HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The pullback from the peak and after the 3Q24 result is excessive, as <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> is still sitting on an attractive 8.4% dividend yield for FY24.</li>
<li>We should not be concerned too much about the fluctuations in government grants and JV contributions, which are the key drags. Historically, they have exhibited quarterly volatility.</li>
<li>Its dividend payout has raised by 6pp in 1H24 despite an 11% earnings drop. Both net cash position and improving operating cash flow can afford a higher payout.</li>
</ul>


The pullback from the peak and after the 3Q24 result is excessive, as Sinotrans (598 HK) is still sitting on an attractive 8.4% dividend yield for FY24.
We should not be concerned too much about the fluctuations in government grants and JV contributions, which are the key drags. Historically, they have exhibited quarterly volatility.
Its dividend payout has raised by 6pp in 1H24 despite an 11% earnings drop. Both net cash position and improving operating cash flow can afford a higher payout.


Sinotrans (598 HK): More than Enough Safety Margin

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Hengan International Group / Equity Bottom-Up

<ul>
<li>Hong Kong Conglomerate Sector is showing renewed strength with Materials and Energy under pressure.  HK market 30 day volatility at 5 year low as market continues to de-risk.</li>
<li>
<a href="https://www.smartkarma.com/entities/hengan-international-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan International Group (1044 HK)</a> chart broke down from its Descending Triangle pattern after reporting its 1H24 results. <a href="https://www.smartkarma.com/entities/j-t-global-express-ltd" target="_blank" data-smartkarma-citation="entities:36819:1" rel="noopener">J&amp;T Global Express (1519 HK)</a> broke down from its double bottom pattern.
</li>
<li>
<a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a> price relative to the MSCI China index broke to a new high.  The company reported good results in a difficult environment for China brokers.
</li>
</ul>


Hong Kong Conglomerate Sector is showing renewed strength with Materials and Energy under pressure.  HK market 30 day volatility at 5 year low as market continues to de-risk.

Hengan International Group (1044 HK) chart broke down from its Descending Triangle pattern after reporting its 1H24 results. J&amp;T Global Express (1519 HK) broke down from its double bottom pattern.


China Galaxy Securities (H) (6881 HK) price relative to the MSCI China index broke to a new high.  The company reported good results in a difficult environment for China brokers.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 13)

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

<ul>
<li>Volume and revenue grow as the company works with China’s new trading partners</li>
<li>Margins and cashflow under pressure due to a weak domestic economy and higher freight rates</li>
<li>Cross-Border e-commerce growing fast from a small base relative to other divisions</li>
</ul>


Volume and revenue grow as the company works with China’s new trading partners
Margins and cashflow under pressure due to a weak domestic economy and higher freight rates
Cross-Border e-commerce growing fast from a small base relative to other divisions


Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

Cross Asset Strategy

<ul>
<li>Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.</li>
<li>
<a href="https://www.smartkarma.com/entities/j-t-global-express-ltd" target="_blank" data-smartkarma-citation="entities:36819:1" rel="noopener">J&amp;T Global Express (1519 HK)</a> received upgrades after reporting strong 2Q24 results.  Its SEA and China business showed growth in revenue and profitability.</li>
<li>
<a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> received an upgrade after revenue and EBITDA approached pre-COVID levels.  <a href="https://www.smartkarma.com/entities/fit-hon-teng-ltd" target="_blank" data-smartkarma-citation="entities:22868:1" rel="noopener">FIT Hon Teng (6088 HK)</a> is seeing improvement in AI server, AirPod, and EV segments.</li>
</ul>


Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.

J&amp;T Global Express (1519 HK) received upgrades after reporting strong 2Q24 results.  Its SEA and China business showed growth in revenue and profitability.

Galaxy Entertainment Group (27 HK) received an upgrade after revenue and EBITDA approached pre-COVID levels.  FIT Hon Teng (6088 HK) is seeing improvement in AI server, AirPod, and EV segments.


BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)

<ul>
<li>Even after the 28% surge in share price since the 1H24 result, <a href="https://www.smartkarma.com/entities/jd-logistics-inc" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> still deserves a look as fundamentals have improved, especially with better cost control.</li>
<li>JDL is riding on scale economies with higher asset utilisation. Quarterly margins have sustained an uptrend, reaching the highest levels since 1Q21 and it will continue.</li>
<li>We like its lower reliance on <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a> and net cash of HK$2.83/share (28% of the share price). There is a massive upside in consensus forecasts too.</li>
</ul>


Even after the 28% surge in share price since the 1H24 result, JD Logistics (2618 HK) still deserves a look as fundamentals have improved, especially with better cost control.
JDL is riding on scale economies with higher asset utilisation. Quarterly margins have sustained an uptrend, reaching the highest levels since 1Q21 and it will continue.
We like its lower reliance on JD.com (9618 HK) and net cash of HK$2.83/share (28% of the share price). There is a massive upside in consensus forecasts too.


JD Logistics (2618 HK): There Are More Rooms

China

Sinotrans Limited provides integrated logistics services with core service of sea, air, rail and road freight forwarding, express services and shipping agency services.  The Company also provides support services of storage and terminal services, trucking and marine transportation services.

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Sinotrans (598 HK)

Sinotrans (598 HK): More than Enough Safety Margin

Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Osbert Tang, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 13)

Hong Kong conglomerate sector shows increased momentum. Hengan and J&T technical patterns broke down. J&T fell to new lows since its listing last...

David Mudd

Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Rikki Malik

BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)

The Hong Kong market breadth continues to improve as the market has shown defensive qualities during recent selloff. J&T Global, Galaxy and FIT...

David Mudd

JD Logistics (2618 HK): There Are More Rooms

Despite a 28% share price surge since 1H24 result, JD Logistics has an improved story. Margin expansion should continue as cost control is...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sinotrans (598 HK): More than Enough Safety Margin

​Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Osbert Tang, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 13)

Hong Kong conglomerate sector shows increased momentum. Hengan and J&T technical patterns broke down. J&T fell to new lows since its listing last...

David Mudd

Sinotrans-(598.HK) - Interim Results Highlight Risks to Be Managed

​Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Rikki Malik

BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)

The Hong Kong market breadth continues to improve as the market has shown defensive qualities during recent selloff. J&T Global, Galaxy and FIT...

David Mudd

JD Logistics (2618 HK): There Are More Rooms

​Despite a 28% share price surge since 1H24 result, JD Logistics has an improved story. Margin expansion should continue as cost control is...

Osbert Tang, CFA

Despite weaker 3Q24 due to fluctuations in government grants and JV contribution, Sinotrans stays attractive at an 8.4% FY24 dividend yield,...

Company sees growth in volume and revenue from new Chinese trading partners, but faces challenges with margins and cashflow due to weak domestic...

Despite a 28% share price surge since 1H24 result, JD Logistics has an improved story. Margin expansion should continue as cost control is...