Earnings forecast for Jiangsu Expressway up 7%

Still positive amidst toll-waiver holiday.

According to Barclays, We raise our earnings forecasts for Jiangsu Expressway by 4-7% for 2013-15E, on higher-than-expected ytd traffic growth. This leads us to raise our sum-of-theparts-based price target 9% to HK$10.30 (previously HK$9.47).

Here's more:

Despite a 17% rise in share price ytd, we still consider the stock attractively valued at current levels. It offers a 6.5% 2014E dividend yield, above the global peer average of 4.4%. Hence, we reiterate our Overweight rating.

Our top pick among the Hong Kong/China toll road operators is Zhejiang Expressway (576 HK; OW; PT HK$7.79) for 5.9% 2014E dividend yield and greater potential upside.

Earnings revisions: Jiangsu Expressway’s 1Q13 earnings surprised us to the upside, with positive earnings growth despite the negative impact from the toll-waiver holiday.

Traffic growth in 4M13 also exceeded our expectations, on the company’s toll roads. We therefore raise our volume assumptions for most of the company’s roads, resulting in our higher earnings forecasts and price target.

Earnings prospects: We now forecast 7% y/y earnings growth for 2013 vs 3% previously, driven by 1% revenue growth and lowerfinance costs due to a lower debt level y/y as of end-2012.

We forecast earnings to grow a further 22% y/y in 2014, driven by delivery of the company’s property projects in Kunshan, Suzhou and Jurong, in Jiangsu province, which we estimate will account for 12% of 2014 gross profit.