JINZHOU PORT (900952)

Valuation and Target price. We downgrade Jingzhou Port (900952 CH) from Buy to Neutral and revise down our TP to US$ 0 .36. We have appl ied a 45% discount to our DCF valuation due to the diminished tender offer impact. Our new target price is US$ 0.36 .

    Key assumptions: Jinzhou Port ’ s cargo throughput will grow moderately with the hinterland’ s economic growth.

    How we differ from consensus

    Dalian Port Group will become Jinzhou Port ’ s largest shareholder Dalian Port Group ( the parent company of Dalian Port (601880 CH, 2880 HK)) announced that it would acquire a 5.03% stake in Jinzhou Port from Jinzhou SAC. Following the acquisition , Dalian Port Group will replace Oriental Group as Jingzhou Port’ s largest shareholder . Jinzhou SAC is the third largest shareholder.

    Resulting synergies will be positive for both Jinzhou Port and Dalian Port. With the Liaoning Provincial Government aiming to help Dalian Port grow into a major hub port for north - east Asia, Dalian Port Group will help develop Jinzhou Port and improve synerg ies between Dalian Port and Jinzhou Port.

    Positive impact of possible tender offer fading Upon the a cquisition of the 5.03% stake, Dalian Port Group will hold a 24.5% stake in Jinzhou Port ( less than 30% ) . The acquisition will not trigger a tender offer in the market. However, Oriental group appears to have accepted this .

    Positive catalysts: Completion of n ew coal berths and railways; Favorable policy change in B -share market .

    Negative catalysts: Coal throughput growth lower than expected on weak demand .

    Risks: 1) . Delays to governme