HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>While valuations for <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> do not appear expensive, there is a risk that the 2H23 earnings outlook is weaker than expected. This opens room for disappointment.</li>
<li>There is no sign that domestic sales have picked up and Jul-Aug was still down significantly. Meanwhile, the strong export in 1H23 has not sustained in the last two months. </li>
<li>The weaker A-share market so far in 2H23 also does not bode well for investment gains, which are important contributors to the impressive earnings rebound in 1H23.</li>
</ul>


While valuations for Lonking Holdings (3339 HK) do not appear expensive, there is a risk that the 2H23 earnings outlook is weaker than expected. This opens room for disappointment.
There is no sign that domestic sales have picked up and Jul-Aug was still down significantly. Meanwhile, the strong export in 1H23 has not sustained in the last two months. 
The weaker A-share market so far in 2H23 also does not bode well for investment gains, which are important contributors to the impressive earnings rebound in 1H23.


Lonking (3339 HK): Between a Rock and a Hard Place

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

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.

Equity Capital Markets

Horizon Construction Development / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/horizon-construction-development" target="_blank" data-smartkarma-citation="entities:35117:1" rel="noopener">Horizon Construction Development (1887128D HK)</a> raised around US$210m in its Hong Kong IPO.</li>
<li>HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.</li>
<li>In this note, we will talk about the trading dynamics and valuation.</li>
</ul>



Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In this note, we will talk about the trading dynamics and valuation.


Horizon Construction Dev IPO Trading - Subscription Rates Still Weak, Despite Cornerstone Support

<ul>
<li>
<a href="https://www.smartkarma.com/entities/horizon-construction-development" target="_blank" data-smartkarma-citation="entities:35117:1" rel="noopener">Horizon Construction Development (1887128D HK)</a> is looking to raise US$223m in its upcoming Hong Kong IPO.</li>
<li>HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.</li>
<li>In our previous notes, we looked at the company’s past performance and refiled PHIP updates. In this note, we undertake a quick peer comparison and share our thoughts on valuation.</li>
</ul>



Horizon Construction Development (1887128D HK) is looking to raise US$223m in its upcoming Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In our previous notes, we looked at the company’s past performance and refiled PHIP updates. In this note, we undertake a quick peer comparison and share our thoughts on valuation.


Horizon Construction Development IPO - Peer Comparison & Thoughts on Valuation

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.</li>
<li>As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.</li>
<li>China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.</li>
</ul>


The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.
As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.
China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.


EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

Thematic (Sector/Industry)

<ul>
<li>Construction machinery sales sustained sequential improvement in Jun. Excavator sales -10.1% (-24.2% in May and -47.3% in Apr) and wheel loader sales -5.8% (-27% in May and -40.2% in Apr).  </li>
<li>It is likely to return to positive YoY in the next two months. Aided by a low base for comparison and increase infrastructure spending in 2H22, industry prospects look brighter. </li>
<li>Both <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> and <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry (1157 HK)</a> are close to inflexion point, though risks remain high before the disappointing 1H22 result. Beyond that, value may emerge. </li>
</ul>


Construction machinery sales sustained sequential improvement in Jun. Excavator sales -10.1% (-24.2% in May and -47.3% in Apr) and wheel loader sales -5.8% (-27% in May and -40.2% in Apr).  
It is likely to return to positive YoY in the next two months. Aided by a low base for comparison and increase infrastructure spending in 2H22, industry prospects look brighter. 
Both Lonking Holdings (3339 HK) and Zoomlion Heavy Industry (1157 HK) are close to inflexion point, though risks remain high before the disappointing 1H22 result. Beyond that, value may emerge. 


China Construction Machinery: Turning to Positive Soon?

China

XCMG Construction Machinery Co., Ltd. manufactures and markets a variety of construction machinery including road construction machinery, scrapers, concrete mixers and other related products.

XCMG Construction Machinery A (000425 CH)

Price Gauge
52-week Range	0.00 - 0.00
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XCMG Construction Machinery A (000425 CH)

Lonking (3339 HK): Between a Rock and a Hard Place

Lonking's valuations are not too expensive, but 2H23 earnings may disappoint. Domestic sales have not improved, strong export in 1H23 not...

Osbert Tang, CFA

Horizon Construction Dev IPO Trading - Subscription Rates Still Weak, Despite Cornerstone Support

Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO. In this note, we will talk about the trading dynamics...

Ethan Aw

Horizon Construction Development IPO - Peer Comparison & Thoughts on Valuation

Horizon Construction Development (1887128D HK) is looking to raise US$223m in its upcoming Hong Kong IPO. In this note, we undertake a quick peer...

Ethan Aw

EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

EM vs. EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the $DXY peaked in November 2022. If the DXY remains below...

Vermilion Research

China Construction Machinery: Turning to Positive Soon?

The pace of decline in construction machinery sales continued to narrow in Jun, and prospects will further improve in 2H22. Opportunities may...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Lonking (3339 HK): Between a Rock and a Hard Place

​Lonking's valuations are not too expensive, but 2H23 earnings may disappoint. Domestic sales have not improved, strong export in 1H23 not...

Osbert Tang, CFA

Horizon Construction Dev IPO Trading - Subscription Rates Still Weak, Despite Cornerstone Support

Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO. In this note, we will talk about the trading dynamics...

Ethan Aw

Horizon Construction Development IPO - Peer Comparison & Thoughts on Valuation

Horizon Construction Development (1887128D HK) is looking to raise US$223m in its upcoming Hong Kong IPO. In this note, we undertake a quick peer...

Ethan Aw

EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

EM vs. EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the $DXY peaked in November 2022. If the DXY remains below...

Vermilion Research

China Construction Machinery: Turning to Positive Soon?

The pace of decline in construction machinery sales continued to narrow in Jun, and prospects will further improve in 2H22. Opportunities may...

Osbert Tang, CFA

Lonking's valuations are not too expensive, but 2H23 earnings may disappoint. Domestic sales have not improved, strong export in 1H23 not...