Guangshen’s 2018 Result Implies a Net Loss in 4Q; Cutting FVE to CNY 5.80, Shares Remain Undervalued
We lower our fair value estimate for Guangshen to HKD 5.80 per share from HKD 6.30, following the company’s full-year 2018 result that was below our expectations. Net profit fell 23% year over year to CNY 784 million, pointing to a net loss of 180 million in the fourth quarter. We think the significant miss was primarily driven by the negative impact from the change of settlement method on freight transport, while rising overhaul and repair costs also dampened margins. Core operating performance...Guangshen Railway Company Limited is engaged in the provision of passenger and freight transportation on railroads. The Company also operates certain other businesses, which include services offered in railway stations, and sales of food, beverages and merchandises on board the trains and in the railway stations. Its segments include The Railway Transportation Business and All other segments. The railroad and related business is conducted by the Company (the Railway Transportation Business). Other segments include on-board catering services, leasing, sales of materials, sale of goods and other businesses related to railway transportation provided by the subsidiaries of the Company. The Company is engaged in the provision of integrated services in relation to railway facilities and technology, commercial trading and other industrial businesses. It also operates with other railway companies in the People's Republic of China (PRC) for the provision of freight transportation services.
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