Hebei Construction released its annual report in 2019, and we compared the company's latest operating indicators and valuation with the listed listed companies China Construction International (code 3311 HK) and China Communications Construction (code 1800 HK). We expect a strong rebound from China Construction International and China Communications Construction and recommend that investors sell Hebei Construction (code 1727 HK) and switch to China Construction International and China Communications Construction in order to get a double dividend yield.
We think that China Construction International's current dividend yield of 6.3% is very attractive. China Construction International relies on the state-owned China Construction Group (code 601688 CH). We estimate that China Construction International holds outstanding orders of HK $227 billion, which is equivalent to 3.7 times annual revenue.
This means that the company's revenue will be highly visible in the next few years. China Construction International received orders with a total value of HK $14.14 billion in the first quarter of 20 years, equivalent to 1.4 times the order and sales value.
China Communications Construction's current dividend yield of 5.3 per cent is also very attractive. China Communications Construction is the largest port infrastructure construction company in the world. The company relies on the State-owned assets Supervision and Administration Commission (SASAC) to control China Communications Construction Group. We think China Communications Construction is a high-quality state-owned construction company. The company won investment from famous institutional investors such as GIC, Chow Tai Fook Jewellery and China Life Insurance Company Limited during its Hong Kong IPO in 2006. China Communications Construction won the contract value of 227 billion yuan in the first quarter of fiscal year, an increase of 12% over the same period last year. Holding an outstanding order of 2.131 trillion yuan, equivalent to 3.9 times the annual income. We estimate that China Communications Construction's order and sales value in the first quarter of 20 years is 2.4 times. The company's future receivables have strong visibility.
Comparing the above two listed companies in the same industry, we believe that Hebei Construction's dividend yield of 2.3% is totally unattractive to investors. The company has stopped updating its quarterly bid winners since October last year. The market knows nothing about its winning bid in the first quarter of this year and the latest number of handheld orders. According to the company's latest annual report, we estimate that the company held an order of 98 billion yuan at the end of 1919, equivalent to 2.4 times the annual income, which is lower than the above two listed companies.
It lowered its target price to HK $2.44 per share and downgraded it to "strong sell". We think there is 63% downside in the company's current share price. We recommend that investors sell Hebei Construction and switch to China Construction International and China Communications Construction to get double the dividend yield of Hebei Construction.