Xiongan New Zone Hong Kong Stock Weekly Wrap

As mentioned in an earlier post,  at least 14 Hong Kong listed stocks showed a one day ramp up after the surprise announcement last weekend of a new economic zone, the Xiongan New Zone.

Xiongan New Area

Buoyed by the belief that this triangular area will be the next Shenzhen, at least 14 stocks moved sharply upwards on Monday in Hong Kong, following the weekend announcement.

For the week, 5 of the 14 stocks had a weekly change which resulted in a lower weekly move than that on the first day, indicating some rethinking of the over the top optimism on the relatively vague news.

econ zone upd1

econ zone upd2

The stellar performer was building materials and property owner and manager, BBMG 2009 HK.   The move on this large-cap,  industrial and real estate company was so unexpected that the company itself warned investors to be rational.   In the same announcement, it admitted to supplying about 60% of the cement output for the designated region.  Citi picked it as a winner in the new zone,  Credit Suisse raised it to Outperform, with a target price of 5.8hkd to 6.4 hkd, while Morgan Stanley removed it from its focus list, dropped it to Underweight, stating that cement regional sales would increase about 8%/year, giving the most benefits to Jidong Cement.  As I wrote here, BBMG’s financials and recent asset, liability and workforce increases make its future performance unpredictable.

The other big weekly movers, with the exception of Steel stock China Oriental, 581 hk, would need to show major financial improvement in the first quarter of 2017 since annual results showed either minimal revenue or operating net profit before taxes growth.

Tianjun Jinrun 1265

As shown above, Tianjin Jinrun, 1265 hk, utility company actually had a decline in revenues and a minimal increase in net profit.  Thanks to the weekly move, its now at a lofty 31.39 trailing p/e despite its 2016 revenue drop.
Tianjin Cap 1065.PNG

While sewage treatment utility company Tianjin Capital, 1065 hk, showed a substantial net profit growth of 36% in 2016, its revenue only increased by a little over 1%, indicating that other, non-core and more volatile items contributed to the increase.

Beijing N Star 588

Despite the real estate company’s Beijing N Star 588 hk, revenue increase of 37%, its gross profit increased by only 2.4%% and its net profit actually dropped by 6.8%. It’s doubtful that the first quarter will show much improvement, which could result in an immediate drop in the stock price after the first quarter’s earnings release.

China Oriental 581

The steel company China Oriental, 581 hk, had an impressive increase in net profit from 2015, which followed through with an increase in gross profit in terms of dollars and margins while operating income went from a loss to a profit.  While its trailing p/e is only 9.39, the stock has increased by 124% over the past year.

Kunlun Energy 135

Natural gas-related utility Kunlun Energy, 135 hk, although increasing over 10% last week to reflect a trailing p/e of 97, would need significant positive impact from the new area to justify its latest rise.

(All annual performance numbers taken from hk filngs.)

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