HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Jiangsu Expressway (H) / Equity Bottom-Up

<ul>
<li>We find good value in <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> - its 8.3x PER is cheap relative to 10.4% EPS CAGR and P/B multiple of 1.06x is below historical average.</li>
<li>It has an extremely secured dividend stream for the next two years, yielding at least 6.3%. 1Q23 result showed a solid recovery, and potentially adding upside to earnings outlook.</li>
<li>Key drivers are stronger traffic recovery, rise in contribution from clean energy, margin expansion through cost control and completion of new projects in the next two years.</li>
</ul>


We find good value in Jiangsu Expressway (H) (177 HK) - its 8.3x PER is cheap relative to 10.4% EPS CAGR and P/B multiple of 1.06x is below historical average.
It has an extremely secured dividend stream for the next two years, yielding at least 6.3%. 1Q23 result showed a solid recovery, and potentially adding upside to earnings outlook.
Key drivers are stronger traffic recovery, rise in contribution from clean energy, margin expansion through cost control and completion of new projects in the next two years.


Jiangsu Expressway (177 HK): A Decent Play Even After Rally

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.</li>
<li>For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.</li>
<li>Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.</li>
</ul>


Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.


Southbound Stock Connect Expansion: Potential Adds in 2023

Shenzhen Expressway Co H / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co H (548 HK)</a> guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. </li>
<li>Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. </li>
<li>There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.</li>
</ul>



Shenzhen Expressway Co H (548 HK) guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. 
Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. 
There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.


Shenzhen Expressway (548 HK): Cautiously Optimistic

Zhejiang Expressway Co H / Equity Bottom-Up

<p>After reporting an 8.65x surge in profit in 1H21, we think there are three drivers that should bring better outlook for <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> (ZJEC) over the next twelve months. These positive factors include further rebound in traffic and toll revenue, additional contribution from new projects and good upside from profit of <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities Co Ltd (601878 CH)</a>. </p><p>YTD, share price of ZJEC increased by 10%, but we still see good upside potential given that it trades on only 0.9x P/B for FY21 and its ROE for 1H21 already reached 10.1% (before annualised). On earnings valuation, its 5.7x and 5.0x PER for FY21 and FY22, respectively, also appeared very attractive, in our view. </p>

After reporting an 8.65x surge in profit in 1H21, we think there are three drivers that should bring better outlook for Zhejiang Expressway Co H (576 HK) (ZJEC) over the next twelve months. These positive factors include further rebound in traffic and toll revenue, additional contribution from new projects and good upside from profit of Zheshang Securities Co Ltd (601878 CH). YTD, share price of ZJEC increased by 10%, but we still see good upside potential given that it trades on only 0.9x P/B for FY21 and its ROE for 1H21 already reached 10.1% (before annualised). On earnings valuation, its 5.7x and 5.0x PER for FY21 and FY22, respectively, also appeared very attractive, in our view. 

Zhejiang Expressway (576 HK): Drivers in Place for Robust Outlook

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

US Markets were mixed as the S&amp;P was down 0.2%, snapping its 7-day winning streak while NASDAQ, was up 0.2%, at a new record. The June ISM Services index in the US dropped to 60.1 from May’s record high of 64.0 and lower than the forecasted 63.5. US business output continued to expand at the third-fastest rate since October 2009. Real Estate, Consumer Discretionary and IT were up 0.9%, 0.8% and 0.4%, pulling the bourses up while Energy, Financials and Materials down 3.2%, 1.6% and 1.4% pushed them lower. US 10Y Treasury yields dipped 9bp to a four month low of 1.35%. Eurostat eurozone retail sales  rose by more than expected in May. However, German economic sentiment hit its lowest since January, with the ZEW survey at 63.3 in July, lower than the forecasted 75.2. European markets slid across – DAX, FTSE and CAC were down ~1.0%. US IG and HY CDS spreads widened 0.7bp and 4.3bp respectively.  EU main and crossover CDS widened 1bp and 6.6bp respectively. Saudi TASI and Abu Dhabi’s ADX were down 0.3% and 0.2% respectively. Brazil’s Bovespa was down 1.4% higher. Asian markets opened in the red – HSI, Singapore’s STI and Nikkei were down 1.1%, 0.9% and 0.8% while Shanghai was largely flat. Asia ex-Japan CDS spreads were 1bp wider. Chinese property developers’ bonds , including Evergrande , Risesun , Kaisa and Sunac witnessed a sharp fall late on Tuesday. Sri Lanka’s bonds  also made it to the losers list on the overall risk-off sentiment.

Xiaomi, Zhejiang Expressway Launch $ Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top...

China

Zhejiang Expressway Co., Ltd., through its subsidiaries, designs, constructs, operates, and manages high grade roads, as well as develops and operates certain ancillary services, such as technical consultation, advertising, automobile servicing, and fuel facilities.

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Zhejiang Expressway Co H (576 HK)

Jiangsu Expressway (177 HK): A Decent Play Even After Rally

The recent fall in share price has put Jiangsu Expressway on an attractive yield of 7.3% and this is very secure given it has consistently paid out...

Osbert Tang, CFA

Southbound Stock Connect Expansion: Potential Adds in 2023

Expansion to Southbound Stock Connect will include foreign stocks and eligibility will be aligned for Shanghai & Shenzhen. Preparation will take...

Brian Freitas

Shenzhen Expressway (548 HK): Cautiously Optimistic

SZEX is expected to gain earnings momentum over the next few quarters as toll traffic recovers, clean energy and waste management capacity...

Osbert Tang, CFA

Zhejiang Expressway (576 HK): Drivers in Place for Robust Outlook

We believe sustained traffic and toll recovery, contribution from new project addition and positive outlook for Zheshang Securities will drive...

Osbert Tang, CFA

Xiaomi, Zhejiang Expressway Launch $ Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top...

US Markets were mixed as the S&P was down 0.2%, snapping its 7-day winning streak while NASDAQ, was up 0.2%, at a new record. The June ISM...

BondEvalue

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