Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>The conglomerate sector continues to show momentum in Hong Kong while the materials and energy sectors lag</li>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp" target="_blank" data-smartkarma-citation="entities:35280:1" rel="noopener">Weibo (9898 HK)</a><a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> was rated a BUY as valuations and potential catalysts from parent <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a> could support a higher stock price.
</li>
<li>
<a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a> was upgraded to BUY with higher higher price target due to profit increase. <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> was initiated with a BUY with strong upside.
</li>
</ul>


The conglomerate sector continues to show momentum in Hong Kong while the materials and energy sectors lag

Weibo (9898 HK)Weibo Corp (WB US) was rated a BUY as valuations and potential catalysts from parent Alibaba Group Holding (9988 HK) could support a higher stock price.


China East Education (667 HK) was upgraded to BUY with higher higher price target due to profit increase. Dongfang Electric (1072 HK) was initiated with a BUY with strong upside.



BUY/SELL/HOLD: Hong Kong Stock Updates (September 21)

<ul>
<li>Asian ETF flows have been subdued during September as markets start to react positively to Fed rate cuts.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a> parent <a href="https://www.smartkarma.com/entities/las-vegas-sands-corp" target="_blank" data-smartkarma-citation="entities:807:1" rel="noopener">Las Vegas Sands (LVS US)</a> continued to increase its stake as Macau tourists rise.  <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> is seeing increased China sales.
</li>
<li>
<a href="https://www.smartkarma.com/entities/metallurgical-corporation-of-china-ltd-a8048a44-3f03-4836-916c-1596deef9535" target="_blank" data-smartkarma-citation="entities:12762:1" rel="noopener">Metallurgical Corporation of China Ltd (1618 HK)</a> reported a decrease in new contracts for 1H24. <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> early investor sold most of its remaining stake in the company.
</li>
</ul>


Asian ETF flows have been subdued during September as markets start to react positively to Fed rate cuts.

Sands China (1928 HK) parent Las Vegas Sands (LVS US) continued to increase its stake as Macau tourists rise.  Shenzhou Intl Group Holdings (2313 HK) is seeing increased China sales.


Metallurgical Corporation of China Ltd (1618 HK) reported a decrease in new contracts for 1H24. Kuaishou Technology (1024 HK) early investor sold most of its remaining stake in the company.



The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 20)

HK/China Equity Long-Short

Osbert Tang, CFA

China Communications Construction / Equity Bottom-Up

<ul>
<li>Despite a 3.1% drop in profit, <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> is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. </li>
<li>High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. </li>
<li>Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. </li>
</ul>


Despite a 3.1% drop in profit, China Communications Construction (1800 HK) is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. 
High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. 
Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. 


China Comm Const (1800 HK): The Preferred Infrastructure Play

<ul>
<li>Low Volatility and High Dividend yield stocks in Hong Kong outperformed the region during recent global market sell off.</li>
<li>
<a href="https://www.smartkarma.com/entities/mgm-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:472:1" rel="noopener">MGM China Holdings (2282 HK)</a> is outperforming its peers with revenue now exceeding pre-COVID levels.
</li>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp" target="_blank" data-smartkarma-citation="entities:35280:1" rel="noopener">Weibo (9898 HK)</a> maintains a high cash flow and dividend yield in China's tech sector.  <a href="https://www.smartkarma.com/entities/zhuzhou-crrc-times-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:18:1" rel="noopener">Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK)</a> benefits from China's new large-scale maintenance cycle.
</li>
</ul>


Low Volatility and High Dividend yield stocks in Hong Kong outperformed the region during recent global market sell off.

MGM China Holdings (2282 HK) is outperforming its peers with revenue now exceeding pre-COVID levels.


Weibo (9898 HK) maintains a high cash flow and dividend yield in China's tech sector.  Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK) benefits from China's new large-scale maintenance cycle.



BUY/SELL/HOLD: Hong Kong Stock Updates (August 6)

<ul>
<li>
<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>'s overseas contracts surged sharply in 2Q24 as market share gained. Slow domestic contracts are transient as bond issues will accelerate.</li>
<li>Its backlog continued to grow to 4.7x 12-month forward revenue, which is higher than the 5-year average of 4.1x. Improving margin trend in 1Q24 will sustain into 2H24.</li>
<li>With a projected ROE of 8.4% for the next two years, its 0.2x P/B is inexpensive. It is also attractive based on dividend yields of 7.7% and 8.4%, respectively.</li>
</ul>



China Communications Construction (1800 HK)'s overseas contracts surged sharply in 2Q24 as market share gained. Slow domestic contracts are transient as bond issues will accelerate.
Its backlog continued to grow to 4.7x 12-month forward revenue, which is higher than the 5-year average of 4.1x. Improving margin trend in 1Q24 will sustain into 2H24.
With a projected ROE of 8.4% for the next two years, its 0.2x P/B is inexpensive. It is also attractive based on dividend yields of 7.7% and 8.4%, respectively.


China Comm Const (1800 HK): Robust Growth Prospects Accelerating

China

China Railway Construction Corporation Ltd is a full service construction company.  The Company's services include construction operations, survey design and consulting. China Railway also has manufacturing operations, real estate operations, and logistics. The Company specializes in railway construction.

China Railway Construction Corp (1186 HK)

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China Railway Construction Corp (1186 HK)

BUY/SELL/HOLD: Hong Kong Stock Updates (September 21)

Conglomerate stocks in Hong Kong have outperformed this month. Weibo target price is upgraded and Dongfang Electric is intiated BUY. CEE saw a...

David Mudd

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 20)

Sands China's parent increases its stake. Shenzhou is benefits from increased China sales from a health-conscious consumer. MCC new contracts...

David Mudd

China Comm Const (1800 HK): The Preferred Infrastructure Play

In the post-result call, management is very confident that the 2H24 momentum will pick up. The company does not see it will fall short of the...

Osbert Tang, CFA

BUY/SELL/HOLD: Hong Kong Stock Updates (August 6)

Low Vol and High Dividend factors outperformed the region during recent sell off. MGM i EBITDA exceeds pre-COVID levels. Weibo will benefit from...

David Mudd

China Comm Const (1800 HK): Robust Growth Prospects Accelerating

CCCC saw a surge in overseas contracts in 2Q24, with a growing backlog and improving margins. Its low valuation, high dividend yields, and secured...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

BUY/SELL/HOLD: Hong Kong Stock Updates (September 21)

Conglomerate stocks in Hong Kong have outperformed this month. Weibo target price is upgraded and Dongfang Electric is intiated BUY. CEE saw a...

David Mudd

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 20)

Sands China's parent increases its stake. Shenzhou is benefits from increased China sales from a health-conscious consumer. MCC new contracts...

David Mudd

China Comm Const (1800 HK): The Preferred Infrastructure Play

In the post-result call, management is very confident that the 2H24 momentum will pick up. The company does not see it will fall short of the...

Osbert Tang, CFA

BUY/SELL/HOLD: Hong Kong Stock Updates (August 6)

Low Vol and High Dividend factors outperformed the region during recent sell off. MGM i EBITDA exceeds pre-COVID levels. Weibo will benefit from...

David Mudd

China Comm Const (1800 HK): Robust Growth Prospects Accelerating

​CCCC saw a surge in overseas contracts in 2Q24, with a growing backlog and improving margins. Its low valuation, high dividend yields, and secured...

Osbert Tang, CFA

CCCC saw a surge in overseas contracts in 2Q24, with a growing backlog and improving margins. Its low valuation, high dividend yields, and secured...