HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

China Communications Construction (1800 HK)

<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> (CCCC) is definitely one of the worst performing infrastructure-related stocks this year, with 30.2% collapse in its share price YTD. In our view, this should have significantly reflected the concerns on the weak 1H20 result (-37.2% YoY), surge in credit impairment, tight financial position and potential US sanctions. In the post-1H20 result investor call, however, management has already suggested that its profitability should see sequential improvement in 2H20. At 4.2x PER and 0.26x P/B on 12-month forward basis, valuations are clearly inexpensive, but there is likely continue pressure on share price in the near term as the market digests negative news. However, we are positive on its prospects with the resumption of toll collection, acceleration of project construction and lower credit impairment. A successful issuance of REIT on its underlying toll road assets will kick-start a re-rating with a narrower discount to book value, in our view.

China Communications Construction (1800 HK) (CCCC) is definitely one of the worst performing infrastructure-related stocks this year, with 30.2% collapse in its share price YTD. In our view, this should have significantly reflected the concerns on the weak 1H20 result (-37.2% YoY), surge in credit impairment, tight financial position and potential US sanctions. In the post-1H20 result investor call, however, management has already suggested that its profitability should see sequential improvement in 2H20. At 4.2x PER and 0.26x P/B on 12-month forward basis, valuations are clearly inexpensive, but there is likely continue pressure on share price in the near term as the market digests negative news. However, we are positive on its prospects with the resumption of toll collection, acceleration of project construction and lower credit impairment. A successful issuance of REIT on its underlying toll road assets will kick-start a re-rating with a narrower discount to book value, in our view.

China Comm Const (1800 HK): Key Takeaways from Post-1H20 Result Investor Call

We believe the valuations of <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> - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored in concerns including tight cash flow, high gearing, heavy investments and risk of overseas projects. In fact, such valuation multiples are almost at 2 SD below the average in the last five years, and we see further downside limited.In our view, there are a number of drivers that can support a re-rating of the stock over the next 12 months: 1.) infrastructure spending and new project momentum, 2.) beneficiary of government's infrastructure REIT program, 3.) resumption of toll road collection and profit recovery in 2H20, and 4.) share buyback.

We believe the valuations of China Communications Construction (1800 HK) - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored in concerns including tight cash flow, high gearing, heavy investments and risk of overseas projects. In fact, such valuation multiples are almost at 2 SD below the average in the last five years, and we see further downside limited.In our view, there are a number of drivers that can support a re-rating of the stock over the next 12 months: 1.) infrastructure spending and new project momentum, 2.) beneficiary of government's infrastructure REIT program, 3.) resumption of toll road collection and profit recovery in 2H20, and 4.) share buyback.

China Comm Const (1800 HK): Every Dog Has Its Day

China

China Communications Construction Company Limited offers transportation infrastructure construction services. The Company constructs ports, waterways, highways, bridges, and other infrastructures. China Communications Construction also operates real estate development.

China Communications Construct (601800 CH)

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China Communications Construct (601800 CH)

China Comm Const (1800 HK): Key Takeaways from Post-1H20 Result Investor Call

China Communications Construction (1800 HK) is definitely one of the worst pe

Osbert Tang, CFA

China Comm Const (1800 HK): Every Dog Has Its Day

We believe the valuations of China Communications Construction (1800 HK) - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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