Medium-term earnings rose more than 70% year-on-year, better than expected

The company announced yesterday that it was better than we expected. It is expected that the net profit of shareholders in the first half of 2020 will increase by more than 70% compared with the same period last year, mainly due to (1) the continued growth of SI (system integration) and IBO (investment, construction and operation) business; (2) the increase in other income and income; and (3) the increase in profits attributable to the joint venture company. In other words, the medium-term profit reached more than HK $240 million, exceeding our full-year profit forecast of 42.3%.

2020-2021 is the explosive period of profit growth.

As the Myanmar joint venture project will be launched in phases from June, the profit growth of the joint venture company will be faster in the second half of the year. We maintain our view that the financial model will be updated when the interim results are announced at the end of August. The period from 2020 to 2021 was a period of explosive profit growth, with net profits of relevant shareholders rising by 102.2% and 89.9% respectively compared with the same period last year.

Reiterate the "Buy" rating

We maintain the target price estimated by the discounted cash flow analysis at HK $5.70, which corresponds to 13.5 times 2021 price-to-earnings ratio and 30.7% upside. Reiterate the "buy" rating.

Risk hints: (1) delays in project development; (2) tight supply of natural gas; (3) policy risks; and (4) slowdown in electricity demand