HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/space-exploration-technologies-corp-spacex" target="_blank" data-smartkarma-citation="entities:33284:1" rel="noopener">SpaceX (SPCX US)</a> has filed its S-1 prospectus, with the IPO targeting to be on 12 Jun. There are several Hong Kong and mainland Chinese listed companies that may benefit. </li>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-top-numerical-control-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:45697:1" rel="noopener">Shanghai Top Numerical Control (7688 HK)</a>, <a href="https://www.smartkarma.com/entities/tongyu-communication-inc" target="_blank" data-smartkarma-citation="entities:25352:1" rel="noopener">Tongyu Communication (002792 CH)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-sunway-communicatin-co-ltd" target="_blank" data-smartkarma-citation="entities:13458:1" rel="noopener">Shenzhen Sunway (300136 CH)</a>, and <a href="https://www.smartkarma.com/entities/chongqing-zaisheng-technology" target="_blank" data-smartkarma-citation="entities:25126:1" rel="noopener">Chongqing Zaisheng Technology (603601 CH)</a> are more direct.</li>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-co-ltd-class-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology (2357 HK)</a> and <a href="https://www.smartkarma.com/entities/apt-satellite-holdings-limited" target="_blank" data-smartkarma-citation="entities:12240:1" rel="noopener">APT Satellite (1045 HK)</a> may gain from the spillover effects of the SpaceX IPO.</li>
</ul>



SpaceX (SPCX US) has filed its S-1 prospectus, with the IPO targeting to be on 12 Jun. There are several Hong Kong and mainland Chinese listed companies that may benefit. 

Shanghai Top Numerical Control (7688 HK), Tongyu Communication (002792 CH), Shenzhen Sunway (300136 CH), and Chongqing Zaisheng Technology (603601 CH) are more direct.

AviChina Industry &amp; Technology (2357 HK) and APT Satellite (1045 HK) may gain from the spillover effects of the SpaceX IPO.


China Strategy: Some Main Beneficiaries of SpaceX Listing

<ul>
<li>As Rmb moved from appreciation in 1Q23 to depreciation in 2Q23, there is a total change in the beneficiaries discussed in <a href="https://www.smartkarma.com/insights/china-strategy-it-is-the-foreign-exchange-impact-stupid" target="_blank" data-smartkarma-citation="insights:99729" rel="noopener">China Strategy: It Is the Foreign Exchange Impact, Stupid!</a> </li>
<li>The new beneficiaries are <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric Holdings (3899 HK)</a>, <a href="https://www.smartkarma.com/entities/china-energy-engineering-group" target="_blank" data-smartkarma-citation="entities:21017:1" rel="noopener">China Energy Engineering (3996 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> and <a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric Holdings (3899 HK)</a> generated 20.2% of FY22 earnings from exchange gain as Rmb depreciated. Revenue from outside China rose 10% in 1H23 and accounted for 54.4% of total.  </li>
</ul>


As Rmb moved from appreciation in 1Q23 to depreciation in 2Q23, there is a total change in the beneficiaries discussed in China Strategy: It Is the Foreign Exchange Impact, Stupid! 
The new beneficiaries are CIMC Enric Holdings (3899 HK), China Energy Engineering (3996 HK), China Communications Construction (1800 HK), Sinotrans (598 HK) and AviChina Industry &amp; Technology H (2357 HK). 

CIMC Enric Holdings (3899 HK) generated 20.2% of FY22 earnings from exchange gain as Rmb depreciated. Revenue from outside China rose 10% in 1H23 and accounted for 54.4% of total.  


China Strategy: The RMB Reversal Is Just Too Fast!

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

AviChina Industry & Technology / Event-Driven

<ul>
<li>The fundamentals for <a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology (2357 HK)</a>, a PRC aviation/defense play, are undemanding. Its sanctioned status does not help.</li>
<li>Preceding my comments on AviChina - and <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> - are the current setup/unwind tables for Asia-Pacific Holdcos.</li>
<li>These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.</li>
</ul>


The fundamentals for AviChina Industry &amp; Technology (2357 HK), a PRC aviation/defense play, are undemanding. Its sanctioned status does not help.
Preceding my comments on AviChina - and Shenzhen International (152 HK) - are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.


