Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

China Conch Venture Holdings / Equity Capital Markets

China Conch Venture Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides energy preservation and environmental protection solutions and offers environment-friendly building materials.

<p><a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> (CCV) has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0928/2021092801185.pdf" target="_blank" rel="noopener">proposed</a> spinning-off and separately listing the shares of Conch Environment Protection (CEEP), a company principally engaged in providing industrial solid and hazardous waste treatment in the PRC. Here is the listing application form (<a href="https://www1.hkexnews.hk/app/sehk/2021/103856/documents/sehk21092801397.pdf" target="_blank" rel="noopener">Form A1</a>).</p>
<p>CEEP comprised ~17% of the unlisted revenue of CCV in FY20 and ~35% of the profit.</p>
<p>The spin-off will be implemented by way of distribution in-specie - CCV will not retain any interest in CEEP. This is a listing by introduction - no IPO proceeds are involved.</p>
<p>Assuming CEEP's listing goes ahead (no shareholder approval is required), the remaining unlisted ops comprise waste incineration projects, energy-saving equipment, and port logistics.</p>
<p>Separately, I see CCV trading at a 6% discount to its NAV, its narrowest inside a year. The implied stub has never been narrower.</p>
<p>More below the fold.</p>

China Conch Venture Holdings (586 HK) (CCV) has proposed spinning-off and separately listing the shares of Conch Environment Protection (CEEP), a company principally engaged in providing industrial solid and hazardous waste treatment in the PRC. Here is the listing application form (Form A1).
CEEP comprised ~17% of the unlisted revenue of CCV in FY20 and ~35% of the profit.
The spin-off will be implemented by way of distribution in-specie - CCV will not retain any interest in CEEP. This is a listing by introduction - no IPO proceeds are involved.
Assuming CEEP's listing goes ahead (no shareholder approval is required), the remaining unlisted ops comprise waste incineration projects, energy-saving equipment, and port logistics.
Separately, I see CCV trading at a 6% discount to its NAV, its narrowest inside a year. The implied stub has never been narrower.
More below the fold.

China Conch Venture (586 HK): Waste Treatment Spin-Off

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Everbright Environment / Equity Bottom-Up

China Everbright International Limited provides environmental protection project management and consultancy services. The Company's operations are broken up into environmental energy, environmental water, environmental construction and environmental technology.

<p>We believe there will be more positive policy measures to support the waste treatment industry, especially after China's "Two Meetings" to be held in Mar and <a href="https://www.smartkarma.com/entities/china-everbright-international-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> (CEE) is in a good position to benefit. Although its share price has increased by 12.9% YTD, with an undemanding PER of 4.1x for FY21F, there is still more room to go.</p><p>CEE's project momentum has stayed encouraging, with over Rmb1.5bn of new waste and water treatment projects secured over the last few months. The recent grant of approval to its subsidiary <a href="https://www.smartkarma.com/entities/china-everbright-greentech-0377b31c-5401-466f-987e-9a176b05fb52" target="_blank" data-smartkarma-citation="entities:24085:1" rel="noopener">China Everbright Greentech (1257 HK)</a> to issue asset-backed notes (ABN) represents another major step towards asset securitisation. We also see CEE a prime beneficiary of public infrastructure REIT, which when issues, will both improve its valuation and capital structure.  </p>

We believe there will be more positive policy measures to support the waste treatment industry, especially after China's "Two Meetings" to be held in Mar and China Everbright Environment (257 HK) (CEE) is in a good position to benefit. Although its share price has increased by 12.9% YTD, with an undemanding PER of 4.1x for FY21F, there is still more room to go.CEE's project momentum has stayed encouraging, with over Rmb1.5bn of new waste and water treatment projects secured over the last few months. The recent grant of approval to its subsidiary China Everbright Greentech (1257 HK) to issue asset-backed notes (ABN) represents another major step towards asset securitisation. We also see CEE a prime beneficiary of public infrastructure REIT, which when issues, will both improve its valuation and capital structure.  

China Everbright Environment (257 HK): Compelling Story yet to Fully Appreciate

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Thematic (Sector/Industry)

<p>Our next Webinar features Insight Provider <a href="https://www.smartkarma.com/profiles/osbert-tang-cfa" target="_blank" data-smartkarma-citation="accounts:3879" rel="noopener">Osbert Tang, CFA</a>, who will discuss the outlook of China's solid waste treatment industry, as outlined in his Smartkarma Original Insight, <a href="https://www.smartkarma.com/insights/china-environment-sector-deep-dive-solid-waste-treatment" target="_blank" data-smartkarma-citation="insights:39898" rel="noopener">China Environment Sector Deep Dive: Solid Waste Treatment</a>, focusing on the impact of China's revised Solid Waste Pollution Environmental Prevention and Treatment Law on the country's major listed waste treatment companies.</p>
<h3>The webinar was hosted on Wednesday, 21/October/2020, 5.00pm SGT/HKT.<a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=89660448094" target="_blank" rel="noopener"></a>
</h3>
<p>Watch the session here:</p>
<p><iframe src="https://www.youtube.com/embed/dtYP63fpEEU" width="560" height="315" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>Or subscribe to listen on the go:</p>
<p><iframe src="https://open.spotify.com/embed-podcast/episode/2M9lZGkoYbULkNJkmhTMKZ" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe></p>
<p>Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.</p>

