According to the FY11 annual report, the Company realized revenue of RMB 1.71B (-2% YoY), operating profit of RMB 820M (-15% YoY), net profit attributable to the shareholders of RMB 510M (-15% YoY), and basic EPS of RMB 0.78. The Company plans to pay cash dividends of RMB 4.0 (tax included) for every 10 shares held.

We reiterate a “Neutral” rating and kept earnings forecast unchanged. We 2012-2014 EPS estimates are at RMB 0.76/0.78/0.82, representing P/Es of 13.1x/12.7x/12.1x. The Company is currently trading at a P/B of 1.4x – the same level of the industry average.

FY11 results matched expectations and the negative earnings growth was due to declines in container throughput. 1) Its FY11 EPS was in line with our estimate of RMB 0.75 and market consensus of RMB 0.80. Last year, it achieved revenue of RMB 1.71B, down 2% YoY. Revenue remained steady on a quarterly basis in 4Q11, totaling RMB 430M, down 1.7% YoY (downward trend moderated). 2) Profit decline was mainly dragged down by the drop in container throughput. In 2011, the Company posted container throughput of 5.793M TEU, down 5.8% YoY. This was outpaced by a 0.3% throughput growth recorded by the Port of Shenzhen, with the Company’s market share declining by 1.5ppts to 25.7%. Declining container throughput was caused by diversion effects of neighboring ports and sluggish economic conditions in the U.S. and Europe.

Dividend payout ratio and current dividend yield stood at 50% and 4.1% respectively. The Company has maintained a dividend payout ratio of 50% for three straight years. According to its proposal of paying cash dividends of RMB 4.0 for every 10 shares held and the latest share price, the current dividend yield (tax included) is around 4.1%.

The Company still confronts challenges in 2012, but on a positive note the Company’s unit container load capacity increased significantly last year which may carry over to this year. 1) In the first two months of 2012, the Company achieved container throughput of 837,000 TEU, down 10% YoY. It may still face pressures of diversion from neighboring ports. 2) The good news is that the unit container load capacity grew from 8.77 ton/TEU in 2010 to 9.42 ton/TEU in 2011, and the upward trend has been maintained in Jan and Feb. This was due to increased proportion of heavy containers, in our view. 3) We still hold a cautious stance, given current economic conditions in the U.S. and Europe.