HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

Shenzhen International Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides investment, construction, and operation of logistic infrastructure facilities, as well as offers value-added logistic services. Shenzhen International serves customers worldwide.

<ul>
<li>The listing of Air China Cargo and progress on the transformation and upgrading of its South China Logistics Park again demonstrated <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a>'s asset value. </li>
<li>Its 8.8% stake in Air China Cargo is now valued at HK$10.6bn, or 61% of its market capitalisation, suggesting its other assets are almost free.</li>
<li>Government approval on the South China Logistics Park transformation Phase I has been obtained, implying potential land value gains to be booked. </li>
</ul>


The listing of Air China Cargo and progress on the transformation and upgrading of its South China Logistics Park again demonstrated Shenzhen International (152 HK)'s asset value. 
Its 8.8% stake in Air China Cargo is now valued at HK$10.6bn, or 61% of its market capitalisation, suggesting its other assets are almost free.
Government approval on the South China Logistics Park transformation Phase I has been obtained, implying potential land value gains to be booked. 


Shenzhen Intl (152 HK): Realisation of Asset Values

Thematic (Sector/Industry)

<ul>
<li>2024 marks another year that our "Buy the worst" strategy underperformed the HSI. The strategy yielded -1.7% YTD, against HSI's +17.9%. <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> is the only winner.</li>
<li>For 2025, the strategy will switch to <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing (1876 HK)</a>, <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook (1929 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Props (101 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>, and <a href="https://www.smartkarma.com/entities/cspc-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:229:1" rel="noopener">CSPC Pharmaceutical (1093 HK)</a>.  </li>
<li>The top five HSI winners YTD 2024 have generated an average gain of 92.7%, outperforming the HSI massively. Given their current high valuations, this is unlikely to repeat in 2025.</li>
</ul>


2024 marks another year that our "Buy the worst" strategy underperformed the HSI. The strategy yielded -1.7% YTD, against HSI's +17.9%. Meituan (3690 HK) is the only winner.
For 2025, the strategy will switch to Budweiser Brewing (1876 HK), Chow Tai Fook (1929 HK), Hang Lung Props (101 HK), Wuxi Biologics (2269 HK), and CSPC Pharmaceutical (1093 HK).  
The top five HSI winners YTD 2024 have generated an average gain of 92.7%, outperforming the HSI massively. Given their current high valuations, this is unlikely to repeat in 2025.


"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

Vesync Co Ltd develops smart home platform that connect air quality, health monitoring, kitchen, lighting, and outlet systems.The Company helps users to manage home, save energy, and bring remote items within handheld reach.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>'s major shareholders proposed to privatise at HK$5.60, a 33.3% premium to the pre-suspension price. This is the same as we calculated using the 3-year average P/B. </li>
<li>At such a price, it will sit at 7.6x PER for FY25F, a level that it only touched briefly 3 times in the last two years. </li>
<li>This PER is at a 25-30% discount to the sector and justified by its smaller size and lesser diversification. All in all, the proposed price looks fair and reasonable.</li>
</ul>



Vesync (2148 HK)'s major shareholders proposed to privatise at HK$5.60, a 33.3% premium to the pre-suspension price. This is the same as we calculated using the 3-year average P/B. 
At such a price, it will sit at 7.6x PER for FY25F, a level that it only touched briefly 3 times in the last two years. 
This PER is at a 25-30% discount to the sector and justified by its smaller size and lesser diversification. All in all, the proposed price looks fair and reasonable.


Vesync (2148 HK): Proposed Privatisation at HK$5.60 Fair and Reasonable

<ul>
<li>With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. </li>
<li>
<a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> and <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> are expected to sustain strengths into 2025 on market value management and pick-up in new orders.</li>
<li>
<a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <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>, and <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> may hold their share price, but gains are unlikely to be as much as 2024.</li>
</ul>


With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. 

China Communications Construction (1800 HK) and Dongfang Electric (1072 HK) are expected to sustain strengths into 2025 on market value management and pick-up in new orders.

Xinhua Winshare (811 HK), China Everbright Environment (257 HK), and SITC International (1308 HK) may hold their share price, but gains are unlikely to be as much as 2024.


Our Best Calls in 2024: Review and Outlook for 2025

<ul>
<li>
<a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>'s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited. </li>
<li>1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.</li>
<li>Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector's average PER multiple implies ~70% higher than the pre-suspension price.</li>
</ul>



Vesync (2148 HK)'s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited. 
1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.
Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector's average PER multiple implies ~70% higher than the pre-suspension price.


Vesync (2148 HK): A Potential Privatisation?

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.

Osbert Tang, CFA
HK/China Equity Long-Short

Shenzhen Intl (152 HK): Realisation of Asset Values

Air China Cargo's listing and progress on the South China Logistics Park upgrade showcase SZI's asset values, with its 8.8% stake in Air China...

Osbert Tang, CFA

"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...

Osbert Tang, CFA

Vesync (2148 HK): Proposed Privatisation at HK$5.60 Fair and Reasonable

Vesync's major shareholders propose to privatise it at HK$5.60, a 33.3% premium. We consider this a fair and reasonable price based on PER, P/B,...

Osbert Tang, CFA

Our Best Calls in 2024: Review and Outlook for 2025

Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Osbert Tang, CFA

Vesync (2148 HK): A Potential Privatisation?

Vesync may be heading towards privatisation by the Yang family which owns a 68.8% stake. Using historical P/B average and sector PER average as...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Realisation of Asset Values

​Air China Cargo's listing and progress on the South China Logistics Park upgrade showcase SZI's asset values, with its 8.8% stake in Air China...

Osbert Tang, CFA

"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

​The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...

Osbert Tang, CFA

Vesync (2148 HK): Proposed Privatisation at HK$5.60 Fair and Reasonable

​Vesync's major shareholders propose to privatise it at HK$5.60, a 33.3% premium. We consider this a fair and reasonable price based on PER, P/B,...

Osbert Tang, CFA

Our Best Calls in 2024: Review and Outlook for 2025

​Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Osbert Tang, CFA

Vesync (2148 HK): A Potential Privatisation?

​Vesync may be heading towards privatisation by the Yang family which owns a 68.8% stake. Using historical P/B average and sector PER average as...

Osbert Tang, CFA

Air China Cargo's listing and progress on the South China Logistics Park upgrade showcase SZI's asset values, with its 8.8% stake in Air China...

The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...

Vesync's major shareholders propose to privatise it at HK$5.60, a 33.3% premium. We consider this a fair and reasonable price based on PER, P/B,...

Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Vesync may be heading towards privatisation by the Yang family which owns a 68.8% stake. Using historical P/B average and sector PER average as...