HK/China Equity Long-Short

Osbert Tang, CFA

Osbert Tang is an equity analyst with over 20 years of experience with focuses on China transport, infrastructure, industrials and utilities sectors. He has been based in Shanghai since 2003, accumulated nearly 20 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities. 

Osbert has received votes from top-tier institutional investors and has been a highly-ranked transport and infrastructure analyst in the Asiamoney, Institutional Investors and Greenwich surveys. In addition to his extensive experience with international investment banks including RBS, ABN AMRO (both served as Shanghai Chief Representative), Paribas Asia Equity, Maybank Kim Eng and DBS Securities, he has been a senior analyst with Moody’s Investors Service with focus on ratings of China infrastructure and related LGFV issuers. He has also worked in the area of strategic development at Sun Hung Kai Properties Limited. 

Osbert holds a BBA from the Chinese University of Hong Kong, an MBA from the University of Texas at Austin and a MSSc in Applied Psychology from the City University of Hong Kong. He was accredited with the CFA charter in 1997, and is a member of both British Psychological Society and Hong Kong Psychological Society.

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Equity Bottom-Up

<div><p><a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> has a slightly lower-than-expected FY19 result (+6.2% YoY for core profit), but we read that the good news is the strong growth in the natural gas sales business with positive margin improvement. We believe the market's focus on Kunlun should move to its downstream business which will see strong growth prospects in the next three years.  </p></div><div><p>Trading on 0.7x P/B, it is more than 1SD below the historical average since 2013. Some 40% drop in share price YTD should have discounted the oil price collapse. We project ROE of 9.4% for FY20 - still a healthy level. Upside potential will come from better-than-expected city gas project acquisitions, rebound in oil price, successful disposal of E&amp;P business and a favourable outcome from pipeline injection to PipeChina. </p></div>

Kunlun Energy (135 HK) has a slightly lower-than-expected FY19 result (+6.2% YoY for core profit), but we read that the good news is the strong growth in the natural gas sales business with positive margin improvement. We believe the market's focus on Kunlun should move to its downstream business which will see strong growth prospects in the next three years.  Trading on 0.7x P/B, it is more than 1SD below the historical average since 2013. Some 40% drop in share price YTD should have discounted the oil price collapse. We project ROE of 9.4% for FY20 - still a healthy level. Upside potential will come from better-than-expected city gas project acquisitions, rebound in oil price, successful disposal of E&amp;P business and a favourable outcome from pipeline injection to PipeChina. 

Kunlun Energy (135 HK): Solid Growth in Downstream Gas Sales Is the Driver