HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<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

<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> posted 11% profit decline for FY21, with Shenzhen Airlines the main drag. Stripping this and one-off items out, its bottom line would have grown by 46.6%.</li>
<li>Logistics growth pipeline is highly visible, and this adds to potential gains from logistics park transformation and strategic offload of matured and suitable projects through REIT or private fund.</li>
<li>The stock remains a deeply undervalued asset play at just 0.48x P/B. Its willingness to share gains with investors has put its dividend yield at 10.4% on current share price.</li>
</ul>



Shenzhen International (152 HK) posted 11% profit decline for FY21, with Shenzhen Airlines the main drag. Stripping this and one-off items out, its bottom line would have grown by 46.6%.
Logistics growth pipeline is highly visible, and this adds to potential gains from logistics park transformation and strategic offload of matured and suitable projects through REIT or private fund.
The stock remains a deeply undervalued asset play at just 0.48x P/B. Its willingness to share gains with investors has put its dividend yield at 10.4% on current share price.


Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value

Thematic (Sector/Industry)

<ul>
<li>Business transformation has supported share price of many companies in 2021, and we expect transformation will stay as an important theme for 2022 with more companies making related announcements.</li>
<li>We highlighted some interesting names in this theme including <a href="https://www.smartkarma.com/entities/yanzhou-coal-mining-company-limited-h" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group Co (1171 HK)</a>, <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>, <a href="https://www.smartkarma.com/entities/china-energy-engineering-group" target="_blank" data-smartkarma-citation="entities:21017:1" rel="noopener">China Energy Engineering (3996 HK)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co (548 HK)</a>. </li>
<li>While some have already seen share price rallied, many are still lagging other transformation plays. They are also mostly trading on low multiples with transformation potential not yet fully reflected.</li>
</ul>


Business transformation has supported share price of many companies in 2021, and we expect transformation will stay as an important theme for 2022 with more companies making related announcements.
We highlighted some interesting names in this theme including Yankuang Energy Group Co (1171 HK), Anhui Conch Cement (914 HK), China Energy Engineering (3996 HK) and Shenzhen Expressway Co (548 HK). 
While some have already seen share price rallied, many are still lagging other transformation plays. They are also mostly trading on low multiples with transformation potential not yet fully reflected.


Business Transformation Is the Theme in 2022 and Some Interesting Companies to Watch

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 150 stocks over the last week. The average A-H premium was 101.0% as of Dec 13th.</li>
<li>The average A-H premium changed by -1.9ppt week-on-week, led by consumer staples, consumer discretionary, industrials and offset by real estate.</li>
<li>We highlight weekly changes in A-H premium for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.</li>
</ul>


We analyse the changes of A-H premium on 150 stocks over the last week. The average A-H premium was 101.0% as of Dec 13th.
The average A-H premium changed by -1.9ppt week-on-week, led by consumer staples, consumer discretionary, industrials and offset by real estate.
We highlight weekly changes in A-H premium for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.


A-H Premium Weekly (Dec 13th):ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA

China

Shenzhen Expressway Company Limited offers toll expressway and road construction and investment services. The Company provides expressway operation, maintenance, and service station leasing services. Shenzhen Expressway also conducts real estate development, advertising, and engineering consulting businesses.

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Shenzhen Expressway Company (600548 CH)

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

Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value

SZIH is an attractive asset play - it does not only has lots of hidden assets, but also the capability to turn them into profit and cash flow, and...

Osbert Tang, CFA

Business Transformation Is the Theme in 2022 and Some Interesting Companies to Watch

Business transformation will stay as an important theme for 2022 and we highlight Yankuang Energy, Anhui Conch Cement, China Energy Engineering and...

Osbert Tang, CFA

A-H Premium Weekly (Dec 13th):ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA

We analyzed A-H premium changes in the past week and highlight A-H premium changes for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.

Ke Yan, CFA, FRM

Price Gauge

52-week Range

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