CCB

Valuing the large China state-owned Banks using Gordon Growth Model

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Valuing China Banks using Gordon Growth Model

Introduction The Gordon Growth Model, or GGM, is a valuation method for calculating the intrinsic value of a dividend-paying stock. The model is particularly suitable for valuing mature companies with stable operations and sustainable growth in dividends. In this article, a valuation exercise is carried out using the GGM to estimate the intrinsic value of … Read more

Broker Recommendations and Target Prices for China Construction Bank (0939.HK) – November 2021

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Broker Recommendations and Target Prices for China Construction Bank (0939.HK) - November 2021

Introduction China Construction Bank (CCB) is one of the big four State-owned Banks and its H-shares, trading on the Hong Kong Stock Exchange, currently offer some of the best values in the market. An earlier article on CCB provided an estimate of the Intrinsic Value, Margin of Safety and Return on Investment for the H-shares … Read more

BOC, ICBC, ABC, CCB and Citic Bank report double digit earnings growth for first three quarters of FY2021

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BOC, ICBC, ABC, CCB and Citic Bank report double digit earnings growth for first three quarters of FY2021

I have previously published estimates of the intrinsic values of the H-shares of Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and China Citic Bank. In their latest quarterly financial reports, all five banks reported double digit earnings growth for the first 3 quarters of FY 2021: … Read more

I purchased H-shares of the China Construction Bank (CCB) for my Dividend Income Portfolio. Here are the reasons why.

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Summary

In this article, I take a deep look at the stock valuation of the H-share of China Construction Bank (CCB 0939.HK) through the eyes of a Dividend Investor. Dividend Cash Flow analysis was used to evaluate the H-share of China Construction Bank. The Dividend Discount Model was employed to estimate its Intrinsic Value, Expected Return on Investment, and its Margin of Safety.
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Introduction

Following my previous article on the H-shares of the Bank of China (BOC), I also recently purchased the H-shares of the China Construction Bank (CCB). Here, I would like to discuss the rationale behind the investment decision to add China Construction Bank to my dividend income portfolio.

As my investment philosophy evolves over time, I find myself preferring stocks which provide attractive dividend income streams at inexpensive valuations. I used the following set of questions to help determine the investment worthiness of China Construction Bank:

  • Does the stock have a good long-term dividend track record?
  • Does the stock currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?
  • Is the current payout ratio of China Construction Bank sustainable?
  • What is the expected return on investment of China Construction Bank over a 10-year period? Majority of recommendations by financial analysts tend to have a 12 month time horizon. I find the 10-year period to be more suitable for a dividend income stock, especially one which is part of a retirement dividend income portfolio.
  • Does the stock price offer a sufficient margin of safety to its intrinsic value?
  • Are the H-shares of China Construction Bank (CCB) considered attractive when measured against the traditional value investing yardsticks? A good dividend stock with inexpensive valuation will minimize the risk of capital impairment and increase the probability of capital gains.
  • Does the stock have a history of consistent earnings growth?

With the above questions in mind, let us delve into the analysis of the stock to find the answers.

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