HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<ul>
<li>The 1H22 result of <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.</li>
<li>It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.</li>
<li>We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. </li>
</ul>


The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. 


Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/gogox-holdings" target="_blank" data-smartkarma-citation="entities:35556:1" rel="noopener">GoGoX Holdings (GOGO HK)</a> is a major online intra-city logistics platform in Asia. It has passed the listing hearing for an HKEx IPO to raise US$100-150 million.   </li>
<li>In <a href="https://www.smartkarma.com/insights/gogox-ipo-initiation-a-less-than-perfect-delivery" target="_blank" data-smartkarma-citation="insights:64922" rel="noopener">GOGOX IPO Initiation: A Less than Perfect Delivery</a>, we noted that as the losses are expected to persist over the next three years, we would avoid the IPO.</li>
<li>In this note, we examine the PHIP for the 2021 results and recent developments. The fundamentals remain unattractive and we would give the IPO a pass. </li>
</ul>



GoGoX Holdings (GOGO HK) is a major online intra-city logistics platform in Asia. It has passed the listing hearing for an HKEx IPO to raise US$100-150 million.   
In GOGOX IPO Initiation: A Less than Perfect Delivery, we noted that as the losses are expected to persist over the next three years, we would avoid the IPO.
In this note, we examine the PHIP for the 2021 results and recent developments. The fundamentals remain unattractive and we would give the IPO a pass. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co H (548 HK)</a> guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. </li>
<li>Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. </li>
<li>There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.</li>
</ul>



Shenzhen Expressway Co H (548 HK) guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. 
Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. 
There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.


Shenzhen Expressway (548 HK): Cautiously Optimistic

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  </li>
<li>SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.</li>
<li>Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. </li>
</ul>



Shenzhen International (152 HK) has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  
SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.
Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. 


Shenzhen Intl (152 HK): It's the Ability to Realise Underlying Value that Matters

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> posted 11% profit decline for FY21, with Shenzhen Airlines the main drag. Stripping this and one-off items out, its bottom line would have grown by 46.6%.</li>
<li>Logistics growth pipeline is highly visible, and this adds to potential gains from logistics park transformation and strategic offload of matured and suitable projects through REIT or private fund.</li>
<li>The stock remains a deeply undervalued asset play at just 0.48x P/B. Its willingness to share gains with investors has put its dividend yield at 10.4% on current share price.</li>
</ul>



Shenzhen International (152 HK) posted 11% profit decline for FY21, with Shenzhen Airlines the main drag. Stripping this and one-off items out, its bottom line would have grown by 46.6%.
Logistics growth pipeline is highly visible, and this adds to potential gains from logistics park transformation and strategic offload of matured and suitable projects through REIT or private fund.
The stock remains a deeply undervalued asset play at just 0.48x P/B. Its willingness to share gains with investors has put its dividend yield at 10.4% on current share price.


Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value

Hong Kong

Shenzhen International Holdings Limited invests in, constructs, and operates logistics infrastructure facilities, including logistics parks, toll roads, and ports. The company also provides third-party logistics services, logistics information services, and general environmental protection businesses, offering value-added services like intelligent warehousing and integrated cold chain solutions. The company is headquartered in Hong Kong.

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Shenzhen International (152 HK)

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

1H22 is bad but behind us now. We anticipate sequential earnings improvement in 2H22 as the impact of pandemic fades. SZI will continue to realise...

Osbert Tang, CFA

GOGOX IPO: Growth at All Costs

GOGOX has passed the listing hearing for an HKEx IPO to raise US$100-150m. The fundamentals remain unattractive and we would give the IPO a pass.

Arun George

Shenzhen Expressway (548 HK): Cautiously Optimistic

SZEX is expected to gain earnings momentum over the next few quarters as toll traffic recovers, clean energy and waste management capacity...

Osbert Tang, CFA

Shenzhen Intl (152 HK): It's the Ability to Realise Underlying Value that Matters

We think the market has overlooked Shenzhen Intl's potential and capability to translate its assets into profit and cash flow. The latest Qianhai...

Osbert Tang, CFA

Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value

SZIH is an attractive asset play - it does not only has lots of hidden assets, but also the capability to turn them into profit and cash flow, and...

Osbert Tang, CFA

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