HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

<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

We consider the plan by <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> to dispose of its 35.7% direct stake in the Meilin Checkpoint Project a strategic move to move forward its earnings and cash flow from the development. Under normal course, it will have to wait for another 2-3 years to realise such gains and cash. In our view, investors should welcome this decision as the move will also cover an earnings gap in FY21 originally left over from FY20 due to a lack of exceptional gain in this year.With a potential capital gain of Rmb2.9bn (HK$3.5bn), SZI is likely to record a historical high net profit for FY21. Moreover, its track record of sharing exceptional gain with investors through special dividends may mean a dividend yield of 12% for FY21 based on the current share price. The enriched financial position will also provide SZI more resources for pursuing logistics expansion, and it has just announced a logistics acquisition in Pingshan, Shenzhen.

We consider the plan by Shenzhen International (152 HK) to dispose of its 35.7% direct stake in the Meilin Checkpoint Project a strategic move to move forward its earnings and cash flow from the development. Under normal course, it will have to wait for another 2-3 years to realise such gains and cash. In our view, investors should welcome this decision as the move will also cover an earnings gap in FY21 originally left over from FY20 due to a lack of exceptional gain in this year.With a potential capital gain of Rmb2.9bn (HK$3.5bn), SZI is likely to record a historical high net profit for FY21. Moreover, its track record of sharing exceptional gain with investors through special dividends may mean a dividend yield of 12% for FY21 based on the current share price. The enriched financial position will also provide SZI more resources for pursuing logistics expansion, and it has just announced a logistics acquisition in Pingshan, Shenzhen.   

Shenzhen Intl (152 HK): Cashing in Future Earnings

We came back with a positive view on <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> after a brief catch-up discussion with the company. For 2H21, we see upside potential in earnings and our takeaways are also encouraging. We see possibility for higher earnings contribution from the Meilin Checkpoint project and logistics business on asset divestment. At just 6x PER, 0.6x P/B (-2 SD below average) and 8.6% dividend yield for FY21, SZI's valuations are attractive relative to the fundamentals.Strategically, the new CEO will foster closer working relations with its parent and affiliates, it is a beneficiary of the Qianhai expansion (as it still has 40% land yet to be developed) and it sees possibility of participation in the booming air cargo terminal business of Air China. We believe the recent share price weakness is a good opportunity for this interesting name in the Greater Bay Area.

We came back with a positive view on Shenzhen International (152 HK) after a brief catch-up discussion with the company. For 2H21, we see upside potential in earnings and our takeaways are also encouraging. We see possibility for higher earnings contribution from the Meilin Checkpoint project and logistics business on asset divestment. At just 6x PER, 0.6x P/B (-2 SD below average) and 8.6% dividend yield for FY21, SZI's valuations are attractive relative to the fundamentals.Strategically, the new CEO will foster closer working relations with its parent and affiliates, it is a beneficiary of the Qianhai expansion (as it still has 40% land yet to be developed) and it sees possibility of participation in the booming air cargo terminal business of Air China. We believe the recent share price weakness is a good opportunity for this interesting name in the Greater Bay Area. 

Shenzhen Intl (152 HK): Positive Highlights from Recent Catch-Up with Company

Share price of <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> (SZI) has been under pressure lately due to concerns on the proposed acquisition of <a href="https://www.smartkarma.com/entities/suning-com-co-ltd-a" target="_blank" data-smartkarma-citation="entities:9178:1" rel="noopener">Suning.com (002024 CH)</a> and weakened performance on its 49%-owned Shenzhen Airlines (SZA). However, now that it decided not to go ahead on Suning.com and there are signs of recovery at SZA, the still-depressed valuation (0.61x P/B, 5-year low) is unwarranted, in our opinion.Its core logistics segment performed well in 1H21, achieving higher occupancy which is supportive to rental income, and the expansion in project portfolio should be an added driver. The proposed acquisition of <a href="https://www.smartkarma.com/entities/shenzhen-investment-holdings-bay-area-development" target="_blank" data-smartkarma-citation="entities:12134:1" rel="noopener">Shenzhen Investment Holdings Bay Area Development (737 HK)</a> by its subsidiary <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> should also generate good cash flow with upside from its land assets. Long-term, the transformation of South China Logistics Park may potentially create another successful story similar to its Qianhai project. At FY21F dividend yield of 8%, we believe SZI is very attractive at the current level.

