Analyst Note| Jennifer Song |
Despite gradually improving traffic, Guangshen’s third quarter net loss expanded to CNY 503 million from CNY 152 million in the prior quarter. While the bump up in costs was expected, since maintenance activity had been deferred from the first half of the year, revenue lagged the nationwide recovery for other rail lines because travel restrictions between Hong Kong, Macao and the mainland remained for much of the third quarter. In addition, while we continue to believe reform is sorely needed in ticket prices, we now assume that this will be pushed back again to 2022-23. Although economic activities are on the mend in China, pandemic risks are lingering. As a result, we extend our net loss estimate for 2020 and lower our fair value estimate to HKD 3.80 per share from HKD 4.14.