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.

Kunlun Energy (135 HK): Positive Takeaways from Discussion with Company

ENN Energy (2688 HK): Concerns on Margin Squeeze, Key Takeaways from Post-Result Call

Kunlun Energy (135 HK): Our Initial Thoughts on 1H21 - Sharply Ahead of Expectations

Kunlun Energy (135 HK) - Choose Your Fighter (With That One Neat Trick!)

Kunlun Energy (135 HK): A Fantastic 1Q21 at Kunlun Gas

Kunlun Energy (135 HK): Deserves a Gas Utilities Valuation?

Kunlun Energy (135) - Be Careful Of The Special Div Dates

Kunlun Energy (135 HK) Approaching The Special Div - Still The Wrong Price

Equity Bottom-Up

<p>Despite the good share price performance after going ex-dividends, <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> still has significant upside potential, in our view. YTD, industry and peer figures have already showed a very solid underlying picture of China's gas consumption market. We updated our financial projections to incorporate the good 1Q21 result of Kunlun Gas, particularly to reflect the lower-than-expected minority interests which means that its wholly-owned subsidiaries are more profitable than non-wholly-owned which is a fact likely to be missed by the market.</p><p>We project 3-year EPS CAGR of 20% for Kunlun's continuing operations, with ROE of 10.9% for FY22; and the stock trades on just 10.9x PER for FY21F and 0.9x P/B for FY22F. Such growth, return and valuation metrics clearly put the stock in an attractive zone relative to the peers' multiples - average sector growth is 15.9% at PER of 15.6x and average ROE of 17.7% at 2.2x P/B. More importantly, we see its net cash over the next two years to amount to 26-37% of the current share price.</p>

Despite the good share price performance after going ex-dividends, Kunlun Energy (135 HK) still has significant upside potential, in our view. YTD, industry and peer figures have already showed a very solid underlying picture of China's gas consumption market. We updated our financial projections to incorporate the good 1Q21 result of Kunlun Gas, particularly to reflect the lower-than-expected minority interests which means that its wholly-owned subsidiaries are more profitable than non-wholly-owned which is a fact likely to be missed by the market.We project 3-year EPS CAGR of 20% for Kunlun's continuing operations, with ROE of 10.9% for FY22; and the stock trades on just 10.9x PER for FY21F and 0.9x P/B for FY22F. Such growth, return and valuation metrics clearly put the stock in an attractive zone relative to the peers' multiples - average sector growth is 15.9% at PER of 15.6x and average ROE of 17.7% at 2.2x P/B. More importantly, we see its net cash over the next two years to amount to 26-37% of the current share price.

Kunlun Energy (135 HK): Updated Financial Projections Point to Still Very Undemanding Valuations