HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The pullback from the peak and after the 3Q24 result is excessive, as <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> is still sitting on an attractive 8.4% dividend yield for FY24.</li>
<li>We should not be concerned too much about the fluctuations in government grants and JV contributions, which are the key drags. Historically, they have exhibited quarterly volatility.</li>
<li>Its dividend payout has raised by 6pp in 1H24 despite an 11% earnings drop. Both net cash position and improving operating cash flow can afford a higher payout.</li>
</ul>


The pullback from the peak and after the 3Q24 result is excessive, as Sinotrans (598 HK) is still sitting on an attractive 8.4% dividend yield for FY24.
We should not be concerned too much about the fluctuations in government grants and JV contributions, which are the key drags. Historically, they have exhibited quarterly volatility.
Its dividend payout has raised by 6pp in 1H24 despite an 11% earnings drop. Both net cash position and improving operating cash flow can afford a higher payout.


Sinotrans (598 HK): More than Enough Safety Margin

<ul>
<li>Despite an 11% drop in profit in 1H24, <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. </li>
<li>The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. </li>
<li>We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.</li>
</ul>


Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. 
The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. 
We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.


Sinotrans (598 HK): Attracted by the Yield

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

<ul>
<li>Volume and revenue grow as the company works with China’s new trading partners</li>
<li>Margins and cashflow under pressure due to a weak domestic economy and higher freight rates</li>
<li>Cross-Border e-commerce growing fast from a small base relative to other divisions</li>
</ul>


Volume and revenue grow as the company works with China’s new trading partners
Margins and cashflow under pressure due to a weak domestic economy and higher freight rates
Cross-Border e-commerce growing fast from a small base relative to other divisions


Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

<ul>
<li>Cost and business optimisations lead to increased profits as revenues drop due to freight rate declines</li>
<li>Successfully pivoting by geography as the global trading environment changes</li>
<li>The company increases its dividend payout in a sign of confidence for the future</li>
</ul>


Cost and business optimisations lead to increased profits as revenues drop due to freight rate declines
Successfully pivoting by geography as the global trading environment changes
The company increases its dividend payout in a sign of confidence for the future


<ul>
<li>A Profit-Oriented State Owned Enterprise that is walking the walk.</li>
<li>Management incentives are aligned with shareholders, a rarity in China.</li>
<li>Plenty of upside remains despite the market outperformance to date</li>
</ul>


A Profit-Oriented State Owned Enterprise that is walking the walk.
Management incentives are aligned with shareholders, a rarity in China.
Plenty of upside remains despite the market outperformance to date


Sinotrans (598.HK), a Shining Example of SOE Reform

China

Sinotrans Limited provides integrated logistics services with core service of sea, air, rail and road freight forwarding, express services and shipping agency services.  The Company also provides support services of storage and terminal services, trucking and marine transportation services.

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Sinotrans (598 HK)

Sinotrans (598 HK): More than Enough Safety Margin

Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Osbert Tang, CFA

Sinotrans (598 HK): Attracted by the Yield

After its parent announced a plan to increase shareholding by Rmb250-500m in the next 6 months on 13-Oct, Sinotrans announced today that it will...

Osbert Tang, CFA

Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Rikki Malik

Sinotrans (598. HK) Continues to Deliver

Cost and business optimizations increase profits as freight rates drop; Sinotrans adjusts operations geographically in response to changing trade...

Rikki Malik

Sinotrans (598.HK), a Shining Example of SOE Reform

State-owned enterprise in China demonstrates profit-oriented approach with management incentives aligned with shareholders, offering potential for...

Rikki Malik

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sinotrans (598 HK): More than Enough Safety Margin

​Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Osbert Tang, CFA

Sinotrans (598 HK): Attracted by the Yield

After its parent announced a plan to increase shareholding by Rmb250-500m in the next 6 months on 13-Oct, Sinotrans announced today that it will...

Osbert Tang, CFA

Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

​Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Rikki Malik

Sinotrans (598. HK) Continues to Deliver

​Cost and business optimizations increase profits as freight rates drop; Sinotrans adjusts operations geographically in response to changing trade...

Rikki Malik

Sinotrans (598.HK), a Shining Example of SOE Reform

​State-owned enterprise in China demonstrates profit-oriented approach with management incentives aligned with shareholders, offering potential for...

Rikki Malik

Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Cost and business optimizations increase profits as freight rates drop; Sinotrans adjusts operations geographically in response to changing trade...

State-owned enterprise in China demonstrates profit-oriented approach with management incentives aligned with shareholders, offering potential for...