HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

<ul>
<li>The fall in share price in the last five months have sent <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> back to very attractive level. The market has misread the strong 2Q23 result.</li>
<li>2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. </li>
<li>There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.</li>
</ul>


The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.


China Comm Const (1800 HK): Well Worth Revisiting

<ul>
<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> is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.</li>
<li>Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. </li>
<li>Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders'. </li>
</ul>



China Communications Construction (1800 HK) is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.
Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. 
Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders'. 


China Comm Const (1800 HK): We See More Stories Coming

<ul>
<li>There is a sharp escalation in business momentum 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> in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.</li>
<li>New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. </li>
<li>Local governments' special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC's contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.</li>
</ul>


There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
Local governments' special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC's contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.


China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

<ul>
<li>Asian buybacks, dominated by HK, China and Korea, are skyrocketing.  In H125, buybacks more than doubled from their full year 2024 levels in HK/China and increased 40% in Korea. </li>
<li>We screen companies repurchasing consistently, with total buyback of minimum $1bn and buyback over 2024-25 of at least 2% of present market cap, yielding companies in HK(11), Korea(6), Philippines(2), Singapore(1).</li>
<li>Top five repurchasers are Alibaba, Tencent, China Communication Construction, AIA, Netease. These, barring the third, are up more than 20% this year. Share price support from buybacks do seem solid.</li>
</ul>


Asian buybacks, dominated by HK, China and Korea, are skyrocketing.  In H125, buybacks more than doubled from their full year 2024 levels in HK/China and increased 40% in Korea. 
We screen companies repurchasing consistently, with total buyback of minimum $1bn and buyback over 2024-25 of at least 2% of present market cap, yielding companies in HK(11), Korea(6), Philippines(2), Singapore(1).
Top five repurchasers are Alibaba, Tencent, China Communication Construction, AIA, Netease. These, barring the third, are up more than 20% this year. Share price support from buybacks do seem solid.


Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Cosco Shipping Development / Event-Driven

<ul>
<li>AH spreads are slightly narrower, but performance is concentrated in fewer names and broad spread volatility is up. <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> now 5% through. CATL 10% through will help.</li>
<li>It feels like there were some concentrated shorts on H vs A. BYD performance on CATL and Hang Seng upweight/inclusion exacerbate the issue. CATL H less liquid than people think.</li>
<li>The data tables below update on a daily basis in the <a href="https://www.smartkarma.com/tools" target="_blank" rel="noopener">Tools</a> section of Smartkarma. The <strong><a href="https://www.smartkarma.com/tools/quiddity/south-flow-monitor" target="_blank" rel="noopener">SOUTHBOUND Flow Monitor</a></strong> and <strong><a href="https://www.smartkarma.com/tools/quiddity/ah-shares-monitor" target="_blank" rel="noopener">AH Monitor</a></strong> are both there free for SK readers.</li>
</ul>


AH spreads are slightly narrower, but performance is concentrated in fewer names and broad spread volatility is up. BYD (1211 HK) now 5% through. CATL 10% through will help.
It feels like there were some concentrated shorts on H vs A. BYD performance on CATL and Hang Seng upweight/inclusion exacerbate the issue. CATL H less liquid than people think.
The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers.


A/H Premium Tracker (To 23 May 2025):  AH Premia Contract, H Premia Names Perform Best; Batteries!

China

China Communications Construction Company Ltd. is a transportation infrastructure group.  The Company is involved in infrastructure construction, infrastructure design, dredging, and port machinery manufacturing.  China Communications has operations worldwide.

China Communications Construction (1800 HK)

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China Communications Construction (1800 HK)

China Comm Const (1800 HK): Well Worth Revisiting

CCCC has become very attractive due to an unjustified fall in share price. Recurring net profit surged 68.5% in 2Q23 and its contract outlook is...

Osbert Tang, CFA

China Comm Const (1800 HK): We See More Stories Coming

CCCC is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of...

Osbert Tang, CFA

China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

CCCC recorded a sharp 95.3% YoY growth in new contracts signed in 4Q22, finishing the year sharply ahead of its target. Its shares stay very...

Osbert Tang, CFA

A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!

AH Premia contract again. Interestingly, the best performing tranche of discount was stocks where Hs trade at a premium to As. BYD squeezed. CATL a...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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China Comm Const (1800 HK): Well Worth Revisiting

CCCC has become very attractive due to an unjustified fall in share price. Recurring net profit surged 68.5% in 2Q23 and its contract outlook is...

Osbert Tang, CFA

China Comm Const (1800 HK): We See More Stories Coming

CCCC is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of...

Osbert Tang, CFA

China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

CCCC recorded a sharp 95.3% YoY growth in new contracts signed in 4Q22, finishing the year sharply ahead of its target. Its shares stay very...

Osbert Tang, CFA

Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety

​Asian buybacks, led by HK, CN, KR, are surging. Buybacks more than doubled in H125 relative to full year 24 levels. Top consistent repurchasers:...

Manishi Raychaudhuri

A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!

AH Premia contract again. Interestingly, the best performing tranche of discount was stocks where Hs trade at a premium to As. BYD squeezed. CATL a...

Travis Lundy

Asian buybacks, led by HK, CN, KR, are surging. Buybacks more than doubled in H125 relative to full year 24 levels. Top consistent repurchasers:...