Hu An Cable

News
According to OCBC research,
Infrastructure expansion in China.
Hu An Cable (Hu An) is one of the top 10 largest integrated cable manufacturers in China. Under the 12th Five Year Plan for China (2011-2015), RMB5.3t will be spent on capital expenditure in the power industry. This represents a 67.7% increase from the RMB3.16t that was earmarked for 2006-2010 under the 11th Five Year Plan. For 2011-2015, China will spend approximately RMB610b on power cables (+103% from the 11th plan), RMB500b on ultra-high voltage power cables (+2400%) and RMB521.6b on rural grid power cables (+38.5%). Urbanization in the form of 400m migrant workers becoming city-dwellers within the next 20 years will greatly boost electricity demand.

New factory for mid- & high-end cables manufacturing.
The company group to enter the high-end cables market to boost its profitability. It is building a factory with the capacity to manufacture mid- and high-end cables at a location close to its current factory in Yixing City, Jiangsu Province. The capital expenditure of RMB430m will be funded by internal cash, bank borrowings and IPO proceeds from the SGX listing. Two production lines for mid-voltage power cables and one production line for high-voltage power cables were installed as of Oct 2011. We believe that production will start sometime during the middle of this year.

Undervalued compared to peers.
Hu An appears inexpensive compared to its peers which are listed in China and Taiwan. It is trading at a P/E of 3.6x, P/B of 0.6x and offering a dividend yield of ~4.6%. In contrast, the overall medians for its peer group are as follows: P/E of 22.8x, P/B of 1.4x and dividend yield at 1.0%. We note that Hu An is also trading at an attractive estimated FY12 P/E of 3.1x.

Analysis
With reference to the OCBC reseach, the company is expanding with the setting up of new factories to manufacture higher end cables. The expansion plans were also strongly supported by the 12th five-year plan with RMB5.3 trillion (SGD$1.04 trillion) on the power industry. Capital will flow into this company as the years pass. Be patient.

Dividend Yield
Approx. 4% with the price of $0.162 a share.

PE Ratio
Based on the shareholder’s valuation, PE ratio of this company is at a low 4.


About Hu An Cable (From SGX)
On 26 May 2008, the Company was incorporated in Singapore as a private company limited under the name of China Hu An Cable Holdings Pte Ltd. On 27 January 2010, the Company converted into a public limited company and changed its name to China Hu An Cable Holdings Ltd.The Group is a fully integrated manufacturer of wire and cable products in China. Its core capabilities include the design and development, manufacture and supply of a wide variety of low, mid and high end wire and cable products used across many industries (in particular the infrastructure development as well as other important industrial markets) in China’s national economy.

The Group’s wire and cable products are widely used in power generation plants, including traditional power plants (such as coal fired plants) and alternative power plants (such as nuclear power plants, wind and solar power plants), power transmission and distribution grids, coal mining and ship-building industries, transportation networks and real estate projects, various electrical equipment and devices for industrial and household uses.

The Group also has the capabilities to manufacture a variety of other products such as aluminium rods, copper rods and plastic cable materials including insulating materials, sheath materials and other auxiliary materials which are used in the production of wires and cables.




Published on 06 May 2012