Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener"><strong>ENN Energy (2688 HK)</strong></a>, a major clean energy distributor based in China, is currently suspended pursuant to the Takeovers Code</li>
<li>The largest shareholder is ENN Group (34.28% of shares out), an entity controlled by founder Wang Yusuo and his wife, Zhao Baoju. </li>
<li>ENN Energy is a US$8.5bn market cap company. It's <em>possible</em> ENN Group make an Offer. But more likely, I'd expect an Offer from a (larger) third party.</li>
</ul>



ENN Energy (2688 HK), a major clean energy distributor based in China, is currently suspended pursuant to the Takeovers Code
The largest shareholder is ENN Group (34.28% of shares out), an entity controlled by founder Wang Yusuo and his wife, Zhao Baoju. 
ENN Energy is a US$8.5bn market cap company. It's possible ENN Group make an Offer. But more likely, I'd expect an Offer from a (larger) third party.


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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> announced a pre-conditional privatisation from <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>/ENN-NG comprising HK$24.50 cash per share + 2.9427 ENN-NG H Shares per ENN share.</li>
<li>The appraised offer value is HK$80.00 (HK$82.35, including the 2024 dividend), which is a tad optimistic. My calculations suggest a realistic offer value range of HK$71.47-76.32. </li>
<li>The offer is final. The precondition satisfaction is low-risk. A high AGM minority participation is a risk, but the scheme vote should pass as the offer terms are reasonable.   </li>
</ul>



ENN Energy (2688 HK) announced a pre-conditional privatisation from ENN Natural Gas (600803 CH)/ENN-NG comprising HK$24.50 cash per share + 2.9427 ENN-NG H Shares per ENN share.
The appraised offer value is HK$80.00 (HK$82.35, including the 2024 dividend), which is a tad optimistic. My calculations suggest a realistic offer value range of HK$71.47-76.32. 
The offer is final. The precondition satisfaction is low-risk. A high AGM minority participation is a risk, but the scheme vote should pass as the offer terms are reasonable.   


ENN Energy (2688 HK): ENN Natural Gas’ Preconditional Cash/Scrip Offer

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The proposed privatisation price for <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> appears reasonable, which is estimated to be 1.73x P/B and 11.5x PER on a 12-month forward basis. </li>
<li>The valuations are both at a good premium over the average since 2024. ENN Energy is also being put at the top of the sector's PER range. </li>
<li>Scheme shareholders will hold new H-shares of <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>, which historically has a more volatile earnings record, but its A-share has been doing well. </li>
</ul>


The proposed privatisation price for ENN Energy (2688 HK) appears reasonable, which is estimated to be 1.73x P/B and 11.5x PER on a 12-month forward basis. 
The valuations are both at a good premium over the average since 2024. ENN Energy is also being put at the top of the sector's PER range. 
Scheme shareholders will hold new H-shares of ENN Natural Gas (600803 CH), which historically has a more volatile earnings record, but its A-share has been doing well. 


ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a>'s net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. It is encouraging to see the dividend payout ratio increase by 2pp YoY.</li>
<li>An increase in the adoption of the residential price linkage system is positive for the dollar margin, while the distortion from E&amp;P expiry will no longer impact earnings. </li>
<li>With net cash equals HK$2.56/share, or 31% of the share price, such financial strength is unmatched by peers. Its PER valuations are also inexpensive.</li>
</ul>



Kunlun Energy (135 HK)'s net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. It is encouraging to see the dividend payout ratio increase by 2pp YoY.
An increase in the adoption of the residential price linkage system is positive for the dollar margin, while the distortion from E&amp;P expiry will no longer impact earnings. 
With net cash equals HK$2.56/share, or 31% of the share price, such financial strength is unmatched by peers. Its PER valuations are also inexpensive.


Kunlun Energy (135 HK): Remains Very Decent

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> has suspended trading. The possibilities include privatisation, third-party offer, increase in stake by <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>, and a change in control. </li>
<li>It trades on 1.16x 12-month forward P/B, vs. 5-year average of 2.42x and 1.31x since 2024. Given the lower forward ROE, it is difficult to return to the 5-year average.</li>
<li>For PER, it should be higher than <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> but lower than <a href="https://www.smartkarma.com/entities/china-resources-gas-group-ltd" target="_blank" data-smartkarma-citation="entities:20525:1" rel="noopener">CR Gas (1193 HK)</a>. At 10.8x (average of the two), it equates to HK$74.26.  </li>
</ul>



ENN Energy (2688 HK) has suspended trading. The possibilities include privatisation, third-party offer, increase in stake by ENN Natural Gas (600803 CH), and a change in control. 
It trades on 1.16x 12-month forward P/B, vs. 5-year average of 2.42x and 1.31x since 2024. Given the lower forward ROE, it is difficult to return to the 5-year average.
For PER, it should be higher than China Gas Holdings (384 HK) but lower than CR Gas (1193 HK). At 10.8x (average of the two), it equates to HK$74.26.  


ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

Hong Kong

China Resources Gas Group Ltd distributes natural gas and petroleum gas in the cities of Chengdu, Fuyang, Huaibei, Linhai, Suzhou and Wuxi in the PRC. The Company also operates compressed natural gas filling stations in Chengdu, Nanjing and Wuxi. The group also is involved in bottled liquefied petroleum gas distribution in cities of Fuyang, Suzhou and Wuxi.

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CR Gas (1193 HK)

ENN Energy (2688 HK): Third Party Offer?

My initial takeaway is that this not is the Offer investors are seeking. Yes - the headline Offer consideration of $80/share is fair. However,...

David Blennerhassett

ENN Energy (2688 HK): ENN Natural Gas’ Preconditional Cash/Scrip Offer

There is valuation uncertainty on the yet-to-be-listed ENN-NG H shares. While the appraised value is a tad optimistic, the terms are reasonable....

Arun George

ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Osbert Tang, CFA

Kunlun Energy (135 HK): Remains Very Decent

Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Osbert Tang, CFA

ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ENN Energy (2688 HK): Third Party Offer?

My initial takeaway is that this not is the Offer investors are seeking. Yes - the headline Offer consideration of $80/share is fair. However,...

David Blennerhassett

ENN Energy (2688 HK): ENN Natural Gas’ Preconditional Cash/Scrip Offer

There is valuation uncertainty on the yet-to-be-listed ENN-NG H shares. While the appraised value is a tad optimistic, the terms are reasonable....

Arun George

ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

​The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Osbert Tang, CFA

Kunlun Energy (135 HK): Remains Very Decent

​Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Osbert Tang, CFA

ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

​Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...

Osbert Tang, CFA

The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...