HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The proposed privatisation price for <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> appears reasonable, which is estimated to be 1.73x P/B and 11.5x PER on a 12-month forward basis. </li>
<li>The valuations are both at a good premium over the average since 2024. ENN Energy is also being put at the top of the sector's PER range. </li>
<li>Scheme shareholders will hold new H-shares of <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>, which historically has a more volatile earnings record, but its A-share has been doing well. </li>
</ul>


The proposed privatisation price for ENN Energy (2688 HK) appears reasonable, which is estimated to be 1.73x P/B and 11.5x PER on a 12-month forward basis. 
The valuations are both at a good premium over the average since 2024. ENN Energy is also being put at the top of the sector's PER range. 
Scheme shareholders will hold new H-shares of ENN Natural Gas (600803 CH), which historically has a more volatile earnings record, but its A-share has been doing well. 


ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a>'s net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. It is encouraging to see the dividend payout ratio increase by 2pp YoY.</li>
<li>An increase in the adoption of the residential price linkage system is positive for the dollar margin, while the distortion from E&amp;P expiry will no longer impact earnings. </li>
<li>With net cash equals HK$2.56/share, or 31% of the share price, such financial strength is unmatched by peers. Its PER valuations are also inexpensive.</li>
</ul>



Kunlun Energy (135 HK)'s net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. It is encouraging to see the dividend payout ratio increase by 2pp YoY.
An increase in the adoption of the residential price linkage system is positive for the dollar margin, while the distortion from E&amp;P expiry will no longer impact earnings. 
With net cash equals HK$2.56/share, or 31% of the share price, such financial strength is unmatched by peers. Its PER valuations are also inexpensive.


Kunlun Energy (135 HK): Remains Very Decent

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> has suspended trading. The possibilities include privatisation, third-party offer, increase in stake by <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>, and a change in control. </li>
<li>It trades on 1.16x 12-month forward P/B, vs. 5-year average of 2.42x and 1.31x since 2024. Given the lower forward ROE, it is difficult to return to the 5-year average.</li>
<li>For PER, it should be higher than <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> but lower than <a href="https://www.smartkarma.com/entities/china-resources-gas-group-ltd" target="_blank" data-smartkarma-citation="entities:20525:1" rel="noopener">CR Gas (1193 HK)</a>. At 10.8x (average of the two), it equates to HK$74.26.  </li>
</ul>



ENN Energy (2688 HK) has suspended trading. The possibilities include privatisation, third-party offer, increase in stake by ENN Natural Gas (600803 CH), and a change in control. 
It trades on 1.16x 12-month forward P/B, vs. 5-year average of 2.42x and 1.31x since 2024. Given the lower forward ROE, it is difficult to return to the 5-year average.
For PER, it should be higher than China Gas Holdings (384 HK) but lower than CR Gas (1193 HK). At 10.8x (average of the two), it equates to HK$74.26.  


ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of March 21st.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for Ke, China Mobile, Alibaba, Kuaishou, BOC, China Resources Beer, SMIC, Meituan.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of March 21st.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for Ke, China Mobile, Alibaba, Kuaishou, BOC, China Resources Beer, SMIC, Meituan.


Hong Kong Connect Flows (Mar 21st): Ke, China Mobile, Alibaba, Kuaishou, BOC, CR Beer, SMIC

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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> is in a trading halt “<em>pending the issuance of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers containing inside information of the Company</em>." </li>
<li>
<a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a>, also in a trading halt, is likely seeking to privatise ENN through a Cayman scheme. A high AGM minority participation necessitates an attractive offer.</li>
<li>I use several methods to triangulate the likely offer price, which suggests a price range of HK$66.50-85.01, with an average of HK$76.04, a 28% premium to the last close.</li>
</ul>



ENN Energy (2688 HK) is in a trading halt “pending the issuance of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers containing inside information of the Company." 

ENN Natural Gas (600803 CH), also in a trading halt, is likely seeking to privatise ENN through a Cayman scheme. A high AGM minority participation necessitates an attractive offer.
I use several methods to triangulate the likely offer price, which suggests a price range of HK$66.50-85.01, with an average of HK$76.04, a 28% premium to the last close.


ENN Energy (2688 HK): ENN Natural Gas to Launch a Privatisation Offer?

Hong Kong

Towngas China Company Ltd. distributes and markets gas.  The Company sells LPG (liquefied petroleum gas) in  bulk and in cylinder, provides piped LPG and natural gas, constructs gas pipelines, operates city gas-pipeline networks and gas stations, and sells LPG  and natural gas household appliances.

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Towngas China (1083 HK)

ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Osbert Tang, CFA

Kunlun Energy (135 HK): Remains Very Decent

Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Osbert Tang, CFA

ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...

Osbert Tang, CFA

Hong Kong Connect Flows (Mar 21st): Ke, China Mobile, Alibaba, Kuaishou, BOC, CR Beer, SMIC

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Ke, China Mobile, Alibaba, Kuaishou, BOC, China Resources...

Ke Yan, CFA, FRM

ENN Energy (2688 HK): ENN Natural Gas to Launch a Privatisation Offer?

I use several methods to triangulate the likely offer price, which suggests a price range of HK$66.50-85.01, with an average of HK$76.04, a 28%...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ENN Energy (2688 HK): Our Initial View on the Privatisation - Valuation and Fundamentals

​The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Osbert Tang, CFA

Kunlun Energy (135 HK): Remains Very Decent

​Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Osbert Tang, CFA

ENN Energy (2688 HK): Privatisation or What? A Look at the Valuations

​Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...

Osbert Tang, CFA

Hong Kong Connect Flows (Mar 21st): Ke, China Mobile, Alibaba, Kuaishou, BOC, CR Beer, SMIC

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Ke, China Mobile, Alibaba, Kuaishou, BOC, China Resources...

Ke Yan, CFA, FRM

ENN Energy (2688 HK): ENN Natural Gas to Launch a Privatisation Offer?

I use several methods to triangulate the likely offer price, which suggests a price range of HK$66.50-85.01, with an average of HK$76.04, a 28%...

Arun George

The privatisation price appears reasonable, at a premium over average since 2024 and at the top of sector's PER range. Scheme shareholders will...

Kunlun's net profit grew 7.9% in 2H24, accelerating from 2.6% in 1H24. Its increased dividend payout ratio, strong financial position and positive...

Possibilities for ENN Energy including privatisation, third-party offer, stake increase by parent, and change in control. A price of at least...