HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Conch Venture Holdings / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.</li>
<li>The company's waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.</li>
<li>We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China's new energy industry.</li>
</ul>



China Conch Venture Holdings (586 HK) is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.
The company's waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.
We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China's new energy industry.


Conch Venture (586 HK): An Overlooked Value Play

<ul>
<li>Following listing of <a href="https://www.smartkarma.com/entities/china-conch-environment-protection-holdings-ltd" target="_blank" data-smartkarma-citation="entities:4827:1" rel="noopener">China Conch Environment (587 HK)</a>, <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture (586 HK)</a> is seeking a spin-off of CV Green Energy in A-share market and we view this move positively.</li>
<li>Limited details are currently available, but we think CV Green Energy, which operates WTE businesses, will trade at significantly higher multiples than its Hong Kong peers. </li>
<li>Assuming CV Green Energy to hold all Conch Venture's WTE businesses, we estimate the IPO will boost the latter's sum-of-the-parts value by 8% or HK$2.14 per share.</li>
</ul>


Following listing of China Conch Environment (587 HK), China Conch Venture (586 HK) is seeking a spin-off of CV Green Energy in A-share market and we view this move positively.
Limited details are currently available, but we think CV Green Energy, which operates WTE businesses, will trade at significantly higher multiples than its Hong Kong peers. 
Assuming CV Green Energy to hold all Conch Venture's WTE businesses, we estimate the IPO will boost the latter's sum-of-the-parts value by 8% or HK$2.14 per share.


Conch Venture (586 HK): Another Spin-Off in the Pipeline

China Everbright Environment / Equity Bottom-Up

<ul>
<li>The FY21 result of <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> (CEE) should look impressive and we see improvement in cash flow to relieve market concerns on leverage and financial position.  </li>
<li>New project addition is solid over the last three months, adding about 5% to operational project portfolio. Strong special purpose bonds issuance in 4Q21 and 2022 will fuel pipeline momentum.</li>
<li>Valuations look undemanding at 4.1x PER and 0.65x P/B for FY22F; and by maintaining payout ratio at c.30%, dividend yields are at attractive 6.4% and 7.4% for next 2 years.</li>
</ul>


The FY21 result of China Everbright Environment (257 HK) (CEE) should look impressive and we see improvement in cash flow to relieve market concerns on leverage and financial position.  
New project addition is solid over the last three months, adding about 5% to operational project portfolio. Strong special purpose bonds issuance in 4Q21 and 2022 will fuel pipeline momentum.
Valuations look undemanding at 4.1x PER and 0.65x P/B for FY22F; and by maintaining payout ratio at c.30%, dividend yields are at attractive 6.4% and 7.4% for next 2 years.


China Everbright Environment (257 HK): Roaring in the Year of Tiger!

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> is sitting on a steep discount of 59% to its NAV. Its holding in <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd-094855ab-abec-4b71-956b-5bfc85e22fdd" target="_blank" data-smartkarma-citation="entities:389:1" rel="noopener">Anhui Conch Cement (600585 CH)</a> is already valued at HK$13.3/share.</li>
<li>Its waste-to-energy business has a value of Rmb4.4bn by assuming 5x PER, but this business has a net book value of Rmb10bn. Pipeline capacity equals 21.7% of operational capacity.</li>
<li>The new energy segment, including lithium battery recycling and the manufacture of positive and negative electrode materials, has solid prospects but is overlooked by the market.</li>
</ul>



China Conch Venture Holdings (586 HK) is sitting on a steep discount of 59% to its NAV. Its holding in Anhui Conch Cement (600585 CH) is already valued at HK$13.3/share.
Its waste-to-energy business has a value of Rmb4.4bn by assuming 5x PER, but this business has a net book value of Rmb10bn. Pipeline capacity equals 21.7% of operational capacity.
The new energy segment, including lithium battery recycling and the manufacture of positive and negative electrode materials, has solid prospects but is overlooked by the market.


Conch Venture (586 HK): Interesting Angles, yet Undervalued

Canvest Environmental Protection Group / Equity Bottom-Up

<ul>
<li>The 25.6% increase in net profit for <a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a> in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.</li>
<li>Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.</li>
<li>Canvest's expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.</li>
</ul>


The 25.6% increase in net profit for Canvest Environmental Protection Group (1381 HK) in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.
Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.
Canvest's expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.


Canvest Env (1381 HK): Streaming Ahead Despite Tough Time

China

Zhejiang Weiming Environmental Protection Co., Ltd. provides solid waste disposal services. The Company provides services in garbage disposal projects' technical development, equipment manufacturing, project investment, project construction, and operation management.

Zhejiang Weiming Environment Protection Co Ltd (603568 CH)

Zhejiang Weiming Environment Protection Co Ltd

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Zhejiang Weiming Environment Protection Co Ltd (603568 CH)

Conch Venture (586 HK): An Overlooked Value Play

The market has deeply undervalued Conch Venture's waste-to-energy business as reflected by the negative stub value. New business initiatives and...

Osbert Tang, CFA

Conch Venture (586 HK): Another Spin-Off in the Pipeline

The proposed spin-off of CV Green Energy in Shanghai should benefit Conch Venture's valuations given the higher multiples for waste-to-energy...

Osbert Tang, CFA

China Everbright Environment (257 HK): Roaring in the Year of Tiger!

CEE's FY21 result should be impressive and will serve as share price catalyst. Solid recent new project pipeline and higher special purpose bond...

Osbert Tang, CFA

Conch Venture (586 HK): Interesting Angles, yet Undervalued

Conch Venture is undervalued at a 59% NAV discount, with a valuable holding in Anhui Conch Cement and promising new energy segments. It also...

Osbert Tang, CFA

Canvest Env (1381 HK): Streaming Ahead Despite Tough Time

After a good start in 1H22, we think there is room for Canvest's earnings to further improve in 2H22. Its improved cash flow and potential to...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Conch Venture (586 HK): An Overlooked Value Play

The market has deeply undervalued Conch Venture's waste-to-energy business as reflected by the negative stub value. New business initiatives and...

Osbert Tang, CFA

Conch Venture (586 HK): Another Spin-Off in the Pipeline

The proposed spin-off of CV Green Energy in Shanghai should benefit Conch Venture's valuations given the higher multiples for waste-to-energy...

Osbert Tang, CFA

China Everbright Environment (257 HK): Roaring in the Year of Tiger!

CEE's FY21 result should be impressive and will serve as share price catalyst. Solid recent new project pipeline and higher special purpose bond...

Osbert Tang, CFA

Conch Venture (586 HK): Interesting Angles, yet Undervalued

​Conch Venture is undervalued at a 59% NAV discount, with a valuable holding in Anhui Conch Cement and promising new energy segments. It also...

Osbert Tang, CFA

Canvest Env (1381 HK): Streaming Ahead Despite Tough Time

After a good start in 1H22, we think there is room for Canvest's earnings to further improve in 2H22. Its improved cash flow and potential to...

Osbert Tang, CFA

Conch Venture is undervalued at a 59% NAV discount, with a valuable holding in Anhui Conch Cement and promising new energy segments. It also...