Share price of Shenzhen Intl (152 HK) (SZI) has been under pressure lately due to concerns on the proposed acquisition of Suning.com (002024 CH) and weakened performance on its 49%-owned Shenzhen Airlines (SZA). However, now that it decided not to go ahead on Suning.com and there are signs of recovery at SZA, the still-depressed valuation (0.61x P/B, 5-year low) is unwarranted, in our opinion.Its core logistics segment performed well in 1H21, achieving higher occupancy which is supportive to rental income, and the expansion in project portfolio should be an added driver. The proposed acquisition of Shenzhen Investment Holdings Bay Area Development (737 HK) by its subsidiary Shenzhen Expressway Co H (548 HK) should also generate good cash flow with upside from its land assets. Long-term, the transformation of South China Logistics Park may potentially create another successful story similar to its Qianhai project. At FY21F dividend yield of 8%, we believe SZI is very attractive at the current level.

Shenzhen Intl (152 HK): What's Wrong Recently?

<ul>
<li>Poor 1H23 result at <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> should have been anticipated, and we believe there is good room for sharp earnings improvement in 2H23.</li>
<li>Completion of logistics projects, more asset value realisation (through REIT and private equity funds), contribution from Yicheng Qiwanli and lower finance costs should underpin outlook.</li>
<li>SZI is an asset play with significant upside and this is reflected in the undemanding 0.42x P/B. Against its historical average of 0.67x, such a level is almost -2SD below. </li>
</ul>


Poor 1H23 result at Shenzhen International (152 HK) should have been anticipated, and we believe there is good room for sharp earnings improvement in 2H23.
Completion of logistics projects, more asset value realisation (through REIT and private equity funds), contribution from Yicheng Qiwanli and lower finance costs should underpin outlook.
SZI is an asset play with significant upside and this is reflected in the undemanding 0.42x P/B. Against its historical average of 0.67x, such a level is almost -2SD below. 


Shenzhen Intl (152 HK): Brighter Outlook in 2H23 Not to Be Overlooked

Hong Kong

Shenzhen International Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides investment, construction, and operation of logistic infrastructure facilities, as well as offers value-added logistic services. Shenzhen International serves customers worldwide.

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Shenzhen International (152 HK)

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

Shenzhen Intl (152 HK): Cashing in Future Earnings

The disposal of Meilin Checkpoint Project should be a welcomed move to shift earnings and cash flow ahead. SZI is likely to share with investors...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Positive Highlights from Recent Catch-Up with Company

We believe the takeways from our catch-up with SZE are encouraging, and we see upside potential for earnings in 2H21 to come from both Meilin...

Osbert Tang, CFA

Shenzhen Intl (152 HK): What's Wrong Recently?

SZI's depressed share price has already reflected the concerns of the market, with upside coming from good logistics segment, asset transformation...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Brighter Outlook in 2H23 Not to Be Overlooked

Poor 1H23 results were expected, but there is potential for strong earnings improvement in 2H23. Logistics projects, asset value realisation, and...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

Shenzhen Intl (152 HK): Cashing in Future Earnings

The disposal of Meilin Checkpoint Project should be a welcomed move to shift earnings and cash flow ahead. SZI is likely to share with investors...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Positive Highlights from Recent Catch-Up with Company

We believe the takeways from our catch-up with SZE are encouraging, and we see upside potential for earnings in 2H21 to come from both Meilin...

Osbert Tang, CFA

Shenzhen Intl (152 HK): What's Wrong Recently?

SZI's depressed share price has already reflected the concerns of the market, with upside coming from good logistics segment, asset transformation...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Brighter Outlook in 2H23 Not to Be Overlooked

​Poor 1H23 results were expected, but there is potential for strong earnings improvement in 2H23. Logistics projects, asset value realisation, and...

Osbert Tang, CFA

Poor 1H23 results were expected, but there is potential for strong earnings improvement in 2H23. Logistics projects, asset value realisation, and...