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.

Lonking (3339 HK): Back in Again Supported by Improved Risk-Return Payoff

China Construction Machinery: No Sign of Slowing Down

Lonking (3339 HK): Rapid Catch-Up in Unit Sales, Further Backed by Attractive Yield

Lonking (3339 HK): Industry Momentum Has Positive Implications

China's Rmb25trn Infrastructure Spending: Bond Issuance, Infrastructure Machinery and Construction

China Infrastructure: Record Special Purpose Bonds Issuance to Drive Construction Sectors in 2H20

China Infrastructure REITs: First Look on H-Share Toll Road Sector

Equity Bottom-Up

<p><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>'s 6.2% YoY growth in profit in 1H20 is mostly boosted by a 56.4% YoY gains from investment in financial assets. Excluding this, earnings have declined by 6.4% YoY. There is mild contraction in gross margin (-0.4pp YoY) as sales value for most product categories have declined YoY. </p><p>While the 1H20 result is not very disappointing, it compared unfavourably against its construction machinery peers. Fundamentally, we still like its exposure to the government's massive infrastructure spending and strong financial position (net cash equals to 27% of share price). Also, its unit sales have already gathered pace in the last two months. However, the market may take some time to observe if Lonking can catch up its unit sales with peers. As a result, we believe there is opportunity to pick up the stock at a lower price, possibly close to the historical average P/B of 0.8x, or around HK$2.15-2.20 level. At the moment, it trades on 0.98x. </p>

Lonking Holdings (3339 HK)'s 6.2% YoY growth in profit in 1H20 is mostly boosted by a 56.4% YoY gains from investment in financial assets. Excluding this, earnings have declined by 6.4% YoY. There is mild contraction in gross margin (-0.4pp YoY) as sales value for most product categories have declined YoY. While the 1H20 result is not very disappointing, it compared unfavourably against its construction machinery peers. Fundamentally, we still like its exposure to the government's massive infrastructure spending and strong financial position (net cash equals to 27% of share price). Also, its unit sales have already gathered pace in the last two months. However, the market may take some time to observe if Lonking can catch up its unit sales with peers. As a result, we believe there is opportunity to pick up the stock at a lower price, possibly close to the historical average P/B of 0.8x, or around HK$2.15-2.20 level. At the moment, it trades on 0.98x. 

XCMG Construction Machinery A (000425 CH)

Lonking (3339 HK): 1H20 Fuelled by Investment Income but Core Profit Down