The third quarter results slightly exceeded our expectations.
The company's revenue in the first three quarters was $723 million, down 6.5% from a year earlier, while its net profit was $249 million, up 13.5% from a year earlier, or $0.08 per share.
The company's third-quarter revenue was 270 million US dollars, up 6.0% from the same period last year. Excluding the sold terminals, the comparable revenue increased by 11.3% year-on-year, an improvement from the first quarter (down 11% from the same period last year) and the second quarter (down 14% from the same period last year). This is due to the resumption of container throughput growth. Gross profit was $70.49 million, up 5.9% from a year earlier. Among them, the profit contribution from joint ventures and associated enterprises increased by 12.3% compared with the same period last year. Homed net profit was $85.94 million, up 19.7% from a year earlier, corresponding to $0.03 per share, better than recurrent net profit growth in the first and second quarters, indicating that the company's profitability is recovering due to throughput growth and cost control. The third-quarter results slightly exceeded our expectations, mainly because the company's cost control was effective, sales and management expenses fell 14% year-on-year, and financial costs fell 3% year-on-year.
The total throughput in the third quarter was 33.46 million TEUs, an increase of 3.3% over the same period last year and 11% month-on-month.
Trend of development
Profitability is recovering. The throughput of some overseas terminals is still affected by the epidemic. However, considering the company's business at major portals, we believe that the pick-up in domestic terminal throughput since April has brought growth opportunities for the company. Thanks to the rapid growth of the Beibu Gulf, the total throughput of the southwest coastal areas increased by 240.0% to 1.473 million TEUs in the third quarter compared with the same period last year, accounting for 4.4% of the total throughput, mainly because the container throughput of the Beibu Gulf was completed in January. We expect the Beibu Gulf to benefit from economic growth and industrial development in southwest China and Southeast Asia.
A strong financial position is expected to ensure dividends. Given the company's ample cash ($1.19 billion in cash on hand as of the third quarter) and healthy leverage, management promised to maintain a dividend ratio of 40 per cent. Based on our earnings forecast, the company's dividend yields in 2020 and 2021 are expected to reach 6.6% and 5.9%. The company said it was considering paying a second interim dividend to replace the final dividend so that shareholders could receive the dividend earlier.
Profit forecast and valuation
We keep our earnings forecasts for 2020 and 2021 unchanged, with the current share price corresponding to 6.1 times 2020 earnings and 6.8 times 2021 earnings. Maintain an outperform industry rating and target price of HK $5.58, corresponding to 7.2 times 2020 price-to-earnings ratio and 8.0 times 2021 price-to-earnings ratio, with 18.2% upside compared to current share prices.
Risk.
Throughput and macroeconomic recovery fell short of expectations.