Our next Webinar features Insight Provider Osbert Tang, CFA, who will discuss the outlook of China's solid waste treatment industry, as outlined in his Smartkarma Original Insight, China Environment Sector Deep Dive: Solid Waste Treatment, focusing on the impact of China's revised Solid Waste Pollution Environmental Prevention and Treatment Law on the country's major listed waste treatment companies.
The webinar was hosted on Wednesday, 21/October/2020, 5.00pm SGT/HKT.

Watch the session here:

Or subscribe to listen on the go:

Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.

Smartkarma Webinar | China Environment Sector Deep Dive: Solid Waste Treatment

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/669/original/2020-07-01_05-28-36.png?1593548938" class="editor-image img-responsive" data-smartkarma-image-id="143669"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/673/original/2020-07-01_06-01-59.png?1593550949" class="editor-image img-responsive" data-smartkarma-image-id="143673"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>WASTE NOT.</strong>.- Waste treatment company <a href="https://www.smartkarma.com/entities/daiseki-co-ltd" target="_blank" data-smartkarma-citation="entities:2330:1" rel="noopener">Daiseki (9793 JP)</a>'s first-quarter results saw Net Income decline by 17% on a 1% decline in sales. However, the 19% and 24% cuts to both Operating and Net Income for the first half and full-year highlight the current decline in industrial activity in Japan is likely to be prolonged and, possibly, similar to that seen in 2009. The outlook for Daiseki's listed subsidiary <a href="https://www.smartkarma.com/entities/daiseki-eco-solution-co-ltd" target="_blank" data-smartkarma-citation="entities:13776:1" rel="noopener">Daiseki Eco. Solution (1712 JP)</a> is equally subdued.  Meanwhile, <a href="https://www.smartkarma.com/entities/japan-display-inc" target="_blank" data-smartkarma-citation="entities:8280:1" rel="noopener">Japan Display (6740 JP)</a> annual losses 'improved' to only ¥101 billion at the net level on ¥504 billion in sales, while <a href="https://www.smartkarma.com/entities/pasona-group-inc" target="_blank" data-smartkarma-citation="entities:15778:1" rel="noopener">Pasona (2168 JP)</a> revised down the soon-to-be-declared FY2020 Net Income by 66% relative to TTM on further Anime theme park write-offs. LCD/SPE specialist <a href="https://www.smartkarma.com/entities/marumae-co-ltd" target="_blank" data-smartkarma-citation="entities:16671:1" rel="noopener">Marumae (6264 JP)</a> produced the best results of the day driven by a 38% year-on-year increase in quarterly sales.</p>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
<hr>
</div><div><p style="text-align: center;"><strong>21 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 6 Positive / 3 Neutral / 12 Negative</li>
<li>
<strong>Average Results Score Change:</strong>-3.2</li>
<li>
<strong>Average % Change in Revenue:</strong> +0.2% Quarter YoY / -5.9% Rolling TTM YoY</li>
<li>
<strong>Average Operating Profit Margin Change</strong>: 0.0ppt</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>13 Annual • 8 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 4 Positive / 2 Neutral / 7 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 2 Positive / 1 Neutral / 5 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -5.6</li>
</ul></div>


Source • Japan Analytics
WASTE NOT..- Waste treatment company Daiseki (9793 JP)'s first-quarter results saw Net Income decline by 17% on a 1% decline in sales. However, the 19% and 24% cuts to both Operating and Net Income for the first half and full-year highlight the current decline in industrial activity in Japan is likely to be prolonged and, possibly, similar to that seen in 2009. The outlook for Daiseki's listed subsidiary Daiseki Eco. Solution (1712 JP) is equally subdued.  Meanwhile, Japan Display (6740 JP) annual losses 'improved' to only ¥101 billion at the net level on ¥504 billion in sales, while Pasona (2168 JP) revised down the soon-to-be-declared FY2020 Net Income by 66% relative to TTM on further Anime theme park write-offs. LCD/SPE specialist Marumae (6264 JP) produced the best results of the day driven by a 38% year-on-year increase in quarterly sales.

