As expectations for the A-share Hong Kong stock bull market continue to heat up, investors' enthusiasm for the capital market is constantly being activated, and trading activity has increased markedly.

After experiencing the previous rapid rise, market fluctuations and differentiation were inevitable, which made investors also pay more attention to the company's fundamental analysis to find opportunities with definite investment value. In this context, financial reports have become a key tool for all parties in the market to explore potential investment opportunities.

Recently, Guangdong Investment released its three-quarter report, demonstrating its comprehensive strength in many areas. These capabilities not only support the continuous delivery of shareholder returns, but also indicate that the company may be expected to usher in a new revaluation.

1. The basic business market is stable, and long-term management strength has been verified

Looking back at this latest report card, Guangdong Investment showed a steady and steady side as always.

In the first three quarters, the company achieved consolidated revenue of HK$18.142 billion, up 10.4% year over year, and achieved net profit of HK$3.593 billion to mother.

Looking at the overall macro environment, under a situation where market pressure still exists, Guangdong Investment can be said to have maintained a fairly steady operation. At the same time, judging from the details of the business sector, it has also shown a series of remarkable points.

First, it is the water resources sector of the core business.

In the first three quarters, the pre-tax profit of its “backbone” Dongshen water supply project reached HK$3.461 billion, an increase of 3.8% over the previous year; profit before tax from other water resources projects reached HK$1.644 billion, maintaining a steady growth state.

As a vital force contributing to performance, water resources projects are a sector with definite expectations for investment in Guangdong, and this can also be seen from its continuous expansion of business scale.

In particular, with policy support, it has provided a long-term stable growth environment for this business. It can be said that the steady performance of the water resources business has established a stable source of income and provided a stable cash flow, and the attributes of high-quality assets continue to be prominent.

(Source: Company Information)

Second, there is the property rental and property development sector, where Guangdong invests in another “cash cow” business.

Among them, in terms of property leasing, the company has a number of core regional property investment projects in the Mainland and Hong Kong, and continues to unleash its performance potential.

In the first three quarters, thanks to an increase in average rent levels and occupancy rates for some properties, compounded by the newly opened Guangdong Tiandi project, its property investment business revenue increased 8.3% year-on-year to HK$1.204 billion. Meanwhile, profit before tax (excluding changes in fair value of investment properties and net interest income) increased 14.2% year over year to HK$0.689 billion.

In terms of property development, in the first three quarters, its subsidiary Guangdong Land achieved revenue of HK$4.043 billion, a sharp increase of 207.5% over the previous year. Considering the complex situation that the entire real estate market still faced during the year, this achievement cannot be described as unimpressive.

At the same time, the data also shows that in the first three quarters, the sales rate of projects during Guangdong Land Land was further accelerated, achieving a total floor area of about 0.212 million square meters and 0.21 million square meters respectively. Compared with 0.209 million square meters and 10.1 million square meters in 2023, both showed good growth. Although the profit side is still under pressure to a certain extent, it is clear that the real estate development business has probably reached an inflection point in performance.

Finally, other business aspects have had their own performance, contributing to the company's multiple performance increases.

Among them, Guangdong Energy achieved revenue of HK$1.216 billion, and profit before tax (excluding net financial expenses) increased sharply by 37% to HK$0.122 billion. Overall revenue from the hotel holding, operating and management business reached HK$0.471 billion, achieving profit before tax (excluding changes in fair value of investment properties and net exchange differences) of approximately HK$86.499 million; revenue from department store operations reached HK$0.582 billion, achieving profit before tax (excluding changes in fair value of investment properties and income from rental changes) of HK$46.697 million.

Furthermore, it is worth mentioning that its toll revenue for the first three quarters of the Guangdong Expressway, which mainly operates the Xingliu Expressway, reached HK$0.479 billion, and realized profit before tax (excluding net financial expenses) of HK$0.252 billion. Judging from the past, this business segment has always had stable revenue and profit performance, which provides a reliable source of cash for investment in Guangdong. Especially during periods of macroeconomic fluctuations, this stability is particularly important. At the same time, it is considered that the Xingliu Expressway of the Guangdong Expressway is an important transportation artery connecting Guangxi and Guangdong. As the regional economy develops and traffic demand increases, its business volume is expected to continue to increase and contribute more to the overall performance growth of investment in Guangdong.

(Source: Company Information)

It can be said that the highlights of each business segment demonstrate the resilience and adaptability of Guangdong investment in the face of market challenges. At the same time, it also shows that under flexible market coping strategies, the company can maintain steady growth in complex market situations.

Considering the introduction of the current series of economic stabilization policies, the subsequent economic operation is expected to usher in a steady recovery. The company's major business sectors will also face a better external macroeconomic environment, especially the real estate-related sector, which has been “stuck” for a long time in the past, and the performance flexibility it has released is expected to exceed expectations.

2. Continuously activate growth momentum and wait for the new cycle to begin

Over the past few years, it has experienced challenges brought about by an intricate external environment, and Guangdong Investment has always demonstrated a steady operating basic market.

