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

Beijing Enterprises Urban Resources / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/beijing-enterprises-urban-re" target="_blank" data-smartkarma-citation="entities:29131:1" rel="noopener">Beijing Enterprises Urban Resources (3718 HK)</a>/BEUR and <a href="https://www.smartkarma.com/entities/beijing-enterprises-water-group-limited" target="_blank" data-smartkarma-citation="entities:1660:1" rel="noopener">Beijing Enterprises Water Group (371 HK)</a>/BEWG entered trading halts relating to the Code on Takeovers and Mergers and “<em>a proposed notifiable transaction</em>”, respectively. </li>
<li>BEWG, the largest BEUR shareholder, has steadily increased its stake from 26.25% at BEUR’s IPO on 15 January 2020 to 29.45% as of 31 March 2022.</li>
<li>Our best guess is that the trading halts relate to a potential mandatory general offer associated with BEWG acquiring 30%+ of the voting rights. </li>
</ul>



Beijing Enterprises Urban Resources (3718 HK)/BEUR and Beijing Enterprises Water Group (371 HK)/BEWG entered trading halts relating to the Code on Takeovers and Mergers and “a proposed notifiable transaction”, respectively. 
BEWG, the largest BEUR shareholder, has steadily increased its stake from 26.25% at BEUR’s IPO on 15 January 2020 to 29.45% as of 31 March 2022.
Our best guess is that the trading halts relate to a potential mandatory general offer associated with BEWG acquiring 30%+ of the voting rights. 


Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Conch Venture Holdings / Equity Bottom-Up

<ul>
<li>Following CCEP spin-off and share price decline, <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> is now at more attractive valuations relative to the stub, on sum-of-the-parts and on PER multiple. </li>
<li>Growth profile should improve in next two years and it has an optimistic expectation of of 76% increase in waste treatment and 79% growth in on-grid electricity for FY22.</li>
<li>New business initiatives including anode and cathode materials of lithium iron phosphate and lithium batteries and used lithium batteries treatment may provide potential medium term upside.</li>
</ul>


Following CCEP spin-off and share price decline, China Conch Venture (586 HK) is now at more attractive valuations relative to the stub, on sum-of-the-parts and on PER multiple. 
Growth profile should improve in next two years and it has an optimistic expectation of of 76% increase in waste treatment and 79% growth in on-grid electricity for FY22.
New business initiatives including anode and cathode materials of lithium iron phosphate and lithium batteries and used lithium batteries treatment may provide potential medium term upside.


Conch Venture (586 HK): Improving Risk-Reward Profile

China Everbright Environment / Equity Bottom-Up

<ul>
<li>Share price was off 23% in the last two days, yet we think <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> has posted a set of healthy result, though somewhat behind expectations.</li>
<li>Good new project momentum, further increase in operation revenue and collection of national subsidies are key factors backing earnings growth and improvement in cash flow over the next 2 years.</li>
<li>Longer term, management stays bullish on the industry growth opportunities. Its 14.5% ROE and mid-teens earnings growth both suggest the stock's 3.3x PER, 0.45x P/B and 9.4% yield inexpensive.</li>
</ul>


Share price was off 23% in the last two days, yet we think China Everbright Environment (257 HK) has posted a set of healthy result, though somewhat behind expectations.
Good new project momentum, further increase in operation revenue and collection of national subsidies are key factors backing earnings growth and improvement in cash flow over the next 2 years.
Longer term, management stays bullish on the industry growth opportunities. Its 14.5% ROE and mid-teens earnings growth both suggest the stock's 3.3x PER, 0.45x P/B and 9.4% yield inexpensive.


China Everbright Environment (257 HK): Sell-Down Unwarranted Given Positive Prospects

China Everbright Water / Equity Bottom-Up

<ul>
<li>Full-Year earnings growth of 17% suggested a slowdown in 2H21, but this is mostly a result of higher base. A 3pp increase in dividend payout ratio also demonstrated management's confidence.</li>
<li>Focus should be on the positive new project momentum - 10 secured in 2H21, versus only 4 in 1H21. More special purpose bonds issuance should drive project pipeline.</li>
<li>CE Water's valuations are cheap at 0.43x P/B and 3.8x PER for FY22F. Its prospective dividend yield of 7.9% also provides an appealing income component. </li>
</ul>


Full-Year earnings growth of 17% suggested a slowdown in 2H21, but this is mostly a result of higher base. A 3pp increase in dividend payout ratio also demonstrated management's confidence.
Focus should be on the positive new project momentum - 10 secured in 2H21, versus only 4 in 1H21. More special purpose bonds issuance should drive project pipeline.
CE Water's valuations are cheap at 0.43x P/B and 3.8x PER for FY22F. Its prospective dividend yield of 7.9% also provides an appealing income component. 


China Everbright Water (1857 HK): Good New Project Flow Is the Key

<ul>
<li>China's special purpose bonds (SPB) issuance by local governments stayed high for 4Q21; but as from NDRC, proceeds of these bonds will be used in 1Q22 to boost economic growth.</li>
<li>NDRC has already made early release of Rmb1.46trn SPB quota for 2022 to local governments, and provided guidance and supervision to ensure speedy and targeted use of proceeds in early-2022.</li>
<li>Both <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> are well placed to capture SPB-funded projects. Yet their valuations are still very appealing despite good YTD performance.</li>
</ul>


China's special purpose bonds (SPB) issuance by local governments stayed high for 4Q21; but as from NDRC, proceeds of these bonds will be used in 1Q22 to boost economic growth.
NDRC has already made early release of Rmb1.46trn SPB quota for 2022 to local governments, and provided guidance and supervision to ensure speedy and targeted use of proceeds in early-2022.
Both China Everbright Environment (257 HK) and China Communications Construction (1800 HK) are well placed to capture SPB-funded projects. Yet their valuations are still very appealing despite good YTD performance.


Special Purpose Bonds in 2022: Benefiting China Everbright Env (257 HK) & China Comm Const (1800 HK)

Hong Kong

China Everbright International Limited provides environmental protection project management and consultancy services. The Company's operations are broken up into environmental energy, environmental water, environmental construction and environmental technology.

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China Everbright Environment (257 HK)

Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?

Our best guess is that the trading halts of BUER and BEWG (the largest shareholder) relate to a potential mandatory general offer associated with...

Arun George

Conch Venture (586 HK): Improving Risk-Reward Profile

Following CCEP spin-off and recent share price decline, Conch Venture is now at more attractive valuation level. In the medium term, upside will...

Osbert Tang, CFA