HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-merchants-port-holdings-company-ltd" target="_blank" data-smartkarma-citation="entities:15155:1" rel="noopener">China Merchants Port Holdings Company Ltd (144 HK)</a> (CMPH) is very cheap based on its stub value after stripping out the market value of its 25.15% holdings in <a href="https://www.smartkarma.com/entities/shanghai-international-port-group-co-ltd" target="_blank" data-smartkarma-citation="entities:14806:1" rel="noopener">Shanghai International Port Group (600018 CH)</a> (SIPG). The market is now pricing CMPH's holdings of other significant strategic non-SIPG port assets at virtually zero value. We think these assets are grossly undervalued as they collectively accounted for between 44% and 65% of CMPH's total earnings in the last five years. Even if we apply a 20% discount to CMPH's holdings in SIPG, the remaining assets are still cheap at just 2-3x P/E. In the long term, there is upside to many of these non-SIPG assets, in our view. For example, we expect CMPH's Hong Kong and Shenzhen port assets to benefit from the Guangdong-Hong Kong-Macao Greater Bay Area initiative, which is currently still in the early stage of development.

China Merchants Port Holdings Company Ltd (144 HK) (CMPH) is very cheap based on its stub value after stripping out the market value of its 25.15% holdings in Shanghai International Port Group (600018 CH) (SIPG). The market is now pricing CMPH's holdings of other significant strategic non-SIPG port assets at virtually zero value. We think these assets are grossly undervalued as they collectively accounted for between 44% and 65% of CMPH's total earnings in the last five years. Even if we apply a 20% discount to CMPH's holdings in SIPG, the remaining assets are still cheap at just 2-3x P/E. In the long term, there is upside to many of these non-SIPG assets, in our view. For example, we expect CMPH's Hong Kong and Shenzhen port assets to benefit from the Guangdong-Hong Kong-Macao Greater Bay Area initiative, which is currently still in the early stage of development.

China Merchants Port (144 HK): Attractive Stub Value Ex-SIPG (600018 CH)

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

This week in StubWorld ...
<ul>
<li>
<a href="https://www.smartkarma.com/entities/52" target="_blank" data-smartkarma-citation="entities:52:1">Wheelock &amp; (20 HK) </a>is coming up "expensive", but it's <a href="https://www.smartkarma.com/entities/51" target="_blank" data-smartkarma-citation="entities:51:1">Wharf Holdings (4 HK)</a> which is <a href="https://www.smartkarma.com/entities/51" target="_blank" data-smartkarma-citation="entities:51:1"></a>under-performing after PRC property sales targets are lowered amid Beijing's cooling measures.</li>
</ul>
Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.

This week in StubWorld ...


Wheelock &amp; (20 HK) is coming up "expensive", but it's Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing's cooling measures.

Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.

StubWorld: Wharf Under Pressure As Cooling Measures Bite

Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

<a href="https://www.smartkarma.com/entities/15155" target="_blank" data-smartkarma-citation="entities:15155:1">China Merchants Port Holdings Company Ltd (144 HK)</a> (CMPort) is one of the largest port developers, operators, and investors in the world. Due to concerns over trades wars and pressure on container handling fees within China, the market values the company on an EV/EBITDA of 6.14 and on a Price to Book of 0.65 times. These depressed multiples seem unwarranted given the company’s consistently profitable, financial health, decent corporate governance, and growth potential. Based on the typical acquisition multiples of ports (8 to 12 times EBITDA),CMPort has between 22.1% and 115.8% upside. On an asset-based valuation, CMPort has 75.7% to 258.4%. The earnings base case fair value per share (HKD25.20) is 70.0% above the current market price.

China Merchants Port Holdings Company Ltd (144 HK) (CMPort) is one of the largest port developers, operators, and investors in the world. Due to concerns over trades wars and pressure on container handling fees within China, the market values the company on an EV/EBITDA of 6.14 and on a Price to Book of 0.65 times. These depressed multiples seem unwarranted given the company’s consistently profitable, financial health, decent corporate governance, and growth potential. Based on the typical acquisition multiples of ports (8 to 12 times EBITDA),CMPort has between 22.1% and 115.8% upside. On an asset-based valuation, CMPort has 75.7% to 258.4%. The earnings base case fair value per share (HKD25.20) is 70.0% above the current market price.

