Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

Hua Hong Semiconductor / Equity Bottom-Up

<ul>
<li>After hitting a low point in Q4 2023, Research on Hong Kong companies has been slow to pick up reflecting the ongoing skepticism from investors. </li>
<li>Reports on the large China tech companies dominated the top ten companies covered over the last couple of years and in the first half of 2024.</li>
<li>As China continues to dominate and make news in the global EV market, research in that sector has picked up.</li>
</ul>


After hitting a low point in Q4 2023, Research on Hong Kong companies has been slow to pick up reflecting the ongoing skepticism from investors. 
Reports on the large China tech companies dominated the top ten companies covered over the last couple of years and in the first half of 2024.
As China continues to dominate and make news in the global EV market, research in that sector has picked up.


BUY/SELL/HOLD: China/Hong Kong Stock Updates (July 8th)

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Canvest Environmental Protection Group / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/grandblue-environment-co-a" target="_blank" data-smartkarma-citation="entities:17887:1" rel="noopener">Grandblue Environment Co A (600323 CH)</a> disclosed a potential pre-conditional privatisation of <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> at HK$4.90 per share, a 20.7% premium to the last close price. </li>
<li>Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake. </li>
<li>While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk. </li>
</ul>



Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price. 
Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake. 
While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk. 


Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90

HK/China Equity Long-Short

Osbert Tang, CFA

China Everbright Environment / Equity Bottom-Up

<ul>
<li>Plunge in net profit, high gearing and slowdown in new projects are market concerns, but should have well reflected in its share price. Its 3.6x PER is just too cheap. </li>
<li>FY23 will see profit recovery, backed by decent project pipeline and lack of one-offs like impairment and exchange losses. Consensus forecast of 15% profit growth is too conservative.</li>
<li>Cash flow will improve over the next two years as collection of national subsidies accelerates, capex moderates and contribution from operating projects increases. </li>
</ul>


Plunge in net profit, high gearing and slowdown in new projects are market concerns, but should have well reflected in its share price. Its 3.6x PER is just too cheap. 
FY23 will see profit recovery, backed by decent project pipeline and lack of one-offs like impairment and exchange losses. Consensus forecast of 15% profit growth is too conservative.
Cash flow will improve over the next two years as collection of national subsidies accelerates, capex moderates and contribution from operating projects increases. 


China Everbright Environment (257 HK): The Dust Should Have Settled

<ul>
<li>
<a href="https://www.smartkarma.com/entities/moya-holdings-asia-ltd" target="_blank" data-smartkarma-citation="entities:2293:1" rel="noopener">Moya Holdings Asia (MHAL SP)</a> received a delisting proposal from Tamaris Infrastructure (a 72.84% shareholder) at S$0.092 per share, a 41.5% premium to the undisturbed price (8 September).</li>
<li>The key condition is shareholder approval. Gateway Partners, which holds a blocking stake, will likely use the offer as an opportunity to exit an underperforming investment.</li>
<li>The offer price is attractive. At the last close price, the gross and annualised spread for a year-end effective date is 3.4% and 11.5%, respectively.</li>
</ul>



Moya Holdings Asia (MHAL SP) received a delisting proposal from Tamaris Infrastructure (a 72.84% shareholder) at S$0.092 per share, a 41.5% premium to the undisturbed price (8 September).
The key condition is shareholder approval. Gateway Partners, which holds a blocking stake, will likely use the offer as an opportunity to exit an underperforming investment.
The offer price is attractive. At the last close price, the gross and annualised spread for a year-end effective date is 3.4% and 11.5%, respectively.


Canvest Environmental Protection Group / Equity Bottom-Up

<ul>
<li>The 25.6% increase in net profit for <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> in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.</li>
<li>Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.</li>
<li>Canvest's expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.</li>
</ul>


The 25.6% increase in net profit for Canvest Environmental Protection Group (1381 HK) in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.
Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.
Canvest's expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.


Canvest Env (1381 HK): Streaming Ahead Despite Tough Time

Hong Kong

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.

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China Everbright Environment (257 HK)

BUY/SELL/HOLD: China/Hong Kong Stock Updates (July 8th)

Tech NEV companies continue to dominate the research landscape for Hong Kong coverage. Bosideng, China Water Affairs, Topsports, BYD and Xiaomi...

David Mudd

Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90

While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. The key risk is the timing...

Arun George