HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

3Q21 result of <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> (CCCC) marks another steady quarter with reported growth of 4.9% YoY. We believe the improvement in construction business has been partly offset by weaker toll road operation given the negative traffic impact from higher domestic COVID-19 cases during the summer time. Hence, recurring profit was weaker with a marginal 1.2% decline in 3Q21. Nonetheless, 9M21 vs. 9M19 still sees a steady CAGR of 4.8% in earnings. Also, there is good YoY growth in operating cash flow.We expect a recovery in traffic to bode well for CCCC's investment projects, adding to its good cost management and positive reversal in credit and asset impairments. The encouraging 3Q21 new contract momentum (+57.6% YoY) and the sharp rebound in overseas contracts signed is expected to underpin CCCC's outlook for the next two years. Valuation multiples are clearly still very undemanding - 0.21x P/B, 3.3x PER and 6% dividend yield.

3Q21 result of China Communications Construction (1800 HK) (CCCC) marks another steady quarter with reported growth of 4.9% YoY. We believe the improvement in construction business has been partly offset by weaker toll road operation given the negative traffic impact from higher domestic COVID-19 cases during the summer time. Hence, recurring profit was weaker with a marginal 1.2% decline in 3Q21. Nonetheless, 9M21 vs. 9M19 still sees a steady CAGR of 4.8% in earnings. Also, there is good YoY growth in operating cash flow.We expect a recovery in traffic to bode well for CCCC's investment projects, adding to its good cost management and positive reversal in credit and asset impairments. The encouraging 3Q21 new contract momentum (+57.6% YoY) and the sharp rebound in overseas contracts signed is expected to underpin CCCC's outlook for the next two years. Valuation multiples are clearly still very undemanding - 0.21x P/B, 3.3x PER and 6% dividend yield. 

China Comm Const (1800 HK): Sustaining a Stable Track in 3Q21

<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> (CCCC) has a very solid 1H21 with net profit growth of 88.3% YoY. While the low base in 1H20 has exaggerated the growth rate; relative to 1H19, net profit still increased 18.3%, implying a healthy operational recovery back to pre-pandemic level. The remarkable 28.5% YoY increase in new contract value also demonstrated its strong foothold in the domestic market. All in all, we believe the market should be happy with CCCC's interim result. We believe CCCC will maintain good new contract momentum for the rest of the year as supported by the acceleration of issuance of special purpose bonds by local governments. Having already achieved 58% of its full-year target, there is potential for it to beat its FY21 expectation. The current excellent backlog, which equals to 4.75x its FY20 revenue, also implies that forward earnings are well secured. At 0.2x P/B, 2.8x PER and 6.6% dividend yield for FY21, we believe CCCC is grossly undervalued.

China Communications Construction (1800 HK) (CCCC) has a very solid 1H21 with net profit growth of 88.3% YoY. While the low base in 1H20 has exaggerated the growth rate; relative to 1H19, net profit still increased 18.3%, implying a healthy operational recovery back to pre-pandemic level. The remarkable 28.5% YoY increase in new contract value also demonstrated its strong foothold in the domestic market. All in all, we believe the market should be happy with CCCC's interim result. We believe CCCC will maintain good new contract momentum for the rest of the year as supported by the acceleration of issuance of special purpose bonds by local governments. Having already achieved 58% of its full-year target, there is potential for it to beat its FY21 expectation. The current excellent backlog, which equals to 4.75x its FY20 revenue, also implies that forward earnings are well secured. At 0.2x P/B, 2.8x PER and 6.6% dividend yield for FY21, we believe CCCC is grossly undervalued. 

China Comm Const (1800 HK): A Healthy 1H21 with Full Operational Recovery

<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> has a fruitful 1H21 as reflected by impressive new contract growth and profit recovery. Driven by the strength at the domestic market, overall new contract addition reached Rmb685.1bn, a good 28.5% YoY growth. Such pace is the fastest when compared with the annual growth rate since FY15, and this solid project pipeline will translate into positive profit momentum over the next three years.CCCC has also issued positive profit alert for 1H21, guiding for between 109.70% and 139.01% YoY growth in net profit. For 2Q21 standalone, the YoY growth should reach an even higher 1.4-2.1x. We see limited regulatory risks for CCCC given the infrastructure construction industry landscape and its centrally-owned SOE status. In our view, its ROE of 6.9% for FY21F and 7.5% for FY22F highly justify a re-rating in its P/B multiple which currently stands at 0.19x on a 12-month forward basis.

