Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pasona-group-inc" target="_blank" data-smartkarma-citation="entities:15778:1" rel="noopener">Pasona Group (2168 JP)</a> is massively net cash. And it's ofloading <a href="https://www.smartkarma.com/entities/benefit-one-inc" target="_blank" data-smartkarma-citation="entities:14502:1" rel="noopener">Benefit One Inc (2412 JP)</a>. Though we don't know what the future holds, Pasona is the wrong price.</li>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> controlling shreholder announced it intends to increase it stake. And it's been in the market almost everry day since the interims. </li>
<li>
<a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway (576 HK)</a> announced its rights offering. It's at a long-term low price, and about to earn a long-term high net income, and have a long-term high payout ratio</li>
</ul>



Pasona Group (2168 JP) is massively net cash. And it's ofloading Benefit One Inc (2412 JP). Though we don't know what the future holds, Pasona is the wrong price.

ENN Energy (2688 HK) controlling shreholder announced it intends to increase it stake. And it's been in the market almost everry day since the interims. 

Zhejiang Expressway (576 HK) announced its rights offering. It's at a long-term low price, and about to earn a long-term high net income, and have a long-term high payout ratio


Last Week in Event SPACE: Zhejiang, Pasona, ENN Energy, Asahi Group, Azure Minerals

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>We think <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.</li>
<li>It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. </li>
<li>Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.</li>
</ul>


We think Kunlun Energy (135 HK) will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.
It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. 
Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.


Kunlun Energy (135 HK): The Story Is Still Going On

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<ul>
<li>An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.</li>
<li>The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.</li>
<li>Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.</li>
</ul>


An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.
The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.
Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.


Thematic (Sector/Industry)

<ul>
<li>Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. </li>
<li>With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. </li>
<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>, <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a> and <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> are key beneficiaries, while <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric (3899 HK)</a> may turned into exchange losses.</li>
</ul>


Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. 
With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. 

Shenzhen International (152 HK), ENN Energy (2688 HK), Shenzhen Expressway (548 HK) and Kunlun Energy (135 HK) are key beneficiaries, while CIMC Enric (3899 HK) may turned into exchange losses.


China Strategy: It Is the Foreign Exchange Impact, Stupid!

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>ENN Energy delivered FY22 results with core profit rising by 11.3% YoY.</li><li>Despite a 0.8% YoY decline in gross profit and 24.4% YoY drop in attributable net profit due to economic downturn, exchange fluctuation, and higher gas cost, ENN’s integrated-energy business and VAS business maintain robust growth.</li><li>We believe ENN’s results will improve in 2023 considering that: 1) gas sales growth is expected to rebound to low double digit; 2) dollar margin may improve based on lower gas cost and more effective price-through measures; 3) wholesales gas net profit may further rise; 4) ENN’s IE maintains a robust growth momentum; 5) the Company accelerates product promotion of value added business which shows great growth potential.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

ENN Energy delivered FY22 results with core profit rising by 11.3% YoY.Despite a 0.8% YoY decline in gross profit and 24.4% YoY drop in attributable net profit due to economic downturn, exchange fluctuation, and higher gas cost, ENN’s integrated-energy business and VAS business maintain robust growth.We believe ENN’s results will improve in 2023 considering that: 1) gas sales growth is expected to rebound to low double digit; 2) dollar margin may improve based on lower gas cost and more effective price-through measures; 3) wholesales gas net profit may further rise; 4) ENN’s IE maintains a robust growth momentum; 5) the Company accelerates product promotion of value added business which shows great growth potential.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

ENN Energy (2688 HK) – Emerging from the downturn

China

Enn Natural Gas Co.,Ltd. offers natural gas engineering services. The Company provides natural gas engineering investment, gas station construction, and energy equipment distribution services. Enn Natural Gas also operates coal materials, chemicals,  and biopharmaceutical products trading businesses.

Shenzhen Gas Corporation Ltd., supplies gas in Shenzhen. The Company business includes wholesale of gas, pipeline and the supply of bottled gas, investment and construction in the distribution network of gas transmission.

Foran Energy Group Co.,Ltd. operates as a natural gas production company. The Company mainly offers liquefied and compressed natural gas transmission and distribution services. Foran Energy Group also provides natural gas high pressure pipe network construction services.

Xinjiang Xintai Natural Gas Co., Ltd. distributes and sells natural, liquefied petroleum, and manufactured gases throughout China.

