HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

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

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<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

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 107.8% as of Jul 19th.</li>
<li>The average A-H premium changed by 2.0ppt week-on-week, led by communication services, energy, utilities and offset by consumer staples, information technology, real estate.</li>
<li>We highlight weekly changes in A-H premium for Wuapptec, Air China, China Longyuan, Smic, Yofc, Flat Glass, Ganfeng Lithium.</li>
</ul>


We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 107.8% as of Jul 19th.
The average A-H premium changed by 2.0ppt week-on-week, led by communication services, energy, utilities and offset by consumer staples, information technology, real estate.
We highlight weekly changes in A-H premium for Wuapptec, Air China, China Longyuan, Smic, Yofc, Flat Glass, Ganfeng Lithium.


A-H Premium Weekly (Jul 19th):Wuxi Apptec, Air China, China Longyuan, Smic, Yofc, Flat Glass

China Railway Signal & Communication / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-railway-signal-communication-co-ltd" target="_blank" data-smartkarma-citation="entities:613:1" rel="noopener">China Railway Signal &amp; Communication (3969 HK)</a>'s latest order backlog is estimated to be Rmb173.7bn, enough to cover FY24F revenue by 4.4x.</li>
<li>Gross margin has sustained expansion, reaching a record high of 27.8% in 1Q24. Higher R&amp;D expenses will benefit its medium-term earnings.</li>
<li>Net cash equals 59% of the share price, allowing it to maintain over 50% payout and potentially higher going forward. Operating cash flow has also turned around to positive.</li>
</ul>



China Railway Signal &amp; Communication (3969 HK)'s latest order backlog is estimated to be Rmb173.7bn, enough to cover FY24F revenue by 4.4x.
Gross margin has sustained expansion, reaching a record high of 27.8% in 1Q24. Higher R&amp;D expenses will benefit its medium-term earnings.
Net cash equals 59% of the share price, allowing it to maintain over 50% payout and potentially higher going forward. Operating cash flow has also turned around to positive.


China CRSC (3969 HK): Well Worth the Premium

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.

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China Railway Group (601390 CH)

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

A-H Premium Weekly (Jul 19th):Wuxi Apptec, Air China, China Longyuan, Smic, Yofc, Flat Glass

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Wuapptec, Air China, China Longyuan, Smic, Yofc, Flat Glass,...

Ke Yan, CFA, FRM

China CRSC (3969 HK): Well Worth the Premium

China CRSC has secured backlog and sustained margin improvement. High R&D expenses will drive the medium-term outlook. Net cash equals 59% of the...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

A-H Premium Weekly (Jul 19th):Wuxi Apptec, Air China, China Longyuan, Smic, Yofc, Flat Glass

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Wuapptec, Air China, China Longyuan, Smic, Yofc, Flat Glass,...

Ke Yan, CFA, FRM

China CRSC (3969 HK): Well Worth the Premium

​China CRSC has secured backlog and sustained margin improvement. High R&D expenses will drive the medium-term outlook. Net cash equals 59% of the...

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...

China CRSC has secured backlog and sustained margin improvement. High R&D expenses will drive the medium-term outlook. Net cash equals 59% of the...