HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<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> posted a 43.6% YoY growth in net profit for FY21, which is ahead of peers like <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> and <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>. </li>
<li>While 2H21 gas sales segment is weaker, the contraction of dollar margin for Kunlun is light at 3.8% YoY. The other gas utilities companies are seeing 12-15% decline.</li>
<li>Its net cash reached Rmb3.3bn at end-FY21, and number of new city gas projects reached 17 in 2H21, vs. 13 only in 1H21, indicating good pick-up in momentum. </li>
</ul>



Kunlun Energy (135 HK) posted a 43.6% YoY growth in net profit for FY21, which is ahead of peers like ENN Energy (2688 HK) and CR Gas (1193 HK). 
While 2H21 gas sales segment is weaker, the contraction of dollar margin for Kunlun is light at 3.8% YoY. The other gas utilities companies are seeing 12-15% decline.
Its net cash reached Rmb3.3bn at end-FY21, and number of new city gas projects reached 17 in 2H21, vs. 13 only in 1H21, indicating good pick-up in momentum. 


Kunlun Energy (135 HK): Better FY21 than Peers

<ul>
<li>Core earnings growth of 14.6% YoY at <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> is not very exciting. Gas sales gross profit was down 5% while integrated energy looks better with 51.2% growth.</li>
<li>Management guidance of 12-15% growth in FY22 seems to be optimistic, especially in a period of time where high input cost is likely to eat into margin still.</li>
<li>Valuations are not too stretched, yet not very appealing. Its net debt position also does not compare well with <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> and <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>. </li>
</ul>


Core earnings growth of 14.6% YoY at ENN Energy (2688 HK) is not very exciting. Gas sales gross profit was down 5% while integrated energy looks better with 51.2% growth.
Management guidance of 12-15% growth in FY22 seems to be optimistic, especially in a period of time where high input cost is likely to eat into margin still.
Valuations are not too stretched, yet not very appealing. Its net debt position also does not compare well with CR Gas (1193 HK) and Kunlun Energy (135 HK). 


ENN Energy (2688 HK): Mediocre FY21, Management Update Not Exciting

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>China Utilities stocks are lightly held, underweight and underowned in active China portfolios.  However, recent fund activity shows an turnaround in sentiment is playing out.</li>
<li>For MSCI China, China A-Share and Greater China funds it was among the top beneficiaries of recent manager rebalancing across domestic sectors.</li>
<li>As investors look for sectors that are insulated from further regulation or red-tape, China &amp; HK Utilities stocks are back on the radar.</li>
</ul>


China Utilities stocks are lightly held, underweight and underowned in active China portfolios.  However, recent fund activity shows an turnaround in sentiment is playing out.
For MSCI China, China A-Share and Greater China funds it was among the top beneficiaries of recent manager rebalancing across domestic sectors.
As investors look for sectors that are insulated from further regulation or red-tape, China &amp; HK Utilities stocks are back on the radar.


China & HK Utilities: Safehaven Comes in to Play

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

AirPower Technologies / Equity Capital Markets

<ul>
<li>AirPower Technologies (1679085D HK) is looking to raise US$1bn in its upcoming Hong Kong IPO.</li>
<li>Airpower Technologies is an industrial gases solution provider with a nationwide footprint in China. </li>
<li>In this note, we will talk about the company's past performance.</li>
</ul>


AirPower Technologies (1679085D HK) is looking to raise US$1bn in its upcoming Hong Kong IPO.
Airpower Technologies is an industrial gases solution provider with a nationwide footprint in China. 
In this note, we will talk about the company's past performance.


Airpower Technologies Pre-IPO - Steady Topline Growth but Lacks Pricing Power

<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> posted weak 1H FY22 result with a 18.6% contraction in core profit, driven primarily by lower new connections and weaker dollar margin for gas sales. </li>
<li>Full-Year guidance on new connections has revised to 3m (vs. 5m) and dollar margin will further contract by HK$0.04-0.06/cu.m. in 2H FY22. Progress on LPG Smart MicroGrid has slowed. </li>
<li>The Shiyan gas explosion looks to have a more long-lasting effect than expected. Also, the need to divert management attention to safety enforcement also weighed on China Gas.</li>
</ul>



China Gas Holdings (384 HK) posted weak 1H FY22 result with a 18.6% contraction in core profit, driven primarily by lower new connections and weaker dollar margin for gas sales. 
Full-Year guidance on new connections has revised to 3m (vs. 5m) and dollar margin will further contract by HK$0.04-0.06/cu.m. in 2H FY22. Progress on LPG Smart MicroGrid has slowed. 
The Shiyan gas explosion looks to have a more long-lasting effect than expected. Also, the need to divert management attention to safety enforcement also weighed on China Gas.


China Gas Holdings (384 HK): Post-Result Call Takeaways, Looks like Not yet Reached the Bottom

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)

Kunlun Energy (135 HK): Better FY21 than Peers

Kunlun has a milder pressue on dollar margin than its peers and the LNG Processing and Terminal segment has provided us some nice surprises. Net...

Osbert Tang, CFA

ENN Energy (2688 HK): Mediocre FY21, Management Update Not Exciting

ENN Energy's FY21 result is not particularly encouraging and we also found management's update on the post-result call not very exciting....

Osbert Tang, CFA

China & HK Utilities: Safehaven Comes in to Play

China Utilities stocks are lightly held, underweight and underowned in active China portfolios. However, recent fund activity shows an turnaround...

Steven Holden

Airpower Technologies Pre-IPO - Steady Topline Growth but Lacks Pricing Power

AirPower Technologies (1679085D HK) is looking to raise US$1bn in its upcoming Hong Kong IPO. In this note, we look at the company's past performance.

Sumeet Singh

China Gas Holdings (384 HK): Post-Result Call Takeaways, Looks like Not yet Reached the Bottom

Weaker-than-expected result for 1H FY22 is negative and management turned more cautious on outlook for 2H FY22, pointing to lower new connections...

Osbert Tang, CFA

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