Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>We are negative on Feng Tay Enterprise's share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike combined with unattractive valuations.</li>
<li>In the next several months, we think there is a higher probability of Feng Tay's share price underperforming versus Nike.</li>
<li>Feng Tay Enterprise is one of the largest global OEM/ODM companies that specializes the design and manufacturing of footwear. Nike is one of the largest customers of Feng Tay Enterprise. </li>
</ul>


We are negative on Feng Tay Enterprise's share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike combined with unattractive valuations.
In the next several months, we think there is a higher probability of Feng Tay's share price underperforming versus Nike.
Feng Tay Enterprise is one of the largest global OEM/ODM companies that specializes the design and manufacturing of footwear. Nike is one of the largest customers of Feng Tay Enterprise. 


Feng Tay Enterprise: Risks from Higher Inventory at Nike & Unattractive Valuations

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Yue Yuen Industrial Holdings / Equity Bottom-Up

<ul>
<li>Despite a softening global demand backdrop, <strong><a href="https://www.smartkarma.com/entities/yue-yuen-industrial-holdings-limited" target="_blank" data-smartkarma-citation="entities:12281:1" rel="noopener">Yue Yuen Industrial (551 HK)</a></strong>, a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.</li>
<li>Yue Yuen's shares have only just recovered from a 20-year low.</li>
<li>From both a historical perspective and relative to peers, Yue Yuen is undemanding here. </li>
</ul>


Despite a softening global demand backdrop, Yue Yuen Industrial (551 HK), a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.
Yue Yuen's shares have only just recovered from a 20-year low.
From both a historical perspective and relative to peers, Yue Yuen is undemanding here. 


Yue Yuen (551 HK): Putting Their Best Feet Forward

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China's cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.</li>
<li>Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.</li>
<li>Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.</li>
</ul>


Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China's cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.
Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.
Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.


Yue Yuen Industrial Holdings (551.HK) - Challenging Prospects Overshadow Undervaluation

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. </p><p>Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. </p><div class="content-highlight">
<p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  </p>
<p>The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. </p>
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. 
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).</p><p>After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.</p><div class="content-highlight"><p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. </p></div>

Bestway Global Holding (3358 HK) is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. 

Hong Kong

Stella International Holdings Limited develops and manufactures footwear products for casual and fashion footwear companies worldwide.

Crystal International Group Limited manufactures apparels. The Company produces casual clothes, jeans, personal under wears, sweaters, sports garments, and other products. Crystal International Group markets its products in Hong Kong.

Theme International Holdings Limited, through its subsidiaries, manufactures, retails, and trades garments. The Company also invests in properties.

Viva Goods Company Limited operates as a sports company. The company provides sports related services such as multi-brand sports apparels and footwear operation, events production and management, and sports-related consultancy and sports community development. Viva Goods conducts business in Hong Kong.

Texhong Textile Group Limited manufactures and sells yarn and grey fabrics. The Company's main focus is promoting and selling spandex stretch yarn and spandex stretch grey fabrics.

Citychamp Watch & Jewellery Group Limited, through its subsidiaries, manufactures and distributes watches, timepieces and enamelled copper wires. The Company also invests in and develops properties.

Pak Tak International Limited, through its subsidiaries, manufactures (through its own producing facilities or sub-contracting to garment manufacturers), on an OEM basis, and export men's, ladies' and children knitted garments to the United States and Europe. The Company also manufactures non-knitted garment for international airlines and retail chain store "Target" in the United States.

Regina Miracle International Holdings Limited is an intimate and sports apparel designer and manufacturer. The Company's biggest customers include Adidas, Reebok, Under Armour, and Champion. Regina Miracle International operates in Southeast Asia.

Eagle Nice (International) Holdings Limited, through its subsidiaries, designs and manufactures sportswear for men, women, and children on an OEM (Original Equipment Manufacturing) basis.  The sportswear supplies by the Company includes sports pants, jackets, tracksuits, sweaters, and T-shirts.

Pacific Textiles Holdings Limited manufactures customized knitted fabrics. The Company's fabrics are used in a broad range of fabrics, including men's, women's, and children's clothing, sportswear, swimwear, and inner-wear.

GOLDWIN INC. manufactures and markets sportswear for skiing, snowboarding, soccer, tennis, swimming, and other outdoor activities.

Zhejiang Weixing Industrial Development Co., Ltd. manufactures buttons, zips, and other apparel accessories. The Company also provides electroplating services.

Bata India Limited manufactures a wide range of leather, rubber/canvas and plastic footwear products.  The Company also manufactures sports apparel and leather accessories.  Bata India sells its products through its chain of company owned retail stores in India, as well as to businesses in the USA, United Kingdom, Europe, the Middle East and the Far East.

Carter's, Inc. markets baby and young children's apparel in the United States. The Company's brands are sold to national department stores, chain and specialty stores, discount retailers, and its own retail stores.

Swan Energy Ltd., through a subsidiary, explores for or procures natural gas and liquefied natural gas for Gujarat.  The Company also develops the gas grid in Gujarat and distributes natural gas.

Relaxo Footwears Ltd. is the marketing company for Relaxo Group.  The Group manufactures Hawai and lightweight chappals.

DESCENTE, LTD. manufactures athletic clothing including golf wear and ski wear. The Company also manufactures tennis shoes, skies, and sports bags.

Welspun India Limited is a home textile manufacturer with a global distribution network.

Vardhman Textiles Limited manufactures textile products. The Company offers wide  range of greige and dyed yarns in cotton, polyester, acrylic, and a variety of blends. Vardhman Textiles serves customers worldwide.

Under Armour, Inc. develops, markets, and distributes branded performance products for men, women, and youth. The Company designs and sells a broad offering of apparel and accessories made of synthetic microfibers.

Yue Yuen Industrial (Holdings) Limited, through its subsidiaries, manufactures and markets athletic, athletic style leisure, and casual and outdoor footwear.

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Yue Yuen Industrial Holdings (551 HK)

Feng Tay Enterprise: Risks from Higher Inventory at Nike & Unattractive Valuations

We are negative on Feng Tay Enterprise's share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike...

Douglas Kim

Yue Yuen (551 HK): Putting Their Best Feet Forward

Shares have bounced off a two-decade low in tandem with its best 9M net profit results since 2017. The current yield is 7.2% Upside is 60% if...

David Blennerhassett