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Nomura rates Regina Miracle (02199) at HK$6.65

  Nomura initiated coverage on Regina Miracle (02199)
with a "neutral" rating, and a target price of HK$6.65, based on 16x FY2019 P/E, derived 
based on a 30% discount to Shenzhou's (02313) valuation. The discount we attached
  It said that Regina Miracle's aggressive expansion plans to establish four factories in
Vietnam increased its capex by 4x from HK$221mn in 2015 to HK$886mn in 2016, and Nomura
estimated capex will peak at HK$1bn in FY2018.
  The further expansion in Vietnam will drive its gearing to 60-70% in FY2018-20, which
will in turn push up finance costs, and thus may also place dividend payout at risk.
  With higher depreciation charges and finance costs following the aggressive expansion in
Vietnam, Nomura believes net profit growth may not be as optimistic as consensus expects. 

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