| The benchmark Shanghai Composite Index rose from 1161.05 at the end of 2005 to 2698.90 at the end of 2006, gaining more than 100% within one year, and meanwhile, the Shenzhen Component Index also marked the biggest gains of over 100%. The lucrative effects out of investments in shares were luring more and more investors.Nevertheless, the surge of the indexes failed to bring profits to all the investors. In the bull market of 2006, 70% of the investors garnered profits by over 10%, but there was a rather big gap among profits of various investors. The phenomenon of"Adding index instead of making money"was still obvious among medium and small investors, and the reasons were that they ignored the value factor; they were engaged in impulsive buying and panic selling blindly; they paid attention only to short-term effects of share prices.This paper is aimed at ignoring the impacts caused by market fluctuations and based on value investment to probe investment values of the Shenzhen Airport, the 4th largest airport in China, from the angle of the financial features of the Shenzhen Airport.The Shenzhen Airport was founded in May 1989, transformed into a group in May 1994, and listed in April 1998, with its share listed in the Shenzhen Stock Exchange on April 20, 1998. This paper takes the financial features of the Shenzhen Airport as cut-in points, uses fundamental financial analysis methods such as comparative analysis, trend analysis, ratio analysis, etc. to analyze the business operation achievements and various financial indicators of the Shenzhen Airport, makes comparisons between the airport and other listed companies of similar nature in terms of financial features and corporate basics, and, referring to the present situations of the airport, predicts the Shenzhen Airport's development prospects and long-term investment values based on value investment. Then it uses Warren Buffett's stock investment models to predict reasonable prices for investment in the share on the basis of varied anticipated earnings and PE, for the purpose of offering readers references to their investment. The trade of airport, due to the"access barriers"of heavy capital deposits, long operation period, etc., restricts entries of potential competitors, and, as a result, it reduces the number of the enterprises, increases the concentration of the industry, and forms the innate monopoly in the trade. Besides, the industry of airports also has the characteristics of scale, region, public good, etc. In addition to the above trade features, the Shenzhen Airport has the financial features of its own.In terms of the financial features of the Shenzhen Airport, its assets structures are fairly good. Its fixed assets proportion decreased from 53.68% last year to 49.94%; its current assets proportion increased from 33.51% last year to 37.73%; its long-term liability is 0; its liabilities are all current liabilities, and they account for only 24.68% of its current assets. The enterprise is constantly expanding. It is not burdened by liabilities, so it has the capacity to rapidly increase investments and expand by means of financial leverages.Over the past few years, the Shenzhen Airport has had fast increases of its major business operations and net profits. 2006 witnessed the gross assets growth rate of 5.0832%, and OE growth rate of 6.242%, marking sustained increases in both assets and OE. However, due to the enterprise's expanded investments outside and capital raising, the net cash flow in 2006 was 3.393 million Yuan out. Compared with the Baiyun Airport and the Shanghai Airport, the assets of the Shenzhen Airport were the smallest, but its assets structures are rationalized and it has sufficient capital, which provides guarantee for its sustainable development.According to its financial indicators, the Shenzhen airport excel the other two airports in the capacity to repay liabilities. Its inventory velocity, its velocity of accounts receivable, etc. all rank first. Its enterprise operation efficiency is higher than the other two airports. However, owing to scale restrictions, its major business cost is higher than that of the Shanghai Airport but lower than the Baiyun Airport. Although it attempts to increase its profiting capacity through intensified management, raised efficiency, etc., the Shenzhen airport finds it still hard to narrow the gaps in sizes and capacities. In particular, before the completion of the 2nd runway of the Shenzhen Airport by 2010, it is expected that the aviation-related business growth of the Shenzhen Airport will slow down.Nevertheless, thanks to the vast development prospect of the airport industry, the Shenzhen Airport still holds a bright future. The strong demand in the airport industry serves as a guarantee for the domestic civil aviation industry and the airport industry. With the gradual liberalization of the civil aviation regulations, the airport industry will expand its space for growth. So many factors such as rapid increase of domestic aviation turnovers, tourism development, increased number of travelers at their own expense, continued increase of the number of civil aviation aircrafts, increased flight booking rate, basically stable prices of flight tickets, etc. can ensure the profiting capacity and development capacity of the airport industry.Meanwhile, the Shenzhen Airport is redoubling its efforts to expand to take market shares. While the civil aviation business growth is slowing down, it is active to develop non-aviation-related businesses. International cargo transport, property lease and advertisement will become major points of profit growth for the airport in the future. Since acquiring shares of the Chengdu Shuangliu Airport and the Guizhou Libo Airport, in particular, the Shenzhen Airport has expanded rapidly coupled with consolidated profiting capacity and outstanding values for investment.Looking across the former 10 biggest shareholders of the Shenzhen Airport at the end of 2006 and in 2007, we see that, except the Shenzhen Airport (Group) Co., Ltd. as a shareholder with restricted circulation, all the shareholders were circulating shareholders of Share A, and most of them were strong fund management companies. It is clear that these large stakeholders were all confident in the Shenzhen Airport's future. Looking at the Shenzhen Airport's share price, we find its share price has moved basically with the Shenzhen Component Index, which will continue to rise as a result of such enabling conditions as RMB's appreciation, minus bank interest rate, large increase of listed companies'earnings, etc.According to Warren Buffett's share investment models, if a company's earnings continue to grow, its share price will continue to rise. Practices have proven that there is an almost corresponding correlation between profit increase and share price rise. In another word, the rate of the company's annual earning increase is basically the same as the rate of the company's annual share price rise.This paper takes the anticipated annual compound return rate of 15% as the investment baseline. According to the financial features of the Shenzhen Airport, it predicts that, in the following 10 years, its net profit growth averages 12%; its dividend distribution rate is 55%; its PE in the 10 years averages 30. Based on this, it calculates that the Shenzhen Airport's annual compound return rate can reach 18.46%. Assuming that the anticipated annual compound return rate of 15% is guaranteed, its share price is expected to rise to 7.88 Yuan.In terms of value investment, the share of the Shenzhen Airport possesses investment values. However, under the situations of sufficient capital in stock markets, too many bubbles in the overall values, and wanton speculation hypes, attention should be paid to the purchase price and timing without chasing rising prices. The price will eventually return to the value, so we should wait till the price and the value become compatible and start buying then. Only in this way can we achieve the anticipated annual compound return rate and evade risks. |
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