HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<p>We spoke with <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a> following its recent share price weakness. Operationally, sales volume for 5M21 stayed very solid, with wheel loader and forklift well ahead of the industry growth rates. May figures are, however, weaker than industry, but we do not think this is a concern. Moreover, for 5M21, its forklift sales already reached more than 55% of its full-year target, suggesting better-than-expected performance in this booming segment.</p><p>It is true that higher cost will erode 1H21 percentage gross margin, but the strong volume growth, price increase and cost containment measures should limit the impact on the overall gross profit. We think earnings growth for the next three years will be stable, but it will still generate over 20% of ROE and sit on net cash (including financial investments) equals to over 60% of its current share price. Our projections suggested the Lonking is trading on attractive 4.2x PER, 0.84x P/B and 14.3% dividend yield for FY21.</p>

We spoke with Lonking Holdings (3339 HK) following its recent share price weakness. Operationally, sales volume for 5M21 stayed very solid, with wheel loader and forklift well ahead of the industry growth rates. May figures are, however, weaker than industry, but we do not think this is a concern. Moreover, for 5M21, its forklift sales already reached more than 55% of its full-year target, suggesting better-than-expected performance in this booming segment.It is true that higher cost will erode 1H21 percentage gross margin, but the strong volume growth, price increase and cost containment measures should limit the impact on the overall gross profit. We think earnings growth for the next three years will be stable, but it will still generate over 20% of ROE and sit on net cash (including financial investments) equals to over 60% of its current share price. Our projections suggested the Lonking is trading on attractive 4.2x PER, 0.84x P/B and 14.3% dividend yield for FY21.

Lonking (3339 HK): Streaming Ahead Despite Turbulence

China

Shenzhen Heungkong Holding Co., Ltd. operates the development and sales of real estates. It invests in the infrastructure development. Apart from property management, it also involves in development and decoration projects.

Shenzhen Heungkong Holding Co, Ltd. (600162 CH)

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Lonking (3339 HK): Streaming Ahead Despite Turbulence

Lonking achieved good volume growth for wheel loader and forklift in 5M21, and we think price increase, volume growth and cost containment can...

Osbert Tang, CFA