Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.

China Tourism Group Duty Free Corp Ltd (601888 CH) (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

We have expressed our positive view on <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> in various Insights previously. In this Insight, we look at the proposed H-share IPO from the perspective of investors who do not know it well. For seasoned investors in this name, this Insight serves as a summary of our views and provides background details on the proposed IPO.Fundamentally speaking, the key positives for CTG Duty Free are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook, and 3.) solid profitability and financial position. Key negatives are: 1.) policy risk and rising competition, 2.) concern on payback of new projects, and 3.) risk of overseas expansion. If the IPO is being priced at the current average H-A discount, it will be on 32.7x FY21F PER, we see this not expensive relative to the premium retailers listed in Hong Kong.

We have expressed our positive view on China Tourism Group Duty Free Corp Ltd (601888 CH) in various Insights previously. In this Insight, we look at the proposed H-share IPO from the perspective of investors who do not know it well. For seasoned investors in this name, this Insight serves as a summary of our views and provides background details on the proposed IPO.Fundamentally speaking, the key positives for CTG Duty Free are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook, and 3.) solid profitability and financial position. Key negatives are: 1.) policy risk and rising competition, 2.) concern on payback of new projects, and 3.) risk of overseas expansion. If the IPO is being priced at the current average H-A discount, it will be on 32.7x FY21F PER, we see this not expensive relative to the premium retailers listed in Hong Kong. 

CTG Duty Free (601888 CH) H-Share Pre-IPO: Fundamentally Speaking

We believe <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CTG Duty Free) will maintain its solid sales momentum in 2Q21, given the positive Hainan duty free sales figures (estimated monthly average of Rmb5bn in Apr and May) as released by the Department of Commerce and good tourist arrival trend in Apr (-1.3% MoM, vs. -13.1% MoM in Apr 2019). We also project an EPS CAGR of 49.2% between FY20 and FY23 with ROE of over 40% consistently.CTG Duty Free's Board has approved its proposed H-share issue, with new shares to be issued amounting to 9.2% of existing capital (including greenshoe). We estimate that the issue may raise HK$47-66bn, making it one of the largest IPOs in Hong Kong in this year.  In our view, the stock should attract good interests given its unique consumption exposure, leadership position and sizeable market capitalisation.

We believe China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) will maintain its solid sales momentum in 2Q21, given the positive Hainan duty free sales figures (estimated monthly average of Rmb5bn in Apr and May) as released by the Department of Commerce and good tourist arrival trend in Apr (-1.3% MoM, vs. -13.1% MoM in Apr 2019). We also project an EPS CAGR of 49.2% between FY20 and FY23 with ROE of over 40% consistently.CTG Duty Free's Board has approved its proposed H-share issue, with new shares to be issued amounting to 9.2% of existing capital (including greenshoe). We estimate that the issue may raise HK$47-66bn, making it one of the largest IPOs in Hong Kong in this year.  In our view, the stock should attract good interests given its unique consumption exposure, leadership position and sizeable market capitalisation. 

CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO

Shanghai International Airport / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a> (SIAC) announced that it will suspend from trading starting 10 Jun, pending the announcement of the acquisitions of a 100% stake in Hongqiao Company, 100% stake in Logistics Company and assets related to the 4th runway at the Shanghai Pudong International Airport from its parent. Valuation and consideration have not been finalised and financial figures not disclosed yet. However, strategically, we think the deal is positive to SIAC with reduction in connected transactions, consolidation of both airports in Shanghai under its ownership, cash cow contribution from Hongqiao Airport, capture of the cargo momentum through Logistics Company and part coverage of earnings hole left by the unfavourable duty free agreement with <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>.

Shanghai International Airport (600009 CH) (SIAC) announced that it will suspend from trading starting 10 Jun, pending the announcement of the acquisitions of a 100% stake in Hongqiao Company, 100% stake in Logistics Company and assets related to the 4th runway at the Shanghai Pudong International Airport from its parent. Valuation and consideration have not been finalised and financial figures not disclosed yet. However, strategically, we think the deal is positive to SIAC with reduction in connected transactions, consolidation of both airports in Shanghai under its ownership, cash cow contribution from Hongqiao Airport, capture of the cargo momentum through Logistics Company and part coverage of earnings hole left by the unfavourable duty free agreement with China Tourism Group Duty Free Corp Ltd (601888 CH). 

Shanghai International Airport (600009 CH): Suspension of Trading on Potential Acquisitions

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> expects recurring net profit of Rmb2.834bn for 1Q21, compared with a loss of Rmb120m in 1Q20. On a QoQ basis, this is down by a marginal 3.8% with a retreat in operating margin. Despite so, we still see this set of result as decent, and it represents about 25% of the full-year consensus forecasts.Share price of CTG Duty Free was off 10% yesterday before the earnings announcement, with various concerns including border-opening in Hong Kong, anti-trust risk and clamp down of duty free grey-market, among others. We, however, think that fundamentals stay solid and these concerns are overplayed. With share price already fallen by 34% from the peak, value starts to emerge for this duty free leader in China, in our view.

China Tourism Group Duty Free Corp Ltd (601888 CH) expects recurring net profit of Rmb2.834bn for 1Q21, compared with a loss of Rmb120m in 1Q20. On a QoQ basis, this is down by a marginal 3.8% with a retreat in operating margin. Despite so, we still see this set of result as decent, and it represents about 25% of the full-year consensus forecasts.Share price of CTG Duty Free was off 10% yesterday before the earnings announcement, with various concerns including border-opening in Hong Kong, anti-trust risk and clamp down of duty free grey-market, among others. We, however, think that fundamentals stay solid and these concerns are overplayed. With share price already fallen by 34% from the peak, value starts to emerge for this duty free leader in China, in our view.  

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free Corp Ltd (601888 CH)

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China Tourism Group Duty Free Corp Ltd (601888 CH)

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

China Tourism Group Duty Free Corp Ltd (601888 CH) aims to raise around US$5-10bn in its H-share listing in Hong Kong. It had 92.3% market share by...

Sumeet Singh

Shanghai International Airport (600009 CH): Suspension of Trading on Potential Acquisitions

We view SIAC's potential acquisitions of Hongiao Airport, Logistics Company and Pudong 4th runway as strategically positive, pending announcement...

Osbert Tang, CFA

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

CTG Duty Free announced a decent 1Q21 recurring profit and we believe concerns on sales diversion and domestic competition are overplayed. We are...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

China Tourism Group Duty Free Corp Ltd (601888 CH) aims to raise around US$5-10bn in its H-share listing in Hong Kong. It had 92.3% market share by...

Sumeet Singh

CTG Duty Free (601888 CH) H-Share Pre-IPO: Fundamentally Speaking

In relation to CTG Duty Free's H-share IPO, key positives are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook,...

Osbert Tang, CFA

CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO

2Q21 should be another good quarter for CTG Duty Free, based on Customs and tourist arrival figures. Its Board has approved its H-share IPO and we...

Osbert Tang, CFA

Shanghai International Airport (600009 CH): Suspension of Trading on Potential Acquisitions

We view SIAC's potential acquisitions of Hongiao Airport, Logistics Company and Pudong 4th runway as strategically positive, pending announcement...

Osbert Tang, CFA

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

CTG Duty Free announced a decent 1Q21 recurring profit and we believe concerns on sales diversion and domestic competition are overplayed. We are...

Osbert Tang, CFA