A Stable Dividend Stock worth looking at

China Merchants Holdings (Pacific) Limited (SGX: C22) reported a solid first quarter results yesterday, with net profits rising 14% to HK$222.67 million from the corresponding quarter last year.

Listed in August 1981, China Merchants Holdings (Pacific) Limited (SGX: C22) ("CMH" in short) was originally a hotel operator under the name of Hotel Tai-Pan Pte Ltd. However, according to this quarter results, the company has announced the disposal of its property development business on 16 April 2014. The sale is a positive sign since the segment has not been performing well and with that, CMH can now focus on its profitable and growing toll road division.

Currently, the company owns and operates four toll roads totalling 367 kilometres. They are located in Zhejiang province , Guangxi Zhuang Autonomous Region and Guizhou province in the PRC. These roads form the main component of the national and provincial road networks.

Some basic numbers

While group revenue for 1Q2014 increased 6% to from HK$436.4 million to HK$464.4 million, net profits edged up 14% due to several components in the income statement.

• ·   Other operating income swelled 199% from HK$4 million to around HK$11.9 million mainly due to recognition of deferred income and effective interest on other receivables relating to compensation granted by local governmental authorities
• ·    19% and 39% fall in admin and finance expenses. The former is because of lower professional fee incurred by the Company and lower administrative expenses incurred by Beilun Port Expressway while the latter is due to repayment of certain long term bank borrowings
• ·    Share of results of jointly controlled entities also inched up 10% with higher contributions from the group's two toll roads, namely Gui Liu Expressway and Gui Huang Expressway

Financial Position and Valuation

If you zoom in on the liabilities area, you would have noticed that it is slightly on the high side at HK$3.38 billion as net profits only amount to HK$222.67 million for the quarter. On the other hand, cash and cash equivalents stands at HK$1.64 billion, and capital expenditure remain at a bare minimum - HK$5.05 million for the quarter.

Executive Chairman and CEO Mr Luo Hui Lai said, “The Group delivered strong results in 1Q2014, continuing the good momentum from FY2013. We expect our toll road business to continue to deliver positive results in light of the economic growth in the provinces where they are located and the continued growth in vehicle ownership.”

CMH last closed at S$0.96 and trades at a Price-earnings ratio of 7.28. It also offers a juicy 7.29% dividend yield, which may attract the attention of many income investors since its underlying toll road businesses can support the dividend pay-outs through stable, recurring cash flows.