DAILY STATS

21 Quarterly Results

Results Score: 6 Positive / 3 Neutral / 12 Negative

Average Results Score Change:-3.2

Average % Change in Revenue: +0.2% Quarter YoY / -5.9% Rolling TTM YoY

Average Operating Profit Margin Change: 0.0ppt
 13 Annual • 8 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 4 Positive / 2 Neutral / 7 Negative

Interim Forecast/Revision Score Change: 2 Positive / 1 Neutral / 5 Negative

Average Forecast/Revision Score Change: -5.6


🇯🇵 JAPAN • Results & Revisions 30th June - Waste Not..

<div><p>We are positive towards the outlook of China's solid waste treatment industry and believe the current share price level is a very good entry point, especially after the approval of the revisions in <a href="http://www.gov.cn/xinwen/2020-04/30/content_5507561.htm" target="_blank" rel="noopener">“Solid Waste Pollution Environmental Prevention and Treatment Law of the People's Republic of China”</a> by National People's Congress in May which will become effective on 1 Sep. In addition to the Law which will lead to an improved operating landscape of the industry, the increase in waste volume stimulated by urbanisation and e-commerce, growth in waste treatment capability, potential for industry consolidation and favourable financial infrastructure are the factors that presented the industry with tremendous opportunities.</p></div><div><p>There are still risks including heightened competition due to fragmented industry structure, potential change in on-grid tariff and subsidies and weak power demand due to economic slowdown. However, the depressed valuations of the sector after sustained underperformance offer good value with long-term structural change in the industry, in our view. We rank the five major Hong Kong listed and A-share companies in the sector in the following order: <a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a>, <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a>, <a href="https://www.smartkarma.com/entities/china-everbright-intl-ltd" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Intl (257 HK)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-weiming-environment-protection-co-ltd" target="_blank" data-smartkarma-citation="entities:29035:1" rel="noopener">Zhejiang Weiming Environment (603568 CH)</a>, and <a href="https://www.smartkarma.com/entities/china-everbright-greentech-0377b31c-5401-466f-987e-9a176b05fb52" target="_blank" data-smartkarma-citation="entities:24085:1" rel="noopener">China Everbright Greentech (1257 HK)</a>.</p></div><h2>What's Original?</h2><p>This Smartkarma Original takes a detailed look on the revised “Solid Waste Pollution Environmental Prevention and Treatment Law” and reads on the implications to the major listed waste treatment companies.  In addition to discussions on the revenue and profit drivers of the individual companies, we will also assess the outlook for improvement in returns, and compared the relative valuations of individual companies within the sector based on their P/B vs. ROE and PEG ratios.</p><p>Since the waste treatment industry is highly fragmented, we analyse the possibility of consolidation as a potential way to improve sector return levels. Lastly, we will take this opportunity to introduce a leading A-share waste treatment company - <a href="https://www.smartkarma.com/entities/zhejiang-weiming-environment-protection-co-ltd" target="_blank" data-smartkarma-citation="entities:29035:1" rel="noopener">Zhejiang Weiming Environment (603568 CH)</a>, which has recorded a marvelous share price performance - up 95% over the last three years and 28% YTD.</p>

We are positive towards the outlook of China's solid waste treatment industry and believe the current share price level is a very good entry point, especially after the approval of the revisions in “Solid Waste Pollution Environmental Prevention and Treatment Law of the People's Republic of China” by National People's Congress in May which will become effective on 1 Sep. In addition to the Law which will lead to an improved operating landscape of the industry, the increase in waste volume stimulated by urbanisation and e-commerce, growth in waste treatment capability, potential for industry consolidation and favourable financial infrastructure are the factors that presented the industry with tremendous opportunities.There are still risks including heightened competition due to fragmented industry structure, potential change in on-grid tariff and subsidies and weak power demand due to economic slowdown. However, the depressed valuations of the sector after sustained underperformance offer good value with long-term structural change in the industry, in our view. We rank the five major Hong Kong listed and A-share companies in the sector in the following order: Canvest Environmental Protection Group (1381 HK), China Conch Venture Holdings (586 HK), China Everbright Intl (257 HK), Zhejiang Weiming Environment (603568 CH), and China Everbright Greentech (1257 HK).What's Original?This Smartkarma Original takes a detailed look on the revised “Solid Waste Pollution Environmental Prevention and Treatment Law” and reads on the implications to the major listed waste treatment companies.  In addition to discussions on the revenue and profit drivers of the individual companies, we will also assess the outlook for improvement in returns, and compared the relative valuations of individual companies within the sector based on their P/B vs. ROE and PEG ratios.Since the waste treatment industry is highly fragmented, we analyse the possibility of consolidation as a potential way to improve sector return levels. Lastly, we will take this opportunity to introduce a leading A-share waste treatment company - Zhejiang Weiming Environment (603568 CH), which has recorded a marvelous share price performance - up 95% over the last three years and 28% YTD.

China Environment Sector Deep Dive: Solid Waste Treatment

Opportunities in the Environmental Sector 