HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> has reached agreement with the government on the South China Logistics Park Phase I transformation and it will receive Rmb1.058bn compensation.</li>
<li>The sum equals a significant 9% of SZI's market capitalisation. The agreement also kick-started the project's long-term contribution, which may provide an income stream lasting 3-5 years.</li>
<li>The deal showcased SZI's ability to realise the underlying value of its assets. The stock should not be valued on its earnings, and its 0.3x P/B is deeply undervalued.</li>
</ul>



Shenzhen International (152 HK) has reached agreement with the government on the South China Logistics Park Phase I transformation and it will receive Rmb1.058bn compensation.
The sum equals a significant 9% of SZI's market capitalisation. The agreement also kick-started the project's long-term contribution, which may provide an income stream lasting 3-5 years.
The deal showcased SZI's ability to realise the underlying value of its assets. The stock should not be valued on its earnings, and its 0.3x P/B is deeply undervalued.


Shenzhen Intl (152 HK): A Big Step Forward

<ul>
<li>The 1H22 result of <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.</li>
<li>It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.</li>
<li>We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. </li>
</ul>


The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. 


Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a>'s FY24 net profit will range at HK$2.8-3.1bn (53-63% growth YoY), boosted by a HK$2.3bn gain from South China Logistics Park Transformation.</li>
<li>Extrapolating this gain to the whole land plot will generate a profit of HK$11.4bn, or 66% of the current market capitalisation. The stock is significantly undervalued at 0.49x P/B. </li>
<li>At an assumed 50% payout ratio, SZI's yield is at 9%. Moreover, with stable profit expected for FY25 and FY26, the yield will be maintained for the next two years.</li>
</ul>



Shenzhen International (152 HK)'s FY24 net profit will range at HK$2.8-3.1bn (53-63% growth YoY), boosted by a HK$2.3bn gain from South China Logistics Park Transformation.
Extrapolating this gain to the whole land plot will generate a profit of HK$11.4bn, or 66% of the current market capitalisation. The stock is significantly undervalued at 0.49x P/B. 
At an assumed 50% payout ratio, SZI's yield is at 9%. Moreover, with stable profit expected for FY25 and FY26, the yield will be maintained for the next two years.


Shenzhen Intl (152 HK): Good News from Positive Profit Alert

Thematic (Sector/Industry)

<ul>
<li>There are 26 companies with dividend yields of over 9% in FY25 based on consensus forecasts. With the slowdown in the US rate cut, they look attractive this year.</li>
<li>The top 5 are <a href="https://www.smartkarma.com/entities/china-new-university" target="_blank" data-smartkarma-citation="entities:23626:1" rel="noopener">China New Higher Education (2001 HK)</a>, <a href="https://www.smartkarma.com/entities/greentown-management-holdings" target="_blank" data-smartkarma-citation="entities:28895:1" rel="noopener">GreenTown Management (9979 HK)</a>, <a href="https://www.smartkarma.com/entities/lever-style-corporation" target="_blank" data-smartkarma-citation="entities:35760:1" rel="noopener">Lever Style (1346 HK)</a>, <a href="https://www.smartkarma.com/entities/paradise-entertainment-ltd" target="_blank" data-smartkarma-citation="entities:3437:1" rel="noopener">Paradise Entertainment (1180 HK)</a>, and <a href="https://www.smartkarma.com/entities/pacific-textiles-holdings" target="_blank" data-smartkarma-citation="entities:12638:1" rel="noopener">Pacific Textiles (1382 HK)</a>. </li>
<li>Key risks are their small-cap nature, potential issues with corporate governance, and low earnings quality when compared with banks and telcos.</li>
</ul>


There are 26 companies with dividend yields of over 9% in FY25 based on consensus forecasts. With the slowdown in the US rate cut, they look attractive this year.
The top 5 are China New Higher Education (2001 HK), GreenTown Management (9979 HK), Lever Style (1346 HK), Paradise Entertainment (1180 HK), and Pacific Textiles (1382 HK). 
Key risks are their small-cap nature, potential issues with corporate governance, and low earnings quality when compared with banks and telcos.


China Strategy: What Are Some Other High Dividend Yield Options?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.</li>
<li>In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.</li>
<li>SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. </li>
</ul>



Shenzhen International (152 HK) reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.
In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.
SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. 


Shenzhen Intl (152 HK): Topping Positive Profit Alert Range

China

Shenzhen Investment Holdings Bay Area Development Company Limited provides infrastructure construction services. The Company provides highway construction, bridge construction, and other related services. Shenzhen Investment Holdings Bay Area Development offers services in China.

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Shenzhen Investment Holdings B (737 HK)

Shenzhen Intl (152 HK): A Big Step Forward

Shenzhen International receives Rmb1.058bn compensation for South China Logistics Park Phase I transformation, highlighting its ability to realize...

Osbert Tang, CFA

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

1H22 is bad but behind us now. We anticipate sequential earnings improvement in 2H22 as the impact of pandemic fades. SZI will continue to realise...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Good News from Positive Profit Alert

Shenzhen Intl's positive profit alert suggested FY24 net profit will grow by 53-63% YoY, boosted by the gain from South China Logistics Park...

Osbert Tang, CFA

China Strategy: What Are Some Other High Dividend Yield Options?

Lever Style, one of the top 5 high yield stocks, has issued a positive profit alert with US$16.4-17.4m for FY24, or 5-12% YoY growth. Given the...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Topping Positive Profit Alert Range

Shenzhen Intl reports a 1H24 net profit of HK$653m, topping the positive profit alert, and the logistics segment has benefited from REIT issuance....

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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Shenzhen Intl (152 HK): A Big Step Forward

​Shenzhen International receives Rmb1.058bn compensation for South China Logistics Park Phase I transformation, highlighting its ability to realize...

Osbert Tang, CFA

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

1H22 is bad but behind us now. We anticipate sequential earnings improvement in 2H22 as the impact of pandemic fades. SZI will continue to realise...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Good News from Positive Profit Alert

​Shenzhen Intl's positive profit alert suggested FY24 net profit will grow by 53-63% YoY, boosted by the gain from South China Logistics Park...

Osbert Tang, CFA

China Strategy: What Are Some Other High Dividend Yield Options?

Lever Style, one of the top 5 high yield stocks, has issued a positive profit alert with US$16.4-17.4m for FY24, or 5-12% YoY growth. Given the...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Topping Positive Profit Alert Range

​Shenzhen Intl reports a 1H24 net profit of HK$653m, topping the positive profit alert, and the logistics segment has benefited from REIT issuance....

Osbert Tang, CFA

Shenzhen International receives Rmb1.058bn compensation for South China Logistics Park Phase I transformation, highlighting its ability to realize...

Shenzhen Intl's positive profit alert suggested FY24 net profit will grow by 53-63% YoY, boosted by the gain from South China Logistics Park...

Shenzhen Intl reports a 1H24 net profit of HK$653m, topping the positive profit alert, and the logistics segment has benefited from REIT issuance....