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/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   </p><p>As discussed in <a href="https://www.smartkarma.com/insights/ausnutria-in-trading-halt-will-yili-lob-an-offer" target="_blank" data-smartkarma-citation="insights:58863" rel="noopener">Ausnutria in Trading Halt - Will Yili Lob an Offer?</a>,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.</p><p>Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.</p><p>The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).</p><p>The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. </p><div class="content-highlight"><p>The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. </p></div>

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   As discussed in Ausnutria in Trading Halt - Will Yili Lob an Offer?,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. 

Ausnutria’s Potential Conditional MGO from Yili

<p><a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   </p><p>Ausnutria entered a trading halt today pursuant to the Hong Kong Code on Takeovers and Mergers. On 1 October, Bloomberg reported that <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> is exploring a potential takeover of Ausnutria. Yili was said to be in talks with banks to finance a potential deal. The article also speculated that Ausnutria could attract takeover interest from other industry players. There was no takeover price or valuation mentioned in the article.  </p><p>We think that Yili is the likely suitor as there is a strong strategic rationale in acquiring Ausnutria. Yili has a strategy to increase its scale in the milk powder business through mergers and acquisitions. Yili was recently unsuccessful in its bid to acquire <a href="https://www.smartkarma.com/entities/reckitt-benckiser-group-plc" target="_blank" data-smartkarma-citation="entities:22105:1" rel="noopener">Reckitt Benckiser (RB/ LN)</a>’s infant-formula and child nutrition business in China. </p><div class="content-highlight"><p>In this note, we look at the strategic rationale for Yili’s potential bid and take a stab at estimating the potential offer price.  </p></div>

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   Ausnutria entered a trading halt today pursuant to the Hong Kong Code on Takeovers and Mergers. On 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. Yili was said to be in talks with banks to finance a potential deal. The article also speculated that Ausnutria could attract takeover interest from other industry players. There was no takeover price or valuation mentioned in the article.  We think that Yili is the likely suitor as there is a strong strategic rationale in acquiring Ausnutria. Yili has a strategy to increase its scale in the milk powder business through mergers and acquisitions. Yili was recently unsuccessful in its bid to acquire Reckitt Benckiser (RB/ LN)’s infant-formula and child nutrition business in China. In this note, we look at the strategic rationale for Yili’s potential bid and take a stab at estimating the potential offer price.  

Ausnutria in Trading Halt - Will Yili Lob an Offer?

Investment Research - Asia Consumer Sector, Investory

Devi Subhakesan

Investment Research - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Health And Happiness (H&H) / Event-Driven

<p><a href="https://www.smartkarma.com/entities/health-and-happiness-h-h-int" target="_blank" data-smartkarma-citation="entities:20582:1" rel="noopener">Health And Happiness (H&amp;H) (1112 HK)</a> announced a USD 610 Mn acquisition of a privately-held US-based pet nutrition company, Zesty Paws. In this report, we discuss the acquisition details and significance of this deal for Health and Happiness both in terms of business outlook and impact on its financials.</p><p>With China's long-term birth rate on a decline despite regulatory intervention ( <a href="https://www.smartkarma.com/insights/china-s-3-child-policy-unlikely-to-reverse-trend-child-care-stocks-can-derate-prefer-diverse-plays" target="_blank" data-smartkarma-citation="insights:52433" rel="noopener">China's 3-Child Policy Unlikely to Reverse Trend. Child-Care Stocks Can Derate, Prefer Diverse Plays</a>), companies with a dominant focus on the Baby &amp; children segment have to look elsewhere for growth. H&amp;H had forayed into the high-growth pet care segment in 2020 with its acquisition of "Solid Gold" - a US-based holistic pet food brand. With its Zesty Paws acquisition,  H&amp;H adds to its stable of pet care brands that could help the company diversify the product portfolio away from baby nutrition, and add a healthy dose of growth. </p><p>Our earlier published Smartkarma original report <a href="https://www.smartkarma.com/insights/pet-care-sector-in-asia-saga-has-just-started-opportunities-galore" target="_blank" data-smartkarma-citation="insights:47000" rel="noopener">Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore.</a> discusses in detail the rapidly growing pet care sector in China.</p>

Health And Happiness (H&amp;H) (1112 HK) announced a USD 610 Mn acquisition of a privately-held US-based pet nutrition company, Zesty Paws. In this report, we discuss the acquisition details and significance of this deal for Health and Happiness both in terms of business outlook and impact on its financials.With China's long-term birth rate on a decline despite regulatory intervention ( China's 3-Child Policy Unlikely to Reverse Trend. Child-Care Stocks Can Derate, Prefer Diverse Plays), companies with a dominant focus on the Baby &amp; children segment have to look elsewhere for growth. H&amp;H had forayed into the high-growth pet care segment in 2020 with its acquisition of "Solid Gold" - a US-based holistic pet food brand. With its Zesty Paws acquisition,  H&amp;H adds to its stable of pet care brands that could help the company diversify the product portfolio away from baby nutrition, and add a healthy dose of growth. Our earlier published Smartkarma original report Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore. discusses in detail the rapidly growing pet care sector in China.

