HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<ul>
<li>We expect <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> to sustain efforts in realising and releasing the value of its assets, and this will be positive in narrowing its discount to book.</li>
<li>The plan to issue REIT by using Hangzhou and Guizhou logistics projects as underlying assets will add to earnings. We estimate they account for 14% of SZI's total project area.</li>
<li>Subscription to A-share issuance of <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> will increase its book value by Rmb5bn. This will lower its P/B multiple to 0.46x, from 0.54x.</li>
</ul>


We expect Shenzhen International (152 HK) to sustain efforts in realising and releasing the value of its assets, and this will be positive in narrowing its discount to book.
The plan to issue REIT by using Hangzhou and Guizhou logistics projects as underlying assets will add to earnings. We estimate they account for 14% of SZI's total project area.
Subscription to A-share issuance of Shenzhen Expressway Co (548 HK) will increase its book value by Rmb5bn. This will lower its P/B multiple to 0.46x, from 0.54x.


Shenzhen Intl (152 HK): Enhancing Its Values

<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

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): Enhancing Its Values

SZI's planned REIT issuance on Hangzhou and Guizhou projects is just an example of its efforts in releasing asset value. The deemed disposal of SZE...

Osbert Tang, CFA

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

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