China Merchants Port Holdings (144:HK)- A Consistent Earner at Cheap Valuations- 70% Upside

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

With the aim of encouraging a recovery in foreign trade, the Chinese port sector’s antitrust investigations have concluded with 11%-33% handling tariff cuts on foreign trade cargos for seven major ports from 2018, which will save about CNY 4.5 billion in logistic costs for import and export enterprises, according to the National Development and Reform Commission, or NDRC. While the tariff cuts will pressure these port operators’ profit margins, we expect little impact on the sector’s monopoly…

With the aim of encouraging a recovery in foreign trade, the Chinese port sector’s antitrust investigations have concluded with 11%-33% handling tariff cuts on foreign trade cargos for seven major ports from 2018, which will save about CNY 4.5 billion in logistic costs for import and export enterprises, according to the National Development and Reform Commission, or NDRC. While the tariff cuts will pressure these port operators’ profit margins, we expect little impact on the sector’s monopoly…

The 11%-33% Tariff Cuts on Seven Ports Will Pressure the Sector’s Earnings, but Downside Is Limited

Infrastructure Analyst - Ports & Terminals, Drewry Maritime Financial Research

Victor Wai, CFA

Infrastructure Analyst - Ports & Terminals

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Hutchison Port Holdings Trust / Equity Bottom-Up

Hutchison Port Holdings Trust (HPHT SP Equity) kisses the support level of $0.40 apiece, with investors finding some feline-cuteness for the once-loved port infrastructure play. Amid a resurgent trade recovery post-Global Financial Crisis, Li Ka-Shing spun off the Pearl River Delta assets and listed them as a Trust for $1.01, promising attractive dividends for shareholders who take a long-term view on ports.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/040/107/original/HPHT_4.JPG?1512883791" class="editor-image img-responsive" data-smartkarma-image-id="40107"></figure><div class="content-caption">Throwback to the busy days... Source: JOC</div>Despite a series of misses in its earnings -…

Hutchison Port Holdings Trust (HPHT SP Equity) kisses the support level of $0.40 apiece, with investors finding some feline-cuteness for the once-loved port infrastructure play. Amid a resurgent trade recovery post-Global Financial Crisis, Li Ka-Shing spun off the Pearl River Delta assets and listed them as a Trust for $1.01, promising attractive dividends for shareholders who take a long-term view on ports.Throwback to the busy days... Source: JOCDespite a series of misses in its earnings -…

Hutchison Port Trust - Dead Cat Bounce No.10?

China

Shanghai International Port (Group) Co., Ltd is a holding company that owns interests in container and port service companies.

Shanghai International Port Group (600018 CH)

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Shanghai International Port Group (600018 CH)

China Merchants Port (144 HK): Attractive Stub Value Ex-SIPG (600018 CH)

China Merchants Port Holdings Company Ltd (144 HK) (CMPH) is very cheap based on its stub value after stripping out the market value of its 25.15%...

Osbert Tang, CFA

StubWorld: Wharf Under Pressure As Cooling Measures Bite

This week in StubWorld ... Wheelock & (20 HK) is coming up "expensive", but it's Wharf Holdings (4 HK) which is under-performing after PRC...

David Blennerhassett

China Merchants Port Holdings (144:HK)- A Consistent Earner at Cheap Valuations- 70% Upside

China Merchants Port Holdings Company Ltd (144 HK) (CMPort) is one of the largest port developers, operators, and investors in the world. Due to...

Reperio Capital

The 11%-33% Tariff Cuts on Seven Ports Will Pressure the Sector’s Earnings, but Downside Is Limited

With the aim of encouraging a recovery in foreign trade, the Chinese port sector’s antitrust investigations have concluded with 11%-33% handling...

Morningstar, Inc.

Hutchison Port Trust - Dead Cat Bounce No.10?

Hutchison Port Holdings Trust (HPHT SP Equity) kisses the support level of $0.40 apiece, with investors finding some feline-cuteness for the...

Drewry Maritime Financial Research

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52-week Range

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