HK/China Equity Long-Short

Osbert Tang, CFA

Osbert Tang is an equity analyst with over 20 years of experience with focuses on China transport, infrastructure, industrials and utilities sectors. He has been based in Shanghai since 2003, accumulated nearly 20 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities. 

Osbert has received votes from top-tier institutional investors and has been a highly-ranked transport and infrastructure analyst in the Asiamoney, Institutional Investors and Greenwich surveys. In addition to his extensive experience with international investment banks including RBS, ABN AMRO (both served as Shanghai Chief Representative), Paribas Asia Equity, Maybank Kim Eng and DBS Securities, he has been a senior analyst with Moody’s Investors Service with focus on ratings of China infrastructure and related LGFV issuers. He has also worked in the area of strategic development at Sun Hung Kai Properties Limited. 

Osbert holds a BBA from the Chinese University of Hong Kong, an MBA from the University of Texas at Austin and a MSSc in Applied Psychology from the City University of Hong Kong. He was accredited with the CFA charter in 1997, and is a member of both British Psychological Society and Hong Kong Psychological Society.

China Transportation: Strong Aug Export to Benefit Sinotrans (598 HK) And SITC Intl (1308 HK)

Sinotrans (598 HK): Massive Beat in 3Q20 Profit

Sinotrans (0598 HK): China Merchants Group to Increase Stake - A Target for Privatisation?

Sinotrans (598 HK): Favorable Risk-Return Payoff

Sinotrans (0598 HK): 1Q20 in Line, Still See Positive Risk-Return Payoff at Historical Low Valuation

Equity Bottom-Up

<p>While the headline 1H20 profit for <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> was a 19.9% YoY drop, the real focus should be on the 4% YoY profit growth (+10% for recurring profit) in 2Q20. This suggests very encouraging recovery of earnings in 2Q20, vs. a plunge of 58.4% YoY.  Both forwarding and e-commerce businesses showed profit growth in 1H20, with logistics being the only key drag. Also, margin at most levels has seen YoY expansion in 2Q20.</p><p>We see 2H20 growth to further recover, riding on the improvement in China's trade performance. Logistics will benefit from the fading impact of COVID-19 and e-commerce to benefit from China's "dual circulation" policy. At 0.38x 12-month forward P/B multiple, or 1.5 SD below the average of 0.71x since 2013, the valuation has not adequately reflected the recovery momentum, in our view. We now project its ROE to reach 8.4% for FY20 and 9.2% for FY21, highly justify a reversion to mean multiple. A PER of 4.7x is also cheap for a name with good recovery pace.</p>

While the headline 1H20 profit for Sinotrans (598 HK) was a 19.9% YoY drop, the real focus should be on the 4% YoY profit growth (+10% for recurring profit) in 2Q20. This suggests very encouraging recovery of earnings in 2Q20, vs. a plunge of 58.4% YoY.  Both forwarding and e-commerce businesses showed profit growth in 1H20, with logistics being the only key drag. Also, margin at most levels has seen YoY expansion in 2Q20.We see 2H20 growth to further recover, riding on the improvement in China's trade performance. Logistics will benefit from the fading impact of COVID-19 and e-commerce to benefit from China's "dual circulation" policy. At 0.38x 12-month forward P/B multiple, or 1.5 SD below the average of 0.71x since 2013, the valuation has not adequately reflected the recovery momentum, in our view. We now project its ROE to reach 8.4% for FY20 and 9.2% for FY21, highly justify a reversion to mean multiple. A PER of 4.7x is also cheap for a name with good recovery pace.

Sinotrans (598 HK): Very Encouraging Profit Recovery Momentum in 2Q20