China Communications Construction (1800 HK) has a fruitful 1H21 as reflected by impressive new contract growth and profit recovery. Driven by the strength at the domestic market, overall new contract addition reached Rmb685.1bn, a good 28.5% YoY growth. Such pace is the fastest when compared with the annual growth rate since FY15, and this solid project pipeline will translate into positive profit momentum over the next three years.CCCC has also issued positive profit alert for 1H21, guiding for between 109.70% and 139.01% YoY growth in net profit. For 2Q21 standalone, the YoY growth should reach an even higher 1.4-2.1x. We see limited regulatory risks for CCCC given the infrastructure construction industry landscape and its centrally-owned SOE status. In our view, its ROE of 6.9% for FY21F and 7.5% for FY22F highly justify a re-rating in its P/B multiple which currently stands at 0.19x on a 12-month forward basis. 

China Comm Const (1800 HK): Well Placed for an Upturn

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

S&amp;P slid 0.9% yesterday while Nasdaq ended 0.1% down after it managed to erase an early decline of 2.6% with dip buying. Energy, financials and industrials led the index lower. Tesla continued its slide and closed 1.9% lower as its April sales in China dipped; its plans to expand its Shanghai plant also took a backseat due to uncertainty on US-China tensions. US IG CDS spreads were 0.4bp wider and HY widened 2.1bp. EU main and crossover CDS spreads widened by 1.2bp and 5.1bp respectively. Most Asian equity markets opened flat while KOSPI is down over 1.5% and Taiwan down 4.5%. Asia ex-Japan CDS spreads were 1bp wider. Asian primary bond markets have cooled off after two busy days ahead of the Hari Raya holiday tomorrow.

China Railway Launches $ Bond; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Lo...

The 1Q21 result of <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> (CCCC) should provide comfort to the market given it showed the sustained pace of earnings recovery. Recurring profit grew 87.5% YoY, or 13.3% versus 1Q19, driven by sharp surge in revenue and good YoY margin expansion on remarkable cost control performance.  We believe CCCC has kick-started an encouraging FY21 - its 1Q21 profit already almost equals to the 1H20 profit. Adding to that is the enchanting new contract addition momentum in the quarter - up 80.3% YoY and 24.5% QoQ, providing good security and visibility for its earnings outlook. All these evidences are supportive to our relentless call that its 12-month forward PER of 2.7x and P/B of 0.2x are just too depressed.

The 1Q21 result of China Communications Construction (1800 HK) (CCCC) should provide comfort to the market given it showed the sustained pace of earnings recovery. Recurring profit grew 87.5% YoY, or 13.3% versus 1Q19, driven by sharp surge in revenue and good YoY margin expansion on remarkable cost control performance.  We believe CCCC has kick-started an encouraging FY21 - its 1Q21 profit already almost equals to the 1H20 profit. Adding to that is the enchanting new contract addition momentum in the quarter - up 80.3% YoY and 24.5% QoQ, providing good security and visibility for its earnings outlook. All these evidences are supportive to our relentless call that its 12-month forward PER of 2.7x and P/B of 0.2x are just too depressed.

China Comm Const (1800 HK): Kick-Start a Rewarding Year

China

China Railway Group Limited offers transportation facility construction services. The Company builds railways, roads, tunnels, and bridges. China Railway Group also conducts engineering survey, equipment manufacturing, real estate development, and investment businesses.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Railway Group (601390 CH)

China Comm Const (1800 HK): Sustaining a Stable Track in 3Q21

CCCC's flat 3Q21 reflects better construction but lower toll road profit, partly as traffic is disrupted by COVID-19 cases during summer. Outlook...

Osbert Tang, CFA

China Comm Const (1800 HK): A Healthy 1H21 with Full Operational Recovery

The market should welcome CCCC's 88.3% 1H21 profit growth, and we expect new contract momentum to stay strong. Its backlog covered 4.75x its FY20...

Osbert Tang, CFA

China Comm Const (1800 HK): Well Placed for an Upturn

Good new contract value momentum and positive profit alert are both encouraging to CCCC. We believe its valuations are undemandiing at just 0.19x P...

Osbert Tang, CFA

China Railway Launches $ Bond; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Lo...

S&P slid 0.9% yesterday while Nasdaq ended 0.1% down after it managed to erase an early decline of 2.6% with dip buying. Energy, financials and...

BondEvalue

China Comm Const (1800 HK): Kick-Start a Rewarding Year

CCCC logged a sharp earnings revival in 1Q21 on the back of a surge in revenue and solid margin expanson; and new contracts added also surged. It...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)