On Monday, UBS upgraded China Merchants Port Holdings Company Limited (144:HK) (OTC: CMHHF) stock from Neutral to Buy, setting a new price target of HK$15.40, up from the previous HK$10.50.
The upgrade reflects a positive outlook on the company's ability to navigate US-China trade tensions, which the market may have overestimated in terms of impact on the company's operations.
The firm noted that despite the ongoing trade tensions, the effect on China Merchants Port's volumes in the years 2018 and 2019 was limited.
Additionally, the company has seen earnings support from increases in port tariffs, consistent volume growth, and the profitability of its international ports.
These factors contribute to what UBS considers an attractive valuation for the port operator, with a 7.7% yield and a 0.4x price-to-book value ratio expected for the year 2025.
UBS also highlighted that their earnings per share (EPS) estimates for the years 2024 to 2026 are 9-11% higher than the market consensus, which suggests a more robust financial performance than what is currently anticipated by the broader market.
This optimistic projection has led to the inclusion of China Merchants Port in the UBS Asia-Pacific Key Call list, indicating the firm's confidence in the stock as a significant investment opportunity.
The upgrade and new price target come amid a period where investors are closely monitoring the effects of geopolitical tensions on global trade and logistics companies.
China Merchants Port's ability to maintain growth and profitability in such an environment has been recognized by UBS as a sign of the company's resilience and strategic positioning.
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