HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<ul>
<li>FY22 is definitely bad for <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> given the 64.9% profit plunge. However, negative contributors like Shenzhen Airlines and exchange losses will be removed in this year.</li>
<li>Earnings for <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a> will improve and 1Q23 has witnessed good traffic recovery. Logistics profit will benefit from higher occupancy, REIT issuance and new projects.</li>
<li>Upside will come from logistics park transformation with profit from Yicheng Qiwanli pre-sale potentially to be booked. Consensus earnings forecast of HK$4.1bn is at low-end of our estimate. </li>
</ul>


FY22 is definitely bad for Shenzhen International (152 HK) given the 64.9% profit plunge. However, negative contributors like Shenzhen Airlines and exchange losses will be removed in this year.
Earnings for Shenzhen Expressway (548 HK) will improve and 1Q23 has witnessed good traffic recovery. Logistics profit will benefit from higher occupancy, REIT issuance and new projects.
Upside will come from logistics park transformation with profit from Yicheng Qiwanli pre-sale potentially to be booked. Consensus earnings forecast of HK$4.1bn is at low-end of our estimate. 


Shenzhen Intl (152 HK): Don't Look Back, Look Forward

<ul>
<li>Share price of <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. </li>
<li>Upside from logistics business, benefits to <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a> on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines' drag are drivers. </li>
<li>ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. </li>
</ul>


Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines' drag are drivers. 
ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. 


Shenzhen Intl (152 HK): Numerous Drivers in Place to Boost FY23

Jiangsu Expressway (H) / Equity Bottom-Up

<ul>
<li>With share price of <a href="https://www.smartkarma.com/entities/jiangsu-express-co-ltd-h" target="_blank" data-smartkarma-citation="entities:9956:1" rel="noopener">Jiangsu Expressway (H) (177 HK)</a> now back to the 2013-2014 level, the stock is very attractive on secured yield of 8.6% based on its dividend record. </li>
<li>Fundamentally, we expect sequential recovery in earnings in 2H22. Its diversification into clean energy will provide a quality earnings stream. Longer-term, new projects will add to earnings. </li>
<li>It has a healthy gearing level and the Rmb denominated borrowings means it will benefit from lower interest rate and lack of exposure to Rmb depreciation.  </li>
</ul>


With share price of Jiangsu Expressway (H) (177 HK) now back to the 2013-2014 level, the stock is very attractive on secured yield of 8.6% based on its dividend record. 
Fundamentally, we expect sequential recovery in earnings in 2H22. Its diversification into clean energy will provide a quality earnings stream. Longer-term, new projects will add to earnings. 
It has a healthy gearing level and the Rmb denominated borrowings means it will benefit from lower interest rate and lack of exposure to Rmb depreciation.  


Jiangsu Expressway (177 HK): A Simple yet Attractive Yield Play

<ul>
<li>The 1H22 result of <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.</li>
<li>It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.</li>
<li>We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. </li>
</ul>


The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. 


Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  </li>
<li>SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.</li>
<li>Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. </li>
</ul>



Shenzhen International (152 HK) has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  
SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.
Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. 


Shenzhen Intl (152 HK): It's the Ability to Realise Underlying Value that Matters

China

Tianjin Port Co., Ltd. operates the Tianjin Port and provides related services including loading and unloading, storage, and transportation services.  The Company also acts as a freight transportation agency.

Beibuwan Port Co., Ltd. provides support services for water transportation, including loading and unloading, storage, transportation, and other port related services. Through its subsidiaries, the Company also acts as an oversea transportation agent and develops real estate.

Jiangxi Ganyue Expressway Co., Ltd. maintains, operates, and manages toll expressways, bridges, and other transportation facilities.  The Company manages the Changjiu Expressway, the Changzhang Expressway, the Changfu Expressway, and the Yinsanjiao Overpass.

Jiangxi Ganyue Expressway Co., (600269 CH)

Anhui Expressway Co. Ltd. principally holds, operates and develops toll expressways and highways in Anhui province in China.

Anhui Wanjiang Logistics Group Co Ltd provides loading, unloading, storage, and transition services for coal, containers, bulk and general marine cargo.

Liaoning Port Co.,Ltd. provides logistics services. The Company offers container handling, container transportation, crude oil warehousing, gross cargo transportation, and other services. Liaoning Port provides its services throughout China.

