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. 


<ul>
<li>Hong Kong Alpha portfolio gained 16.26% in January resulting in a 6.2% outperformance to its benchmark.  The portfolio has outperformed HK indexes by 48% to 63% since inception on 10/1/24.</li>
<li>Hong Kong Alpha has generated 50% of its return from alpha and has a Sharpe ratio of 1.79 since inception.  The portfolio's annualized mean excess return is 28%.</li>
<li>At the end of January, we reduced positions in the materials, communications, and conglomerate sectors and added positions in the food, energy, and manufacturing sectors.</li>
</ul>


Hong Kong Alpha portfolio gained 16.26% in January resulting in a 6.2% outperformance to its benchmark.  The portfolio has outperformed HK indexes by 48% to 63% since inception on 10/1/24.
Hong Kong Alpha has generated 50% of its return from alpha and has a Sharpe ratio of 1.79 since inception.  The portfolio's annualized mean excess return is 28%.
At the end of January, we reduced positions in the materials, communications, and conglomerate sectors and added positions in the food, energy, and manufacturing sectors.


HONG KONG ALPHA PORTFOLIO: (January 2026)

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)