Lowering BEH’s FVE to HKD 39.50 per Share, but Shares Remain Undervalued

We lower our fair value estimate of Beijing Enterprises Holdings, or BEH, to HKD 39.50 per share from HKD 44.50, to reflect lower dollar margin on higher raw material cost, and a lower net profit forecast of its 22%-owned China Gas amid a lower new residential connection assumption due to a slowdown in China’s property sales. We think the shares remain undervalued, now trading at only 0.4 times 2021 price/book, a significant discount relative to the sum of its underlying assets. We think much of the concerns over slower growth and disappointing dividend payouts are already priced in.