- More than 2,000% YTD gain for this counter, new business segment focusing on satellite related ventures.
- Various new appointments to the board of directors, including the current chairman of Hong Kong Cyberport.
- A long list of announcements such as cooperation with Huawei Cloud and the University of Hong Kong, shaping its future growth story in the space industry.
- Long-term target market capitalisation of HKD 300 billion, translating into a potential return of more than 3,200%.
Hong Kong Aerospace Technology Limited (1725.HK), formally known as Eternity Technology Holdings Limited, has experienced stellar performance in 2021. Its share price has risen by more than 2,000%, which is a sharp contrast to the Hang Seng Index’s negative YTD return of close to 8%.
Source: Google Finance
What exactly is Hong Kong Aerospace Technology Group Limited?
Hong Kong Aerospace Technology Group Limited (HKATG) was founded in 2019 as a private company, and has a business interest in the aerospace industry.
After purchasing a majority stake in Eternity Technology Holdings Limited in April 2021, it has transformed itself into a public listed company and is merging existing business operations into this company. Subsequently, it changed its name to Hong Kong Aerospace Technology Group Limited to better reflect the new business operations.
Since then, the Group has commenced the aerospace business under the Golden Bauhinia Constellation project, which includes:
- Smart city with satellite big data applications and solutions;
- Satellite measurement and controlling;
- Satellite manufacturing;
- Satellite launching.
Here’s a quick summary of its new business segments:
Source: Hong Kong Aerospace Technology Group Limited
The company has also appointed various personnel to its board of directors, including Sun Fenquan, who has over 30 years of experience in business management; Lam Kin Fung Jeffrey, a member of the National Committee of the Chinese People’s Political Consultative Conference; Ku Ka Lee Clarie, former Deputy Secretary for Financial Services & the Treasury; and Lam Lee G. BBS, Chairman of Hong Kong Cyberport.
With these high-profile personnel taking on directorship in the company, this goes to show the importance of HKATG in both industry and at the national level.
Partnerships and agreements
Over the past six months, HKATG has released a series of announcements, which generally have had a positive impact on its business segments. They include a partnership with Huawei Cloud Hong Kong, an MOU with the University of Hong Kong, the establishment of satellite application experts committee and aerospace technology steering committee, a successful satellite launch, and a partnership with China Great Wall Industry Corporation.
The cooperation with ICT specialist Huawei Cloud Hong Kong is perhaps one of the more significant developments for HKATG.
Under this cooperation, both parties agreed to act as partners and to jointly establish a remote-sensing big data and AI service platform in the Guangdong-Hong Kong-Macau Greater Bay Area. This will provide boost to HKATG’s “Golden Bauhinia Constellation” project, as it could get the required technological support from Huawei Cloud.
HKATG went into a strategic cooperation with The University of Hong Kong (HKU) in the research & development of satellite data services in Hong Kong. Both parties intend to cooperate in terms of the development of high resolution remote sensing data cubes, application for patents and the promotion of commercial application of the data.
Pursuant to the MOU, both parties also agreed to conduct scientific research on earth observation, carbon neutrality and urban sustainable development. This MOU will have a validity period for the next 15 years, unless terminated by not less than 30 days’ written notice served by either party.
HKATG has highlighted that HKU is a long-standing, reputable tertiary education institution with cutting-edge experience and resources in areas including, the development of remote sensing data cube and the monitoring of global environmental change. With this cooperation, HKATG will see a positive impact on the future development of the Group’s Aerospace Business.
To kick start its satellite manufacturing plans, HKATG has entered into an agreement with the Contractor, China Great Wall Industry Corporation, to undertake the installation and provide technical support services for HKATG. The contractor is wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council and has over 30 years of track record in the aerospace technology industry, including aerospace infrastructure construction.
China Great Wall Industry Corporation provides the relevant services such as, commercial launch services, satellite in-orbit delivery, satellite ground monitor and control station construction, satellite applications, personnel training and technology transfer.
Overall, we can see that HKATG has begun working with various parties in achieving the ultimate goal of building up its Golden Bauhinia Constellation project as well as the setting up of its satellite manufacturing facility.
Mini Space X or the Next Space Giant?
Will HKATG really be the next space giant or a mini version of Space X?
According to Bloomberg:
“HKATG is also developing another Starlink project, called the Golden Bauhinia Constellation, which provides satellite satellite data reception and application services. The project targets to achieve commercial application with global 24 hour online tracking and ability to re-visit key areas in under 30 minutes”.
To summarise, once the Golden Bauhinia Constellation project gets online, this will allow the Greater Bay Area to potentially transform into a smart city. I believe HKATG has the capability and ability to be not just only a mini Space X, but also a formidable space giant in the future. However, at this moment, more work must be done by HKATG.
According to a recent press release, HKATG said that more than 40,000 low-earth orbit satellites will be produced and used annually in various fields.
Typically, the operation lifespan for each satellite is around three years. This will result in the need for defunct satellites to be replaced on a yearly basis. Therefore, this creates the demand to drive the aerospace industry in the future.
In the announcement, the company said that the average profit for each satellite is about HKD 10 million. If HKATG can manufacture 1,000 satellites annually, this will translate into an annual profit of over HKD 10 billion.
Based on an average Price/Earnings ratio of 30 times and the estimated profit of HKD 10 billion, this will give HKATG a market capitalisation of HK$300 billion. Given the current market capitalisation of just HKD 9.27 billion, we are looking at a possible return on investment of more than 3,200%.
Popular figures such as Elon Musk, Jeff Bezos and Richard Branson have shifted their focus to the space industry in recent years. This shows that they are confident in the growth opportunities lying ahead for the sector.
If HKATG can achieve the relevant production figures and profit level, the dream market capitalisation of HKD 300 billion could in fact turn into reality.
With both satellite manufacturing and the Golden Bauhinia Constellation project being parked in this company, we see huge synergy and potential in the long run. The company could make use of its own manufacturing facilities for the project, while helping other companies in building low earth orbit satellites.
In my opinion, HKD 300 billion market cap could be achieved if the storyline for HKATG continues to unfold smoothly, as the market opportunity in the space industry could be exponential in the next few years.
On top of that, none of the equity analysts are initiating any form of coverage on this counter, which goes to show how well the company has been kept under the radar. This could very well be a once-in-a-lifetime opportunity to have an exposure to the space industry in your portfolio.
Disclaimer: The writer owns shares of HKATG (1725.HK).