HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a> continued to post good generation figures - up by 22.8% YoY in Apr, sustaining the encouraging track set in 1Q21 (+26.9%). Versus 4M19, the 4M21 generation growth was 26.6% higher, signaling that low base effect is not a reason for the good growth. After recording a 28.2% net profit growth for 1Q21, we believe Longyuan will be able to sustain its profit trend on the back of capacity addition and improvement in power demand.</p><p>We also see positive implications from the upcoming IPO of <a href="https://www.smartkarma.com/entities/china-three-gorges-renewables" target="_blank" data-smartkarma-citation="entities:28950:1" rel="noopener">China Three Gorges Renewables (600905 CH)</a> (CTGR) in the A-share market. CTGR is expected to be listed in early-Jun, and it is fetching valuations of 13.6x PER (weighted average) or 15.5x (fully-diluted) for FY21 based on its IPO price. With a smaller presence than Longyuan in wind power, lesser net profit and lower ROE, its IPO market cap is 4% higher than Longyuan and PERs are richer than Longyuan's 12.1x. In our view, these figures highlight that Longyuan's currently valuations are still undemanding.   </p><p>Please read this Insight together with <a href="https://www.smartkarma.com/insights/china-three-gorges-renewables-a-share-pre-ipo-initial-thoughts" target="_blank" data-smartkarma-citation="insights:38547" rel="noopener">China Three Gorges Renewables A-Share Pre-IPO: Initial Thoughts</a> and <a href="https://www.smartkarma.com/insights/china-three-gorges-renewables-600905-ch-a-share-ipo-set-for-late-may-and-thoughts-on-valuations" target="_blank" data-smartkarma-citation="insights:51199" rel="noopener">China Three Gorges Renewables (600905 CH) A-Share IPO: Set for Late-May and Thoughts on Valuations</a>.</p>

China Longyuan Power Group Corp (916 HK) continued to post good generation figures - up by 22.8% YoY in Apr, sustaining the encouraging track set in 1Q21 (+26.9%). Versus 4M19, the 4M21 generation growth was 26.6% higher, signaling that low base effect is not a reason for the good growth. After recording a 28.2% net profit growth for 1Q21, we believe Longyuan will be able to sustain its profit trend on the back of capacity addition and improvement in power demand.We also see positive implications from the upcoming IPO of China Three Gorges Renewables (600905 CH) (CTGR) in the A-share market. CTGR is expected to be listed in early-Jun, and it is fetching valuations of 13.6x PER (weighted average) or 15.5x (fully-diluted) for FY21 based on its IPO price. With a smaller presence than Longyuan in wind power, lesser net profit and lower ROE, its IPO market cap is 4% higher than Longyuan and PERs are richer than Longyuan's 12.1x. In our view, these figures highlight that Longyuan's currently valuations are still undemanding.   Please read this Insight together with China Three Gorges Renewables A-Share Pre-IPO: Initial Thoughts and China Three Gorges Renewables (600905 CH) A-Share IPO: Set for Late-May and Thoughts on Valuations.

China Longyuan (916 HK): Good Apr Generation and Implications of China Three Gorges Renewables IPO

Equity Capital Markets

China Three Gorges Renewables / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/china-three-gorges-renewables" target="_blank" data-smartkarma-citation="entities:28950:1" rel="noopener">China Three Gorges Renewables (600905 CH)</a> (CTGR) has just published on 7-May its initial IPO price of Rmb2.65, aiming to raise net proceeds of Rmb22.5bn, giving it a gigantic market cap of Rmb75.7bn. The IPO is expected to take place by end-May with trading commences in early-Jun. After posting a 26.4% YoY net profit growth for FY20, its 1Q21 net profit will still increase by 15.1-24.6% based on its guidance. In our view, this indicated sustained quality earnings stream at CTGR. </p><p>Our earnings projections suggested that CTGR will achieve a 3-year earnings growth of 22%, putting the IPO price at 13.6x (weighted average) and 15.5x (fully-diluted) for FY21. Relative to an average of 20.4x for its A-share peers, such multiples are undemanding. Moreover, its huge market cap should attract good institutional interests, as it will be the largest renewable (ex-hydro) play in China. For our views on the key positives and negatives on CTGR, please refer to <a href="https://www.smartkarma.com/insights/china-three-gorges-renewables-a-share-pre-ipo-initial-thoughts" target="_blank" data-smartkarma-citation="insights:38547" rel="noopener">China Three Gorges Renewables A-Share Pre-IPO: Initial Thoughts</a>. </p>

China Three Gorges Renewables (600905 CH) (CTGR) has just published on 7-May its initial IPO price of Rmb2.65, aiming to raise net proceeds of Rmb22.5bn, giving it a gigantic market cap of Rmb75.7bn. The IPO is expected to take place by end-May with trading commences in early-Jun. After posting a 26.4% YoY net profit growth for FY20, its 1Q21 net profit will still increase by 15.1-24.6% based on its guidance. In our view, this indicated sustained quality earnings stream at CTGR. Our earnings projections suggested that CTGR will achieve a 3-year earnings growth of 22%, putting the IPO price at 13.6x (weighted average) and 15.5x (fully-diluted) for FY21. Relative to an average of 20.4x for its A-share peers, such multiples are undemanding. Moreover, its huge market cap should attract good institutional interests, as it will be the largest renewable (ex-hydro) play in China. For our views on the key positives and negatives on CTGR, please refer to China Three Gorges Renewables A-Share Pre-IPO: Initial Thoughts. 

