Ebeling Heffernan Issue Strong Buy on Hong Kong Exchanges & Clearing Ltd. 0388.HK

Ronald Joseph Arculli OBE

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Stock exchange operator Hong Kong Exchanges & Clearing Ltd. said Thursday its 2009 net profit fell 8% as average daily turnover value on the stock exchange dropped about 14% making the company a standout buy according to Shayne Heffernan of Ebeling Heffernan. The world’s No.2 exchange operator by market value, warned of tougher competition from mainland China as it posted quarterly earnings just below analysts’ forecasts.

Shayne Heffernan put a short term price target of $150 and a long term target of $220 on the stock. This is a quality stock with good prospects and returns a very good regular dividend.

The blue-chip company said its net profit for the year was 4.70 billion Hong Kong dollars (US$606 million), down from HK$5.13 billion in 2008, marking the second consecutive year the exchange’s net profit has fallen.

The result was in line with the average HK$4.79 billion forecast of 16 analysts in a Thomson Reuters poll.

The company said revenue fell 7% to HK$7.04 billion from HK$7.55 billion a year earlier. It declared a final dividend of HK$2.09, up from HK$1.80 a year earlier.

Hong Kong Exchanges makes money from fees and tariffs related to securities, options and derivatives trading, as well as listing fees, investment income and clearing and settlement fees.