.3 1.7 1.6 1.5 1.4
P/NTA (x) 2.4 1.8 1.6 1.5 1.4
Net dividend yield (%) 2.8 3.0 3.3 3.4 3.5
FCF yield (%) 1.4 4.2 0.1 4.1 4.3
EV/EBITDA (x) 106.1 66.2 80.4 75.3 70.6
EV/EBIT (x) nm 75.0 93.8 87.2 81.2
INCOME STATEMENT (HKD m)
Revenue 5,018.0 6,100.0 6,141.8 6,337.0 6,540.7
Gross profit 5,018.0 6,100.0 6,141.8 6,337.0 6,540.7
EBITDA 1,193.0 2,290.7 2,354.9 2,516.4 2,686.4
Depreciation (152.0) (178.7) (193.1) (207.5) (221.9)
Amortisation (17.0) (89.0) (143.9) (136.7) (129.8)
EBIT 1,024.0 2,023.0 2,018.0 2,172.3 2,334.7
Net interest income /(exp) (765.0) (906.0) (1,364.5) (1,553.6) (1,648.2)
Associates & JV 11,424.0 28,786.0 11,478.5 11,969.3 12,340.2
Exceptionals 0.0 2,236.0 0.0 0.0 0.0
Other pretax income 571.0 207.0 0.0 0.0 0.0
Pretax profit 12,254.0 32,346.0 12,132.1 12,587.9 13,026.7
Income tax 58.0 (26.0) (9.8) (10.1) (10.5)
Minorities 8.0 5.0 1.9 1.9 2.0
Perpetual securities (681.0) (543.0) (203.7) (211.3) (218.7)
Discontinued operations 0.0 0.0 0.0 0.0 0.0
Reported net profit 11,639.0 31,782.0 11,920.6 12,368.4 12,799.6
Core net profit 11,639.0 10,563.1 11,920.6 12,368.4 12,799.6
BALANCE SHEET (HKD m)
Cash & Short Term Investments 5,958.0 7,108.0 4,137.4 3,990.1 6,825.3
Accounts receivable 0.0 0.0 0.0 0.0 0.0
Inventory 215.0 175.0 263.1 271.5 280.2
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Property, Plant & Equip (net) 2,408.0 2,452.0 2,846.3 3,043.8 3,227.0
Intangible assets 2,966.0 2,877.0 2,733.2 2,596.5 2,466.7
Investment in Associates & JVs 80,827.0 107,134.0 125,947.0 132,902.5 140,123.0
Other assets 7,534.0 6,324.0 6,581.9 6,651.9 6,722.0
Total assets 99,908.0 126,070.0 142,508.9 149,456.3 159,644.1
ST interest bearing debt 44.0 1,690.0 4,729.6 8,300.2 11,230.3
Accounts payable 0.0 0.0 0.0 0.0 0.0
LT interest bearing debt 12,985.0 16,947.0 19,907.4 16,336.8 16,406.7
Other liabilities 6,281.0 5,687.0 4,847.0 4,906.0 4,965.0
Total Liabilities 19,310.0 24,324.0 29,484.0 29,543.1 32,602.5
Shareholders Equity 70,185.0 93,736.0 105,014.9 111,903.2 119,031.7
Minority Interest 84.0 77.0 77.0 77.0 77.0
Total shareholder equity 70,269.0 93,813.0 105,091.9 111,980.2 119,108.7
Perpetual securities 10,329.0 7,933.0 7,933.0 7,933.0 7,933.0
Total liabilities and equity 99,908.0 126,070.0 142,508.9 149,456.3 159,644.1
CASH FLOW (HKD m)
Pretax profit 12,254.0 32,346.0 12,132.1 12,587.9 13,026.7
Depreciation & amortisation 169.0 267.7 336.9 344.1 351.7
Adj net interest (income)/exp (1,232.0) 747.4 1,228.0 1,455.0 1,517.0
Change in working capital 1,192.0 337.0 (733.9) (3.8) (5.5)
Cash taxes paid 23.0 (291.0) (412.8) (1.0) (1.7)
Other operating cash flow (9,654.0) (26,129.8) (11,937.9) (6,980.0) (7,243.3)
Cash flow from operations 2,752.0 7,277.3 612.4 7,402.2 7,644.9
Capex (405.0) (405.0) (405.0) (405.0) (405.0)
Free cash flow 2,347.0 6,872.3 207.4 6,997.2 7,239.9
Dividends paid 0.0 (4,997.0) (5,483.5) (5,689.5) (5,887.8)
Equity raised / (purchased) 0.0 0.0 4,640.0 0.0 0.0
Perpetual securities 0.0 (2,396.0) 0.0 0.0 0.0
Change in Debt 3,040.0 5,608.0 6,000.0 0.0 3,000.0
Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0
Other invest/financing cash flow (6,412.0) (3,934.3) (8,334.6) (1,455.0) (1,517.0)
Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0
Net cash flow (1,025.0) 1,153.0 (2,970.6) (147.3) 2,835.1
March 9, 2015 20
Cheung Kong Infrastructure
FYE 31 Dec FY13A FY14A FY15E FY16E FY17E
Key Ratios
Growth ratios (%)
Revenue growth 22.2 21.6 0.7 3.2 3.2
EBITDA growth (21.3) 92.0 2.8 6.9 6.8
EBIT growth (30.0) 97.6 (0.2) 7.6 7.5
Pretax growth 21.9 164.0 (62.5) 3.8 3.5