Shaan Xi Provincial Natural Gas Company Ltd. transports natural gas through pipelines.

Shaanxi Provincial Natural Gas Co, Ltd. (002267 CH)

Chongqing Gas Group Corporation Limited supplies gas, installs gas facilities and equipment in Chongqing.

Xinjiang Haoyuan Gas Company Limited processes, sells, services and delivers natural gas. The Company's main products include delivery and sale of natural gas, and home residents pipeline installation services.

China Tian Lun Gas Holdings Ltd. processes and distributes natural gas through urban pipelines.  The Company operates in Henan Province, China.  China Tian Lun Gas also operates a compressed natural gas filling station.

Huadian Power International Corporation Limited generates and sells electricity which is all fed into the Shandong Provincial Grid operated by Shandong Electric Power (Group) Corporation (SEPCO), the immediate holding company of the Company.  The Company also sells heat.

China Longyuan Power Group Corp Ltd designs, develops, manages, and operates wind farms.  The Company also sells the electricity generated by the wind farms.

TOKYO GAS CO., LTD. produces and supplies liquefied natural gas to Tokyo and the surrounding areas.  The Company maintains and manages gas supply equipment and sells air conditioning appliances.  Tokyo Gas operates power generation business as well.

Petronas Gas Berhad processes and separates natural gas into its components from the gas field offshore Terengganu. The Company stores, transports, and distributes these components as well as trades utilities to petrochemical plants.

OSAKA GAS CO., LTD. produces and supplies natural gas primarily in Osaka, Kyoto, and Hyogo areas.  The Company provides gases and energy products for residential, commercial, and industrial customers.  Osaka Gas also constructs and maintains gas supply lines.  In addition, the Company sells gas appliances.

China Resources Gas Group Ltd distributes natural gas and petroleum gas in the cities of Chengdu, Fuyang, Huaibei, Linhai, Suzhou and Wuxi in the PRC. The Company also operates compressed natural gas filling stations in Chengdu, Nanjing and Wuxi. The group also is involved in bottled liquefied petroleum gas distribution in cities of Fuyang, Suzhou and Wuxi.

PetroVietnam Gas JSC transports, stores, and markets petroleum gas.  The Companies products include liquefied petroleum gas, dry gas, compressed natural gas, and liquefied natural gas.  PetroVietnam's services include gas gathering, gas importation, gas transportation and distribution, gas engine development and gas operation and maintenance.

APA Group is a natural gas infrastructure company. The Company owns and or operates gas transmission and distribution assets whose pipelines span every state and territory in mainland Australia. APA Group also holds minority interests in energy infrastructure enterprises.

Southwest Gas Corporation purchases, transports, and distributes natural gas to residential, commercial, and industrial customers in portions of Arizona, Nevada, and California.  The Company also provides construction services to utility companies, including trenching and installation, replacement, and maintenance services for energy distribution systems.

National Fuel Gas Company is an integrated natural gas company with operations in all segments of the natural gas industry, including utility, pipeline and storage, exploration and production, and marketing operations.  The Company operates across the United States.

China Gas Holdings Ltd. invests in, operates and manages natural gas distribution pipelines.  The Company distributes and sells natural gas to residential, commercial and industrial users, and bottles and sells compressed natural gas.  China Gas also constructs and operates gas stations.

UGI Corporation distributes and markets energy products and services.  The Company is a domestic and international distributor of propane.  UGI also distributes and markets natural gas and electricity, and sells related products and services in the Middle Atlantic region of the United States.

ENN Energy Holdings Ltd. distributes natural gas in China.  The Company, through its subsidiaries, invests in, operates, and manages gas pipelines, and sells and distributes piped and bottled gas in China.

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ENN Energy (2688 HK)

Last Week in Event SPACE: Zhejiang, Pasona, ENN Energy, Asahi Group, Azure Minerals

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Kunlun Energy (135 HK): The Story Is Still Going On

Kunlun is expected to accelerate its operating momentum in 2H23, driven by increased natural gas sales and a positive dollar margin. Its strong...

Osbert Tang, CFA

Screening for GEMs: June 2023

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

China Strategy: It Is the Foreign Exchange Impact, Stupid!

Shenzhen Intl, ENN Energy, Shenzhen Expressway and Kunlun Energy are the key beneficiaries of the reverse in Rmb/USD depreciation trend in FY23,...

Osbert Tang, CFA