Shareholder net profit rose 84.5% in the first half of 2020 compared with the same period last year.
The company announced better-than-expected interim results for 2020. The net profit of shareholders in the first half of the year rose 84.5% from the same period last year, better than the company's earlier forecast of more than 70.0% growth, mainly because (1) SI (system integration) services in the pneumonia epidemic, the market supply is more tight, the company seized the opportunity to help customers meet their needs, SI business revenue increased by 104.6% compared with the same period last year. (2) other income (excluding interest income) increased by 1173.5% compared with the same period last year, and the company recorded HK $61.92 million in consultancy services; (3) IBO (investment, construction and operations) business was not significantly affected by the epidemic, and related income increased by 24.6% compared with the same period last year.
The company continues to expand its business territory in Southeast Asia.
The company continued to expand its capacity under the epidemic, obtaining a new IBO power generation project in Sri Lanka in July, and is expected to add 121MW of total installed capacity. In other words, the company's total installed capacity in Sri Lanka will increase from 94 megawatts to 215 megawatts. Including three Burmese joint ventures that the company signed a power purchase agreement in June this year, the latest total installed capacity of the IBO business is 1874 megawatts.
The market has long digested the technical impact of additional share offerings and will once again focus on the fundamentals of the company's earnings growth. The company announced on July 15 a discount of 13.0% of the closing price at that time to raise a net amount of HK $299 million by issuing 83 million more shares in the old-to-new way. We believe that the market has already digested the dilution effect of this rights issue and will once again focus on the fundamentals of the company's earnings growth. The net profit of shareholders in 2020 and 2021 will increase by 117.5% and 78.9% respectively compared with the same period last year.
Raise profit forecast and target price, reiterate "buy" rating
According to the interim results, we raised the shareholder net profit forecasts for 2020-2022 by 7.6%, 1.2% and 1.4% respectively, and correspondingly raised the target price derived from discounted cash flow (DCF) analysis from HK $5.65 to HK $5.80, corresponding to 14.0 times 2021 price-to-earnings ratio and 97.3% room for increase. 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.