Reported net profit growth 23.5 173.1 (62.5) 3.8 3.5
Core net profit growth 23.5 (9.2) 12.9 3.8 3.5
Profitability ratios (%)
EBITDA margin 23.8 37.6 38.3 39.7 41.1
EBIT margin 20.4 33.2 32.9 34.3 35.7
Pretax profit margin nm nm nm nm nm
Payout ratio 39.0 15.4 46.0 46.0 46.0
DuPont analysis
Net profit margin (%) nm nm nm nm nm
Revenue/Assets (x) 0.1 0.0 0.0 0.0 0.0
Assets/Equity (x) 1.4 1.3 1.4 1.3 1.3
ROAE (%) 17.5 12.9 12.0 11.4 11.1
ROAA (%) 12.4 9.3 8.9 8.5 8.3
Liquidity & Efficiency
Cash conversion cycle nm nm nm nm nm
Days receivable outstanding nm nm nm nm nm
Days inventory outstanding nm nm nm nm nm
Days payables outstanding nm nm nm nm nm
Dividend cover (x) 2.6 6.5 2.2 2.2 2.2
Current ratio (x) 1.7 1.4 0.7 0.5 0.6
Leverage & Expense Analysis
Asset/Liability (x) 5.2 5.2 4.8 5.1 4.9
Net debt/equity (%) 10.1 12.3 19.5 18.5 17.5
Net interest cover (x) 1.3 2.2 1.5 1.4 1.4
Debt/EBITDA (x) 10.9 8.1 10.5 9.8 10.3
Capex/revenue (%) 8.1 6.6 6.6 6.4 6.2
Net debt/ (net cash) 7,071.0 11,529.0 20,499.6 20,646.9 20,811.7
Source: Company; Maybank
March 9, 2015 21
Cheung Kong Infrastructure
Research Offices
REGIONAL
WONG Chew Hann, CA
Regional Head of Institutional Research
(603) 2297 8686 [email protected]
ONG Seng Yeow
Regional Head of Retail Research
(65) 6432 1453
Alexander GARTHOFF
Institutional Product Manager
(852) 2268 0638
ECONOMICS
Suhaimi ILIAS
Chief Economist
Singapore | Malaysia
(603) 2297 8682
Luz LORENZO
Philippines
(63) 2 849 8836
Tim LEELAHAPHAN
Thailand
(66) 2658 6300 ext 1420
JUNIMAN
Chief Economist, BII
Indonesia
(62) 21 29228888 ext 29682
STRATEGY
Sadiq CURRIMBHOY
Global Strategist
(65) 6231 5836 [email protected]
Willie CHAN
Hong Kong / Regional
(852) 2268 0631 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers
CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
Ivan YAP (603) 2297 8612 [email protected] • Automotive
Kevin WONG (603) 2082 6824 [email protected] • REITs
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research
(603) 2297 6858 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining – Regional
Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables
Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto
Karen KWAN (852) 2268 0640 [email protected] • Property & REITs
Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos
Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials
Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy
Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research
(91) 22 6632 2632
• Oil & Gas • Automobile • Cement
Anubhav GUPTA
(91) 22 6623 2605
• Metal & Mining • Capital Goods • Property
Urmil SHAH
(91) 22 6623 2606 [email protected]
• Technology • Media
Vishal MODI
(91) 22 6623 2607 [email protected]
• Banking & Financials
Abhijeet Kundu
(91) 22 6623 2628 [email protected]
• Consumer
SINGAPORE
NG Wee Siang Head of Research (65) 6231 5838 [email protected] • Banking & Finance
Gregory YAP (65) 6231 5848 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos
YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine
Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport (Land, Shipping & Aviation)
WEI Bin (65) 6231 5844 [email protected] • Commodity • Logistics • S-chips
John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare
TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps
INDONESIA
Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy
Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property
Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement
Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos
Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail
Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining
Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates
Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer
Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind.Estates
Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services
Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate • Telcos
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport
Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520
[email protected] • Property
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics
VIETNAM
LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities
THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials
Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage
March 9, 2015 22
Cheung Kong Infrastructure
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
March 9, 2015 23
Cheung Kong Infrastructure
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 9 March 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 9 March 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
March 9, 2015 24
Cheung Kong Infrastructure
Malaysia Maybank Investment Bank Berhad
(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd
Maybank Kim Eng Research Pte Ltd
50 North Canal Road
Singapore 059304
Tel: (65) 6336 9090
London Maybank Kim Eng Securities
(London) Ltd
5th Floor, Aldermary House
10-15 Queen Street
London EC4N 1TX, UK
Tel: (44) 20 7332 0221
Fax: (44) 20 7332 0302
New York Maybank Kim Eng Securities USA
Inc
777 Third Avenue, 21st Floor
New York, NY 10017, U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500
Stockbroking Business:
Level 8, Tower C, Dataran Maybank,
No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136
Hong Kong Kim Eng Securities (HK) Ltd
Level 30,
Three Pacific Place,
1 Queen’s Road East,
Hong Kong
Tel: (852) 2268 0800
Fax: (852) 2877 0104
Indonesia PT Maybank Kim Eng Securities
Plaza Bapindo
Citibank Tower 17th Floor
Jl Jend. Sudirman Kav. 54-55
Jakarta 12190, Indonesia
Tel: (62) 21 2557 1188
Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd
2nd Floor, The International 16,
Maharishi Karve Road,
Churchgate Station,
Mumbai City - 400 020, India
Tel: (91) 22 6623 2600
Fax: (91) 22 6623 2604
Philippines Maybank ATR Kim Eng Securities Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200
Tel: (63) 2 849 8888
Fax: (63) 2 848 5738
Thailand Maybank Kim Eng Securities
(Thailand) Public Company Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)
Vietnam Maybank Kim Eng Securities Limited
4A-15+16 Floor Vincom Center Dong
Khoi, 72 Le Thanh Ton St. District 1
Ho Chi Minh City, Vietnam
Tel : (84) 844 555 888
Fax : (84) 8 38 271 030
Saudi Arabia In association with
Anfaal Capital
Villa 47, Tujjar Jeddah
Prince Mohammed bin Abdulaziz
Street P.O. Box 126575
Jeddah 21352
Tel: (966) 2 6068686
Fax: (966) 26068787
South Asia Sales Trading Kevin Foy
Regional Head Sales Trading
Tel: (65) 6336-5157
US Toll Free: 1-866-406-7447
North Asia Sales Trading Alex Tsun
Tel: (852) 2268 0228
US Toll Free: 1 877 837 7635
Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152
Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820
Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177
New York Andrew Dacey [email protected] Tel: (212) 688 2956
India Manish Modi [email protected] Tel: (91)-22-6623-2601
Vietnam Tien Nguyen [email protected]
Tel: (84) 44 555 888 x8079
Philippines Keith Roy [email protected] Tel: (63) 2 848-5288
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