Health & Happiness (1112 HK): Zesty Paws Acqsn. In Pursuit of Growth. At a Price.

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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 Bottom-Up

Jinxin Fertility Group  / Equity Bottom-Up

<p>We have discussed in our previous note that Jinxin Fertility will be a beneficiary for the China's promotional policy for the third child. With the recent share price weakness and development on the policy front, we provide updates on the company and continue to believe that it is a name to hold for more favorable policy tailwinds to come. </p>

We have discussed in our previous note that Jinxin Fertility will be a beneficiary for the China's promotional policy for the third child. With the recent share price weakness and development on the policy front, we provide updates on the company and continue to believe that it is a name to hold for more favorable policy tailwinds to come. 

Jinxin Fertility: Signs of Policy Tailwind and Valuation Dislocation

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

<div>
<p>Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of a short-seller report by Valliant Varriors which was published yesterday, see <a href="https://www.valiantvarriors.org/post/linklogis-the-brightest-stars-will-always-cast-the-deepest-shadows" target="_blank" rel="noopener">here</a>.</p>
<p>In this report, we will talk about the points raised by the short sellers.</p>
</div><div><p>We have covered various aspects of the deal in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-the-positives-fast-growing-blockchain-driven-supply-chain-financier" target="_blank" rel="noopener">Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier,</a> </li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-the-negatives-inconsistent-growth-and-margins-well-funded-competitors" target="_blank" rel="noopener">Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors, and</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-earnings-forecast-peer-comparison-and-first-stab-at-valuation" target="_blank" rel="noopener">Linklogis Pre-IPO - Earnings Forecast, Peer Comparison and First Stab at Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-phip-updates-nothing-to-complain-about" target="_blank" rel="noopener">Linklogis Pre-IPO - PHIP Updates - Nothing to Complain About</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-ipo-pricey-for-a-reason" target="_blank" rel="noopener">Linklogis IPO - Pricey for a Reason</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-ipo-trading-decent-but-not-hot-demand" target="_blank" rel="noopener">Linklogis IPO Trading - Decent but Not Hot Demand</a></li>
</ul></div>


Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of a short-seller report by Valliant Varriors which was published yesterday, see here.
In this report, we will talk about the points raised by the short sellers.
We have covered various aspects of the deal in our earlier notes:

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier, 
Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors, and
Linklogis Pre-IPO - Earnings Forecast, Peer Comparison and First Stab at Valuation
Linklogis Pre-IPO - PHIP Updates - Nothing to Complain About
Linklogis IPO - Pricey for a Reason
Linklogis IPO Trading - Decent but Not Hot Demand


Linklogis Short Sheller Report - Some Merit, Some Plain Drama - Mixed Bag

China

China Feihe Limited manufactures and sells dairy products. The Company provides infant milk formula products processing, production, marketing, and other services. China Feihe also sells infant milk formula products on some electronic commerce platforms.

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China Feihe (6186 HK)

Ausnutria’s Potential Conditional MGO from Yili

The completion of the agreements will result in Yili owning 34.33% voting rights, triggering an MGO at HK$10.06 per share. However, we think...

Arun George

Ausnutria in Trading Halt - Will Yili Lob an Offer?

Bloomberg reported on 1 Oct that Yili is weighing a bid for Ausnutria. We look at the strategic rationale for Yili/Ausnutria combination and take a...

Arun George

Health & Happiness (1112 HK): Zesty Paws Acqsn. In Pursuit of Growth. At a Price.

Significance and impact of the deal on H&H's business outlook and financials. Deal basics and Valuation. H&H's stock Outlook and Valuation update....

Devi Subhakesan

Jinxin Fertility: Signs of Policy Tailwind and Valuation Dislocation

We think there's a dislocation of Jinxin Fertilities' share following the sell-off of Chinese stocks due to the policy targeting education...

Ke Yan, CFA, FRM

Linklogis Short Sheller Report - Some Merit, Some Plain Drama - Mixed Bag

Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of...

Sumeet Singh

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