HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>'s marginal 3.8% drop in 1H FY25 net profit, it has rebounded from a 25.8% collapse in FY24. It maintained an interim DPS of HK$0.15.</li>
<li>Dollar margin expanded Rmb0.02/cu.m. and gross margin was up 0.8pp. Profit from value-added services grew 15.4%, though overall earnings are dragged by LPG and JVs.</li>
<li>FY25 is a year of profit recovery. Its improving cash flow, reduction in capex, and stronger balance sheet should support a stable dividend, putting it on a 7.8% yield.  </li>
</ul>


Despite China Gas Holdings (384 HK)'s marginal 3.8% drop in 1H FY25 net profit, it has rebounded from a 25.8% collapse in FY24. It maintained an interim DPS of HK$0.15.
Dollar margin expanded Rmb0.02/cu.m. and gross margin was up 0.8pp. Profit from value-added services grew 15.4%, though overall earnings are dragged by LPG and JVs.
FY25 is a year of profit recovery. Its improving cash flow, reduction in capex, and stronger balance sheet should support a stable dividend, putting it on a 7.8% yield.  


China Gas Holdings (384 HK): Earnings Have Stabilised

<ul>
<li>The spin-off of the value-added business (VAS) of <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> may add HK$0.22-0.83/share to the stock price, or 3.4-12.8%, based on our initial assessment.</li>
<li>VAS generated an operating profit of HK$1.58bn in FY24, up by 5.7% YoY. It is significant to China Gas as this accounted for 23.5% of its total segment profit.</li>
<li>The share price has not reacted much to the news because weak Chinese equity market and uncertainties on the upcoming 1H FY25 result. Once cleared, we see good upside.</li>
</ul>


The spin-off of the value-added business (VAS) of China Gas Holdings (384 HK) may add HK$0.22-0.83/share to the stock price, or 3.4-12.8%, based on our initial assessment.
VAS generated an operating profit of HK$1.58bn in FY24, up by 5.7% YoY. It is significant to China Gas as this accounted for 23.5% of its total segment profit.
The share price has not reacted much to the news because weak Chinese equity market and uncertainties on the upcoming 1H FY25 result. Once cleared, we see good upside.


China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> and <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> all-scrip merger is set at an exchange ratio of 0.62x. </li>
<li>The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds. </li>
<li>The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip. </li>
</ul>



Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x. 
The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds. 
The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip. 


Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal

<ul>
<li>On 6 September, <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> and <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> entered a legally binding agreement to merge through absorption and share exchange. </li>
<li>The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.</li>
<li>In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.</li>
</ul>


On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange. 
The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.


Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>'s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. </li>
<li>FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.</li>
<li>China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. </li>
</ul>



China Gas Holdings (384 HK)'s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. 
FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.
China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. 


China Gas Holdings (384 HK): Still Warrants a Look

Hong Kong

China Resources Gas Group Limited is an investment holding company primarily engaged in the sale and distribution of natural and liquefied gas, and the construction and connection of gas pipelines. The company also offers comprehensive services including the sale of gas appliances and related products, and provides design, construction, consultancy, and management services for gas connection projects, as well as operating gas stations. It was incorporated in 1994 and is based in Wan Chai, Hong Kong.

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China Resources Gas (1193 HK)

China Gas Holdings (384 HK): Earnings Have Stabilised

China Gas saw a slight dip in 1H FY25 profit but is rebounding from the sharp drop in FY24. Improved margins, profit from VAS, and a stronger...

Osbert Tang, CFA

China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Osbert Tang, CFA

Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal

The share exchange ratio is attractive. Regulatory approvals are a formality. The GJTA/Haitong shareholder vote is low risk. Timing is the key risk.

Arun George

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

Arun George

China Gas Holdings (384 HK): Still Warrants a Look

Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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China Gas Holdings (384 HK): Earnings Have Stabilised

​China Gas saw a slight dip in 1H FY25 profit but is rebounding from the sharp drop in FY24. Improved margins, profit from VAS, and a stronger...

Osbert Tang, CFA

China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

​China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Osbert Tang, CFA

Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal

The share exchange ratio is attractive. Regulatory approvals are a formality. The GJTA/Haitong shareholder vote is low risk. Timing is the key risk.

Arun George

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

Arun George

China Gas Holdings (384 HK): Still Warrants a Look

​Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...

Osbert Tang, CFA

China Gas saw a slight dip in 1H FY25 profit but is rebounding from the sharp drop in FY24. Improved margins, profit from VAS, and a stronger...

China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...