Shenzhen Airport Co., Ltd. provides airport terminal ground passenger transportation and cargo delivery services.  The Company also leases airport lounge, designs and publishes advertisements, and offers air ticket agency services.

Sichuan Expressway Company Limited offers expressway investment and construction services. The Company builds toll highway, bridge, tunnel, and other traffic projects. Sichuan Expressway also conducts city operation, energy, media and financial investment businesses.

Qinhuangdao Port Company Limited loads, stores, transports port cargo. The Company's main products include liquid chemicals, iron ore and coal, oil and other cargo, containers and other products.

Dongguan Development Holdings Co., Ltd invests, develops, and operates toll collection for the Dongguan expressway.

Dongguan Development (Holdings) Co., (000828 CH)

Shenzhen International Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides investment, construction, and operation of logistic infrastructure facilities, as well as offers value-added logistic services. Shenzhen International serves customers worldwide.

COSCO Shipping Ports Limited, through its subsidiaries, provides shipping container leasing services worldwide.  The Company also operates container terminals and provides container handling, storage, transportation and management services, as well as depot handling and stevedoring services.

Port of Tauranga Limited activities include the provision of wharf facilities, back up land for the storage and transit of import and export cargo, berthage, cranes, tug and pilotage services for exporters, importers and shipping companies and the leasing of land and buildings.  The Group also operates a container terminal and has bulk cargo marshalling operations.

Kamigumi Co., Ltd. provides port-harbor transportation services.  The Company's services include port-harbor transport, warehousing, trucking, packing, and heavy cargo transport.  Kamigumi also provides other services like real estate, insurance agency operations, sports clubs, and restaurant management.

PT Jasa Marga Persero Tbk operates the Indonesian highway system.  The Company collects tolls, maintains the road surfaces, and offers towing and ambulance services.

SIA Engineering Co Ltd provides airframe and component overhaul services, line maintenance and technical ground handling services. The Company also manufactures aircraft cabin equipment, refurbishes aircraft galleys, repairs and overhauls hydromechanical aircraft equipment.

Novorossiysk Commercial Sea Port PJSC owns and operates the Novorossiysk Port on the BlackSea. The Company processes, loads, and unloads cargo. Novorossiysk Commercial Sea Trade Port handles mainly crude oil but also services dry cargo such as metals, cement, sugar, grain and containers.

Enav S.p.A. provides air navigation and transportation support services. The Company offers air traffic control, aeronautical information, flight inspection, meteorology, and engineering and maintenance services. Enav conducts its business in Italy.

The Sumitomo Warehouse Co., Ltd. operates warehousing and freight transportation businesses.  The Company provides integrated transportation services including marine, land, and air freight, and stores cargos in warehouses throughout Japan. Sumitomo Warehouse also operates a real estate leasing business.

Mitsubishi Logistics Corporation provides warehousing, logistics, and other distribution services in Japan, the United States, and Asia.  The Company operates ground, port-harbor, and international intermodal transport as well as real estate leasing.

Shenzhen Expressway Company Limited constructs, manages and operates toll highways and expressways in China.

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

Shenzhen Expressway Co H (548 HK)

Shenzhen Intl (152 HK): Don't Look Back, Look Forward

We anticipate an encouraging FY23 profit picture at SZl as losses from Shenzhen Airlines and foreign exchange should be removed. Potential upside...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Numerous Drivers in Place to Boost FY23

Upside from logistics business, benefits to Shenzhen Expressway on border re-opening, potential massive contribution from logistics park...

Osbert Tang, CFA

Jiangsu Expressway (177 HK): A Simple yet Attractive Yield Play

Jiangsu Expressway has very secured dividend yield of 8.6% for the next two years. In the meantime, upside may come from sequential earnings...

Osbert Tang, CFA

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

1H22 is bad but behind us now. We anticipate sequential earnings improvement in 2H22 as the impact of pandemic fades. SZI will continue to realise...

Osbert Tang, CFA

Shenzhen Intl (152 HK): It's the Ability to Realise Underlying Value that Matters

We think the market has overlooked Shenzhen Intl's potential and capability to translate its assets into profit and cash flow. The latest Qianhai...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)