Today, the company seems to be on a new starting point. In this three-quarter report, the company stated that it will continue to increase its expansion efforts upstream and downstream of the water resources industry chain, actively expand to high-value-added businesses, and optimize its asset portfolio and resource allocation while consolidating the scale of its core business. At the same time, it will combine its own business and resource endowments to actively grasp the potential development opportunities brought by the Guangdong-Hong Kong-Macao Greater Bay Area development strategy plan, and continue to pay attention to related marketsmergers and acquisitionsOpportunities seek to form new breakthroughs in profit growth and further enhance the company's operating performance and overall value.

It's easy to see that the company has shown a keen insight into market trends and a positive grasp of future development opportunities. Looking ahead to the future market, the performance of Guangdong Investment can also be viewed from the following aspects.

First, the steady growth of “cash cow” businesses such as water resources, power generation, and high-speed operations can provide the company with a solid income and profit base. The stability of the basic market helps to strengthen market confidence.

Second, the real estate sector, which has put a lot of pressure on performance in the past, has ushered in a new situation, which is expected to bring even greater performance surprises.

Currently, as the real estate market stabilizes, the risk of asset impairment in this business area of the company is expected to be further released. As can be seen, in the past, some of the company's property projects experienced significant depreciation, but judging from this year, its subsidiary Guangdong Land has not made provision for inventory impairment, which is also a very positive factor for the company's performance release.

Considering that policy support and continuous restoration on both sides of supply and demand help stabilize the real estate market, the strategic adjustments of Guangdong Investment in property investment and business development have continued to achieve results. In particular, in terms of promoting inventory removal and increasing property value, it will also help it further boost performance flexibility.

From a longer-term perspective, as an important enterprise deeply involved in the Guangdong-Hong Kong-Macao Greater Bay Area, Guangdong Investment has a huge first-mover advantage in terms of resource endowments, and the potential for asset value appreciation is considerable. The company is expected to continue to seize policy opportunities and development dividends in this region.

All in all, the growth momentum that continues to be activated is driving the company into a new growth cycle.

3. Triple logical support, future market highlights can be expected

Looking back, the company has the following triple logic to support its subsequent performance.

Logic 1: Regardless of whether a bull market arrives, steady performance and definitive restoration of fundamentals may bring back value.

Guangdong Investment has a steady operating strength and has continuously verified its solid fundamental characteristics in different economic cycles. Even in the context of deep adjustments in the real estate business in the past, the company's profitability remained steady. This cross-cycle performance provided solid support for the company's value growth.

Today, in the context of policy-driven and improved macroeconomic expectations, the company's good operating performance and the potential for definitive performance repair are expected to support a further return to its value.

Therefore, regardless of whether the bull market arrives or not, the positive trend in the company's fundamentals will bring positive expectations for its subsequent market performance.

Logic 2: Nurture incremental growth and open up the possibility of flexibility.

As mentioned above, the core of suppressing performance in the past was the real estate sector, but now the recovery of the industry is expected to drive performance to an inflection point and resonate with sector valuation restoration.

From a policy perspective, since September, five ministries and commissions, including the Ministry of Housing and Construction, the Ministry of Finance, the Ministry of Natural Resources, the Central Bank, and the Financial Supervisory Authority, have jointly issued a number of real estate easing policies, forming joint efforts in various aspects such as monetary policy, fiscal policy, and real estate finance policy. Regardless of the level of policy intensity, support, and stimulus, it is impossible to say that the real estate market will stop falling and stabilize in the future. At the same time, this will also provide a stronger impetus to the performance of the company's real estate business. The resonance between fundamentals and valuation will be interesting, and the elastic potential unleashed will also be highly anticipated.

(Source: Futu Market)

Furthermore, in addition to the real estate sector, the diversified business layout presented by Guangdong Investment will also provide more insight into its subsequent performance growth against the backdrop of positive macroeconomic trends.

Logic 3: High dividends and high dividends benefit from the “safe haven” effect in an uncertain environment.

Under pessimistic expectations, considering the current complex global political and economic environment, from the perspective of external market uncertainty, Guangdong investment has shown high dividends and high dividends over a long period of time, and will also have a “safe haven” effect. This has further strengthened its “safety cushion” and may also be a potential stepping stone for subsequent market fluctuations.

The company's current dividend rate has reached 7%, which is significantly superior to 1-year deposit interest rates and long-term treasury bond yields, showing strong appeal. With the current support of a series of favorable policies, including guiding medium- to long-term capital entry into the market, the market dividend strategy is expected to continue to receive attention. It will also support the future market performance of dividend assets, which is reflected in Guangdong investment, and also indicates good opportunities.

4. Conclusion

Overall, the latest report card of Guangdong Investment sends a positive signal to the market, showing steady management capabilities and unleashed operating potential.

As the macro environment continues to improve, the certainty of recovering the company's performance continues to increase, and I believe the release of long-term value potential will be interesting.