HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/h-world-group-ltd" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Group (1179 HK)</a> has been over-penalised by market weakness as its share price was off 16.8% YTD. It turned around in 3Q23 and guidance for 4Q23 is solid.</li>
<li>Surge in operating and adjusted EBITDA margins indicated high operating leverage. Occupancy has not returned to 2019 level, but there will be more margin expansion when this happens.</li>
<li>55% of rooms in China are of economy type, and 82% are in tier-2 and below cities. Such characteristics allow it to benefit from the prevailing consumption downgrade. </li>
</ul>



H World Group (1179 HK) has been over-penalised by market weakness as its share price was off 16.8% YTD. It turned around in 3Q23 and guidance for 4Q23 is solid.
Surge in operating and adjusted EBITDA margins indicated high operating leverage. Occupancy has not returned to 2019 level, but there will be more margin expansion when this happens.
55% of rooms in China are of economy type, and 82% are in tier-2 and below cities. Such characteristics allow it to benefit from the prevailing consumption downgrade. 


H World Group (1179 HK): Uniquely Well-Placed for Lower-Tier Markets

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

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Hilton Worldwide Holdings  / Equity Bottom-Up

<ul><li>Hilton Worldwide delivered an all-around beat in the last quarter, exceeding expectations with strong results.</li><li>The company's solid fundamentals, industry-leading brands, and strategic partnerships continue to drive its growth.</li><li>With a high number of signings and a robust development pipeline, Hilton is poised for continued expansion in the coming quarters.</li></ul>

Hilton Worldwide delivered an all-around beat in the last quarter, exceeding expectations with strong results.The company's solid fundamentals, industry-leading brands, and strategic partnerships continue to drive its growth.With a high number of signings and a robust development pipeline, Hilton is poised for continued expansion in the coming quarters.

Hilton Worldwide Holdings Inc.: Can The New Extended Stay Brand Catalyze The Recovery? – Key Drivers

High Quality Stock Setups, Weekly Stock Bull Finder

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Thematic (Sector/Industry)

<ul><li>Energy- Rotation to Laggards or Something More Brewing?</li><li>The worst S&amp;P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.</li><li>Inflation readings have benefited so far by energy “staying in the box” in 2023 versus the wild price spikes to $5/gallon gasoline and above which occurred last spring.</li></ul>

Energy- Rotation to Laggards or Something More Brewing?The worst S&amp;P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.Inflation readings have benefited so far by energy “staying in the box” in 2023 versus the wild price spikes to $5/gallon gasoline and above which occurred last spring.

<ul><li>Hilton Worldwide Holdings delivered an all-around beat in its latest result as travel demand has remained robust, continuing the pattern seen in the back half of last year.</li><li>This resulted in both the company's top and bottom line results closing the quarter above the high end of the management guidance.</li><li>The quarter's leisure trends continued to be strong, with RevPAR outperforming the previous quarter's performance.</li></ul>

Hilton Worldwide Holdings delivered an all-around beat in its latest result as travel demand has remained robust, continuing the pattern seen in the back half of last year.This resulted in both the company's top and bottom line results closing the quarter above the high end of the management guidance.The quarter's leisure trends continued to be strong, with RevPAR outperforming the previous quarter's performance.

Hilton Worldwide Holdings Inc.: A Strong Emergence From The Lull – Key Drivers

<ul>
<li>Despite <a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.</li>
<li>Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.</li>
<li>Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.</li>
</ul>


Despite Shangri-La Asia (69 HK)'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.
Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.
Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.


Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

United States

Hilton Worldwide Holdings Inc. operates as a holding company. The Company, through its subsidiaries, provides hospitality services. Hilton Worldwide Holdings owns and manages hotels, resorts, and time share properties worldwide.

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Hilton Worldwide Holdings (HLT US)

H World Group (1179 HK): Uniquely Well-Placed for Lower-Tier Markets

H World has solid guidance for 4Q23, allowing it to realise operating leverage and margin expansion. Its focus on economy rooms and tier-2 and...

Osbert Tang, CFA

Hilton Worldwide Holdings Inc.: Can The New Extended Stay Brand Catalyze The Recovery? – Key Drivers

Hilton Worldwide delivered an all-around beat in the last quarter, exceeding expectations with strong results. The company's solid fundamentals,...

Baptista Research

Weekly Stock Bullfinder - Week of 7/10

The worst S&P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.

Weekly Stock Bull Finder

Hilton Worldwide Holdings Inc.: A Strong Emergence From The Lull – Key Drivers

Hilton Worldwide Holdings delivered an all-around beat in its latest result as travel demand has remained robust, continuing the pattern seen in...

Baptista Research

Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Shangri-la Asia is an excellent play on recovery of China, where 55% of rooms are located. Its overseas assets will gain from surge in outbound...

Osbert Tang, CFA

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52-week Range

Market Cap (USDm)

P/E

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H World Group (1179 HK): Uniquely Well-Placed for Lower-Tier Markets

​H World has solid guidance for 4Q23, allowing it to realise operating leverage and margin expansion. Its focus on economy rooms and tier-2 and...

Osbert Tang, CFA

Hilton Worldwide Holdings Inc.: Can The New Extended Stay Brand Catalyze The Recovery? – Key Drivers

Hilton Worldwide delivered an all-around beat in the last quarter, exceeding expectations with strong results. The company's solid fundamentals,...

Baptista Research

Weekly Stock Bullfinder - Week of 7/10

The worst S&P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.

Weekly Stock Bull Finder

Hilton Worldwide Holdings Inc.: A Strong Emergence From The Lull – Key Drivers

Hilton Worldwide Holdings delivered an all-around beat in its latest result as travel demand has remained robust, continuing the pattern seen in...

Baptista Research

Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Shangri-la Asia is an excellent play on recovery of China, where 55% of rooms are located. Its overseas assets will gain from surge in outbound...

Osbert Tang, CFA

H World has solid guidance for 4Q23, allowing it to realise operating leverage and margin expansion. Its focus on economy rooms and tier-2 and...