HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-limited" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>'s 1H26 results demonstrated that, even without <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>'s privatisation, its fundamentals remain solid. </li>
<li>Its gross margin decline has stabilised; with cost control initiatives, the FY26 earnings will stay healthy. Upside will come from improvement in the IE and smart home segments.</li>
<li>At 7.6x PER for FY26 and FY27, it is among the cheapest in the HSI and the gas utilities sector. Its P/B is now over 1SD below average. </li>
</ul>



ENN Energy (2688 HK)'s 1H26 results demonstrated that, even without ENN Natural Gas (600803 CH)'s privatisation, its fundamentals remain solid. 
Its gross margin decline has stabilised; with cost control initiatives, the FY26 earnings will stay healthy. Upside will come from improvement in the IE and smart home segments.
At 7.6x PER for FY26 and FY27, it is among the cheapest in the HSI and the gas utilities sector. Its P/B is now over 1SD below average. 


ENN Energy (2688 HK): Things Are Not That Bad Without the Privatisation

<ul>
<li>The privatisation proposal for <a href="https://www.smartkarma.com/entities/enn-energy-holdings-limited" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> has lapsed with the parties not extending the Long Stop Date. Hence, the focus will return to fundamentals. </li>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-limited" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> has underperformed the gas utility peers lately, and we do not expect a significant negative reaction. Instead, the removal of overhang should be positive. </li>
<li>It is now the cheapest one in the sector, trading on 7.5x FY26 PER. Its P/B of 0.92x is also the lowest in the last five years.</li>
</ul>


The privatisation proposal for ENN Energy (2688 HK) has lapsed with the parties not extending the Long Stop Date. Hence, the focus will return to fundamentals. 

ENN Energy (2688 HK) has underperformed the gas utility peers lately, and we do not expect a significant negative reaction. Instead, the removal of overhang should be positive. 
It is now the cheapest one in the sector, trading on 7.5x FY26 PER. Its P/B of 0.92x is also the lowest in the last five years.


ENN Energy (2688 HK): No Privatisation Now, Then What?

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>HK Alpha portfolio gained 2.22% in September, outperforming its benchmark by 5.36%. Since inception, the portfolio has outperformed HK indexes by 66% to 93%. HK ALPHA is up 14.35% YTD.</li>
<li>The Sharpe ratio stands at 1.22, compared with a benchmark of 0.56 since inception. This higher Sharpe ratio is driven by excess alpha, which represents more than 50% of returns.</li>
<li>The portfolio gained in the healthcare and energy sectors in August, while exposure to materials and communication services dragged on performance.</li>
</ul>


HK Alpha portfolio gained 2.22% in September, outperforming its benchmark by 5.36%. Since inception, the portfolio has outperformed HK indexes by 66% to 93%. HK ALPHA is up 14.35% YTD.
The Sharpe ratio stands at 1.22, compared with a benchmark of 0.56 since inception. This higher Sharpe ratio is driven by excess alpha, which represents more than 50% of returns.
The portfolio gained in the healthcare and energy sectors in August, while exposure to materials and communication services dragged on performance.


HONG KONG ALPHA PORTFOLIO: (September 2026)

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>We've now cleared the one-year mark since <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> first announced a cash/scrip Offer from controlling shareholder <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).</li>
<li>Apart from the ambiguity surrounding the value to be assigned to the scrip into newly-listed ENN-NG H-shares; CSRC, the listing watchdog, has yet to sign off. This should be forthcoming.</li>
<li>By my calcs, I see at least 30% upside to ENN Energy's shares here. The market is implying an unreasonable 67% discount for ENN NG's Hs vs. the As. </li>
</ul>


We've now cleared the one-year mark since ENN Energy (2688 HK) first announced a cash/scrip Offer from controlling shareholder ENN Natural Gas (600803 CH) (ENN NG).
Apart from the ambiguity surrounding the value to be assigned to the scrip into newly-listed ENN-NG H-shares; CSRC, the listing watchdog, has yet to sign off. This should be forthcoming.
By my calcs, I see at least 30% upside to ENN Energy's shares here. The market is implying an unreasonable 67% discount for ENN NG's Hs vs. the As. 


Smartkarma AI Primers, Smartkarma

αSK Primers

Smartkarma AI Primers

Smartkarma

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Research Reinvented

<ul>
 <li>
<a href="https://smartkarma.com/entities/enn-energy-holdings-limited">ENN Energy</a> is a leading clean energy distributor in China, with a primary focus on natural gas distribution and a growing integrated energy business.</li>
 <li>The company benefits from China's supportive policies for cleaner energy but faces challenges from slowing economic growth and regulatory uncertainties.</li>
 <li>Valuation appears attractive relative to peers, but the stock has underperformed, reflecting investor concerns about near-term growth prospects and the impact of a lapsed privatization proposal.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  
ENN Energy is a leading clean energy distributor in China, with a primary focus on natural gas distribution and a growing integrated energy business.
  The company benefits from China's supportive policies for cleaner energy but faces challenges from slowing economic growth and regulatory uncertainties.
  Valuation appears attractive relative to peers, but the stock has underperformed, reflecting investor concerns about near-term growth prospects and the impact of a lapsed privatization proposal.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

China

ENN Energy is a major clean energy distributor in China, primarily engaged in the investment, construction, operation, and management of gas pipeline infrastructure, as well as the sales and distribution of piped gas, liquefied natural gas (LNG), and other multi-energy products. The company also provides low-carbon integrated energy solutions and smart home services. It was founded in 1992 and is headquartered in Langfang, China.

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ENN Energy (2688 HK)