China Three Gorges Renewables (600905 CH) A-Share IPO: Set for Late-May and Thoughts on Valuations

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

EDP - Energias de Portugal SA / Event-Driven

<p>The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.</p><p>The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.</p><p>The largest buying impact in terms of ADV to trade will be on <a href="https://www.smartkarma.com/entities/edp-energias-de-portugal-sa" target="_blank" data-smartkarma-citation="entities:21362:1" rel="noopener">Edp - Energias De Portugal Sa (EDP PL)</a>, <a href="https://www.smartkarma.com/entities/sse-plc" target="_blank" data-smartkarma-citation="entities:22163:1" rel="noopener">SSE PLC (SSE LN)</a>, <a href="https://www.smartkarma.com/entities/northland-power-inc" target="_blank" data-smartkarma-citation="entities:25480:1" rel="noopener">Northland Power (NPI CN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas SA (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/meyer-burger-technology-ag" target="_blank" data-smartkarma-citation="entities:25013:1" rel="noopener">Meyer Burger Technology Ag (MBTN SW)</a> and <a href="https://www.smartkarma.com/entities/centrais-eletricas-br-sp-adr" target="_blank" data-smartkarma-citation="entities:28638:1" rel="noopener">Centrais Eletricas Br-Sp Adr (EBR US)</a>.</p><p>The largest selling impact will be on <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/cia-energetica-de-spon-adr" target="_blank" data-smartkarma-citation="entities:28644:1" rel="noopener">Cia Energetica De-Spon Adr (CIG US)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>.</p><p>Among the current index constituents, there will be buying on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a> and <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>.</p><p>We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.</p>

The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.The largest buying impact in terms of ADV to trade will be on Edp - Energias De Portugal Sa (EDP PL), SSE PLC (SSE LN), Northland Power (NPI CN), Enel Americas SA (ENIA US), Drax Group PLC (DRX LN), Meyer Burger Technology Ag (MBTN SW) and Centrais Eletricas Br-Sp Adr (EBR US).The largest selling impact will be on Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), Innergex Renewable Energy (INE CN), Cia Energetica De-Spon Adr (CIG US), Boralex Inc (BLX CN) and Scatec Solar ASA (SSO NO).Among the current index constituents, there will be buying on Orsted A/S (ORSTED DC) and Vestas Wind Systems A/S (VWS DC).We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Beijing Jingneng Clean Energy / Event-Driven

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<p>Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a>'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. </p>
<p>Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.</p>
<p>Jingneng's undisturbed price back in early July 2020 when a possible Offer was first <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0706/2020070602025.pdf" target="_blank" rel="noopener">floated</a>, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.</p>
<p>Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.</p>
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Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), Beijing Jingneng Clean Energy (579 HK)'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. 
Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.
Jingneng's undisturbed price back in early July 2020 when a possible Offer was first floated, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.
Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.






More below the fold.






Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br/> In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year, with a substantial share of them being SOEs. We review broader trends as well as select cases, and discuss our takeaways on how best to asses the credit profiles of Chinese issuers.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. <br/></p>

  In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year, with a substantial share of them being SOEs. We review broader trends as well as select cases, and discuss our takeaways on how best to asses the credit profiles of Chinese issuers.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - USD Bond Defaults In China - Lucror Analytics

China

GCL New Energy Holdings Ltd., through its subsidiaries, offers solar plant operation and maintenance. The Company also offers energy storage technology, micro-grid and intelligent integration capabilities.

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GCL New Energy Holdings (451 HK)

China Longyuan (916 HK): Good Apr Generation and Implications of China Three Gorges Renewables IPO

Apr stayed as a positive month for Longyuan with 22.8% generation growth. We also see CTGR's upcoming IPO to establish a good comparable and...

Osbert Tang, CFA

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

There are 52 additions to the S&P Global Clean Energy Index. One-way turnover is nearly 55% and the ETF benchmarked to the index will need to trade...

Brian Freitas

Beijing Jingneng (579 HK): This Is A Buy

If it does not go through, the downside should be limited. And current valuations are not demanding - 8.8x PER on an LTM basis. I would buy...

David Blennerhassett

Asia HY Monthly - USD Bond Defaults In China - Lucror Analytics

In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year,...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Longyuan (916 HK): Good Apr Generation and Implications of China Three Gorges Renewables IPO

Apr stayed as a positive month for Longyuan with 22.8% generation growth. We also see CTGR's upcoming IPO to establish a good comparable and...

Osbert Tang, CFA

China Three Gorges Renewables (600905 CH) A-Share IPO: Set for Late-May and Thoughts on Valuations

We think IPO multiples of CTGR are inexpensive relative to growth prospects and peer valuations. Its gigantic market cap of Rmb75.7bn (on IPO...

Osbert Tang, CFA

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

There are 52 additions to the S&P Global Clean Energy Index. One-way turnover is nearly 55% and the ETF benchmarked to the index will need to trade...

Brian Freitas

Beijing Jingneng (579 HK): This Is A Buy

If it does not go through, the downside should be limited. And current valuations are not demanding - 8.8x PER on an LTM basis. I would buy...

David Blennerhassett

Asia HY Monthly - USD Bond Defaults In China - Lucror Analytics

In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year,...

Lucror Analytics