HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Conch Venture Holdings / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.</li>
<li>The company's waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.</li>
<li>We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China's new energy industry.</li>
</ul>



China Conch Venture Holdings (586 HK) is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.
The company's waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.
We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China's new energy industry.


Conch Venture (586 HK): An Overlooked Value Play

Thematic (Sector/Industry)

<ul>
<li>China may bring ahead quota for special purpose bond issuance in 2023 to 2H22. This may potentially at Rmb1.5trn (US$220bn), which will provide big boost to the economy.</li>
<li>For 5M22, the three most important areas of spending of local government bond proceeds are urban construction and industrial park, social services and transport infrastructure.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-state-construction-int-l-holdings" target="_blank" data-smartkarma-citation="entities:10038:1" rel="noopener">China State Construction Int'l (3311 HK)</a>, <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group (390 HK)</a>, <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture (586 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports (2020 HK)</a> are the top picks.</li>
</ul>


China may bring ahead quota for special purpose bond issuance in 2023 to 2H22. This may potentially at Rmb1.5trn (US$220bn), which will provide big boost to the economy.
For 5M22, the three most important areas of spending of local government bond proceeds are urban construction and industrial park, social services and transport infrastructure.

China State Construction Int'l (3311 HK), Anhui Conch Cement (914 HK), China Railway Group (390 HK), China Conch Venture (586 HK) and Anta Sports (2020 HK) are the top picks.


China Stimulus: These Are the Key Beneficiaries

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Canvest Environmental Protection Group / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a>’s IFA opines that <a href="https://www.smartkarma.com/entities/grandblue-environment-co-a" target="_blank" data-smartkarma-citation="entities:17887:1" rel="noopener">Grandblue Environment Co A (600323 CH)</a>’s HK$4.90 offer is fair and reasonable. The vote is on 12 May. </li>
<li>Key conditions include approval by at least 75% of independent shareholders (&lt;10% of independent shareholders' rejection). Shareholders with blocking stakes will be supportive.</li>
<li>This is a done deal. At the last close and for a 10 June payment, the gross/annualised spread is 2.3%/18.3%. </li>
</ul>



Canvest Environmental Protection Group (1381 HK)’s IFA opines that Grandblue Environment Co A (600323 CH)’s HK$4.90 offer is fair and reasonable. The vote is on 12 May. 
Key conditions include approval by at least 75% of independent shareholders (&lt;10% of independent shareholders' rejection). Shareholders with blocking stakes will be supportive.
This is a done deal. At the last close and for a 10 June payment, the gross/annualised spread is 2.3%/18.3%. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/grandblue-environment-co-a" target="_blank" data-smartkarma-citation="entities:17887:1" rel="noopener">Grandblue Environment Co A (600323 CH)</a> has satisfied the precondition related to its privatisation offer for <a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a>. </li>
<li>The offer remains attractive despite the re-rating of peers since announcing the deal. The vote risk is low as the two shareholders holding blocking stakes will be supportive. </li>
<li>This is a done deal. At the last close, the gross/annualised spread for a mid-June payment is 3.8%/13.0%. </li>
</ul>



Grandblue Environment Co A (600323 CH) has satisfied the precondition related to its privatisation offer for Canvest Environmental Protection Group (1381 HK). 
The offer remains attractive despite the re-rating of peers since announcing the deal. The vote risk is low as the two shareholders holding blocking stakes will be supportive. 
This is a done deal. At the last close, the gross/annualised spread for a mid-June payment is 3.8%/13.0%. 


Canvest (1381 HK): Precondition Satisfied

<ul>
<li>The regulatory precondition concerning <a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a>’s privatisation offer from <a href="https://www.smartkarma.com/entities/grandblue-environment-co-a" target="_blank" data-smartkarma-citation="entities:17887:1" rel="noopener">Grandblue Environment Co A (600323 CH)</a> has been satisfied. </li>
<li>The sole remaining precondition concerns resolving loan guarantee issues. Canvest is taking steps to resolve these issues, and satisfying this precondition is low-risk. </li>
<li>Despite peers' re-rating, the offer remains attractive, and the vote is low-risk. At the last close, the gross/annualised spread was 4.5%/15.0% for a mid-June payment. </li>
</ul>


The regulatory precondition concerning Canvest Environmental Protection Group (1381 HK)’s privatisation offer from Grandblue Environment Co A (600323 CH) has been satisfied. 
The sole remaining precondition concerns resolving loan guarantee issues. Canvest is taking steps to resolve these issues, and satisfying this precondition is low-risk. 
Despite peers' re-rating, the offer remains attractive, and the vote is low-risk. At the last close, the gross/annualised spread was 4.5%/15.0% for a mid-June payment. 


Canvest (1381 HK): Regulatory Precondition Satisfied

China

China Everbright Greentech Limited focuses on green technology businesses. The Company engages in projects revolving around biomass, hazardous waste treatment, and solar and wind energy.

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China Everbright Greentech (1257 HK)

Conch Venture (586 HK): An Overlooked Value Play

The market has deeply undervalued Conch Venture's waste-to-energy business as reflected by the negative stub value. New business initiatives and...

Osbert Tang, CFA

China Stimulus: These Are the Key Beneficiaries

Potential massive special purpose bond issuance by local governments in 2H22 (brought forward from 2023) will provide a much-needed boost to the...

Osbert Tang, CFA

Canvest (1381 HK): Scheme Vote on 12 May

This is a done deal as the vote is low-risk. At the last close and for a 10 June payment, the gross/annualised spread is 2.3%/18.3%.

Arun George

Canvest (1381 HK): Precondition Satisfied

Best Approach (concert party) and Shanghai Industrial/SIHL have agreed to amend the exchangeable bonds terms. This amendment allows Best Approach...

Arun George

Canvest (1381 HK): Regulatory Precondition Satisfied

Satisfying the remaining precondition is low risk. The offer remains attractive, and the vote is low-risk. At the last close, the gross/annualised...

Arun George

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