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.

China Construction Machinery: No Sign of Slowing Down

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

China Construction Machinery: Industry Players Expressed Bullish Outlook for 2021

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

Lonking (3339 HK): Wow! It Is Yielding 11.6%!!!

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

Equity Bottom-Up

<p>Share price of <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> has fallen by 31.7% from its intra-day peak before the 1H20 result announcement to the current level of HK$2.05 due to its underperformance against peers in unit sales. However, with its P/B valuation returning to just 0.76x now, below the historical average of 0.8x, we believe value has started to emerge with improved risk-return payoff. We suggest getting back into this counter for potentially better-than-expected 2H20 result.</p><p>We have already seen Lonking's unit sales of excavators and forklifts picked up against the industry in Jul and Aug. Also, there is no further widening of its underperformance in wheel loader sales. In our view, the improvement in sales volume will reflect positively in its gross margin in 2H20. Lonking maintain its excellent financial position, with net cash forecast to reach Rmb2.7bn by end-FY20, or 34% of the current market cap. Having such solid cash balance, we expect it to maintain its FY19 dividend payout ratio of 54% in FY20.  With the fall in share price, its FY20 dividend yield has now returned to a compelling 11.6%. </p>

Share price of Lonking Holdings (3339 HK) has fallen by 31.7% from its intra-day peak before the 1H20 result announcement to the current level of HK$2.05 due to its underperformance against peers in unit sales. However, with its P/B valuation returning to just 0.76x now, below the historical average of 0.8x, we believe value has started to emerge with improved risk-return payoff. We suggest getting back into this counter for potentially better-than-expected 2H20 result.We have already seen Lonking's unit sales of excavators and forklifts picked up against the industry in Jul and Aug. Also, there is no further widening of its underperformance in wheel loader sales. In our view, the improvement in sales volume will reflect positively in its gross margin in 2H20. Lonking maintain its excellent financial position, with net cash forecast to reach Rmb2.7bn by end-FY20, or 34% of the current market cap. Having such solid cash balance, we expect it to maintain its FY19 dividend payout ratio of 54% in FY20.  With the fall in share price, its FY20 dividend yield has now returned to a compelling 11.6%. 

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