<ul>
<li>China's defence industry is poised to be another major focus going forward. Many stocks have corrected by 3-20% from their recent peaks, presenting interesting opportunities. </li>
<li>Most of them are A-share stocks, with business ranging from fighter manufacturing to optical system development to aircraft engine research and production.</li>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> is the best play, given its Hong Kong listing, undemanding FY25 PER of 13.5x and 56% discount to holdings in A-share subsidiaries.</li>
</ul>


China's defence industry is poised to be another major focus going forward. Many stocks have corrected by 3-20% from their recent peaks, presenting interesting opportunities. 
Most of them are A-share stocks, with business ranging from fighter manufacturing to optical system development to aircraft engine research and production.

AviChina Industry &amp; Technology H (2357 HK) is the best play, given its Hong Kong listing, undemanding FY25 PER of 13.5x and 56% discount to holdings in A-share subsidiaries.


China Strategy: The Rise of China's Defence Industry

<ul>
<li>Down 18% in the past month, fundamentals for <a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a>, one of China's leading aviation/defense plays, still appear demanding.</li>
<li>Preceding my comments on AviChina are the current setup/unwind tables for Asia-Pacific Holdcos.</li>
<li>These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.</li>
</ul>


Down 18% in the past month, fundamentals for AviChina Industry &amp; Technology H (2357 HK), one of China's leading aviation/defense plays, still appear demanding.
Preceding my comments on AviChina are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.


StubWorld: AviChina (2357 HK) Coming Up "Cheap"

China

AviChina Industry & Technology Co., Ltd. engages in the research, development, manufacture, and sale of civil aviation products. The company operates through segments including Aviation Entire Aircraft, Aviation Ancillary System and Related Business, and Aviation Engineering Services, offering products such as helicopters, trainer aircraft, regional jets, and aero-parts. It was founded on April 30, 2003, and is headquartered in Beijing, China.

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AviChina Industry & Technology (2357 HK)

China Strategy: Some Main Beneficiaries of SpaceX Listing

SpaceX filed its IPO prospectus, benefiting HK and China-listed companies like Shanghai Top Numerical Control, Tongyu, Shenzhen Sunway, and...

Osbert Tang, CFA

China Strategy: The RMB Reversal Is Just Too Fast!

Trump's presidency is expected to escalate the trade war and increase the possibility of a higher USD rate. That said, the Rmb will be under...

Osbert Tang, CFA

StubWorld: AviChina (2357 HK) Is Cheap

At 6.1x forward EV/EBITDA - and ~80% discount to NAV - AviChina Industry & Technology (2357 HK) is not expensive. AviChina is a company to buy and...

David Blennerhassett

China Strategy: The Rise of China's Defence Industry

China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...

Osbert Tang, CFA

StubWorld: AviChina (2357 HK) Coming Up "Cheap"

Ongoing geopolitical tensions tend to lead to increased defense spending. All told, there should be trickle down benefits to AviChina. I like...

David Blennerhassett

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Strategy: Some Main Beneficiaries of SpaceX Listing

​SpaceX filed its IPO prospectus, benefiting HK and China-listed companies like Shanghai Top Numerical Control, Tongyu, Shenzhen Sunway, and...

Osbert Tang, CFA

China Strategy: The RMB Reversal Is Just Too Fast!

Trump's presidency is expected to escalate the trade war and increase the possibility of a higher USD rate. That said, the Rmb will be under...

Osbert Tang, CFA

StubWorld: AviChina (2357 HK) Is Cheap

At 6.1x forward EV/EBITDA - and ~80% discount to NAV - AviChina Industry & Technology (2357 HK) is not expensive. AviChina is a company to buy and...

David Blennerhassett

China Strategy: The Rise of China's Defence Industry

​China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...

Osbert Tang, CFA

StubWorld: AviChina (2357 HK) Coming Up "Cheap"

Ongoing geopolitical tensions tend to lead to increased defense spending. All told, there should be trickle down benefits to AviChina. I like...

David Blennerhassett

SpaceX filed its IPO prospectus, benefiting HK and China-listed companies like Shanghai Top Numerical Control, Tongyu, Shenzhen Sunway, and...

China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...