Yan Tian Port Holdings published 2012 an nual report, stating that revenue reached RMB 320M in 2012; net profit attributable to shareholders amounted to RMB 410M; and it plans to distribute cash dividend of RMB 1.00 (tax-included) for every 10 existing shares, based upon current number of share outstanding (19.422B).

In 2012, the Company reaped revenue of RM B 320M, down 12.3% YoY. Net profit fell 3.8% YoY to RMB 410M. EPS came in RMB 0.211, less than our forecast of RMB 0.235.

Toll fee exemption on Yan Tian Expressway and lower-than-expected investment return from Caofeidian Port were the two reasons behind weaker-than-expected 2012 earnings. 1) In 2012, vehicle traffic on Yan Tian Expressway rose 6.8% to 28.303M. However, the launch of toll-free policy during public holidays sank revenue by 12.2% to RMB 250M. According to our estimates, the toll fee exemption reduced the Company’s revenue by RMB 35M in 2012. Previously , we expected revenue of RMB 350M. 2) Earnings contributed by Caofeidian Port Co. was RMB 77M (vs. our forecast of RMB 130M). While business volume grew 54.9% in 2012, Caofeidian Port Co. experienced a 27.8% drop in net profit due mainly to surging depreciation, financial expenses and labor costs.

We maintain NEUTRAL, but cut 2013-2014 EPS forecasts to RMB 0.21 and RMB 0.22 in consideration of the impacts of toll-free policy during public holidays. In addition, we expect 2015 EPS to be RMB 0.23. Our revised earnings forecasts reflect 20.2x 13PE, 19.3x 14PE, and 18.7x 15PE. Due to possible asset injections, the Company is priced at ~61.6% higher than industry average (12.5x 13PE). In our opinion, asset injection has lots of unknowns and if it really come s, earnings will normally be affected by 15%-20%. Hence, we maintain our NEUTRAL rating.

Major risk: the pace of asset restructuring surpasses expectations.