Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Event-Driven

Belle International Holdings / Event-Driven

We suggest shareholders vote in favor of the privatization of no-moat Belle. The consideration price of the privatization is HKD 6.3 per share, 20% and 28% premium to last price and our fair value estimate, respectively. The consideration price translates to a price/2017 earnings ratio of 19.1 times, versus 14.9 times implied by our fair value estimate. Mr. Sheng Baijiao, the current CEO of Belle admitted previously that there would be career risks for current management to have a major overhaul of the business and that he did not have a lot of understanding of e-commerce channels. He also had no plan to raise dividends to return cash to shareholders. Both Chairman Mr. Tang Yiu and Mr. Sheng have accepted the offer to sell down their combined 25.8% stake. These factors lead to our low confidence in the ability of the current management to turn around the business. We think Belle will need to go through a multiyear overhaul to effectively compete in the current market place. This could lead to large restructuring costs and earnings volatility that public shareholders may not have the patience to sit through. The offeror stated that it will not increase the consideration price, we think shareholders should capture this opportunity to sell their shares.Analyst: Chelsey Tam

We suggest shareholders vote in favor of the privatization of no-moat Belle. The consideration price of the privatization is HKD 6.3 per share, 20% and 28% premium to last price and our fair value estimate, respectively. The consideration price translates to a price/2017 earnings ratio of 19.1 times, versus 14.9 times implied by our fair value estimate. Mr. Sheng Baijiao, the current CEO of Belle admitted previously that there would be career risks for current management to have a major overhaul of the business and that he did not have a lot of understanding of e-commerce channels. He also had no plan to raise dividends to return cash to shareholders. Both Chairman Mr. Tang Yiu and Mr. Sheng have accepted the offer to sell down their combined 25.8% stake. These factors lead to our low confidence in the ability of the current management to turn around the business. We think Belle will need to go through a multiyear overhaul to effectively compete in the current market place. This could lead to large restructuring costs and earnings volatility that public shareholders may not have the patience to sit through. The offeror stated that it will not increase the consideration price, we think shareholders should capture this opportunity to sell their shares.Analyst: Chelsey Tam

Privatization a Good Way Out of Belle Which Has Little Earnings Growth Prospects

Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Before the opening bell on Tuesday, 18 April 2017, <a href="https://www.smartkarma.com/entities/17174" target="_blank" data-smartkarma-citation="entities:17174:1">Belle International Holdings Limited (1880 HK)</a>, requested a trading halt pending the release of an announcement pursuant to The Hong Kong Code on Takeovers and Mergers (<a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0418/LTN20170418135.PDF" target="_blank">link</a> to filing). <ul><li>Shortly after, Bloomberg <a href="https://www.bloomberg.com/news/articles/2017-04-18/cdh-investments-fund-said-to-lead-buyout-of-5-7-billion-belle" target="_blank">reported</a> that <a href="http://www.cdhfund.com/index.php/a/lists/catid/174/" target="_blank">CDH</a> is leading a buyout of Belle.</li><li>After a 10 day wait, Belle has announced a Scheme of Arrangement with an offer price of HKD 6.30.</li><li>The buyers are Belle's management, Hillhouse, and CDH.</li><li>Trading will resume on 2 May 2017.</li></ul>Shareholding Structure after completion of the Scheme<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/025/194/original/offerors.png?1493432202" class="editor-image img-responsive" data-smartkarma-image-id="25194"></figure><div class="content-caption">Source: Offer announcement; Note: SCBL is wholly-owned by CDH Fund V</div>In this insight, we examine the fairness of the offer and determine the likelihood of the offer going through.

Before the opening bell on Tuesday, 18 April 2017, Belle International Holdings Limited (1880 HK), requested a trading halt pending the release of an announcement pursuant to The Hong Kong Code on Takeovers and Mergers (link to filing). Shortly after, Bloomberg reported that CDH is leading a buyout of Belle.After a 10 day wait, Belle has announced a Scheme of Arrangement with an offer price of HKD 6.30.The buyers are Belle's management, Hillhouse, and CDH.Trading will resume on 2 May 2017.Shareholding Structure after completion of the SchemeSource: Offer announcement; Note: SCBL is wholly-owned by CDH Fund VIn this insight, we examine the fairness of the offer and determine the likelihood of the offer going through. 

Belle International - Privatization Offer at HKD 6.30 from Management and PE Backers

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Equity Capital Markets

Anta Sports Products / Equity Capital Markets

Anta Sports plans to raise around US$500m in order to fund acquisition of yet to be announced international brand to aid its expansion plans.The stock has been doing well over the past few years and is now trading near all-time highs, post a good set of numbers for FY16. The deal scores well on our framework given the company's track record, although the deal is large (7% of existing equity base) and is worth 44 days of ADV but this is partially alleviated by the 6-8% discount.<h2>Placement</h2>…

Anta Sports plans to raise around US$500m in order to fund acquisition of yet to be announced international brand to aid its expansion plans.The stock has been doing well over the past few years and is now trading near all-time highs, post a good set of numbers for FY16. The deal scores well on our framework given the company's track record, although the deal is large (7% of existing equity base) and is worth 44 days of ADV but this is partially alleviated by the 6-8% discount.Placement…

Anta Sports - Raising for Hopefully a Good Acquisition, Great Track Record Helps

Thematic (Sector/Industry)

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for <a href="https://www.smartkarma.com/entities/472" target="_blank" data-smartkarma-citation="entities:472:1">MGM China Holdings Ltd (2282 HK)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a>, HKD 14 for <a href="https://www.smartkarma.com/entities/473" target="_blank" data-smartkarma-citation="entities:473:1">Wynn Macau Ltd (1128 HK)</a>, USD 17 for <a href="https://www.smartkarma.com/entities/810" target="_blank" data-smartkarma-citation="entities:810:1">Melco Crown Entertainment ADR (MPEL US)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/806" target="_blank" data-smartkarma-citation="entities:806:1">Galaxy Entertainment Group Limited (27 HK)</a>, HKD 6.6 for <a href="https://www.smartkarma.com/entities/805" target="_blank" data-smartkarma-citation="entities:805:1">SJM Holdings Ltd (880 HK)</a>, $133 for <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a>, $56 for <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a>, and $29.50 for <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a>. We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for MGM China Holdings Ltd (2282 HK), HKD 36 for Sands China Ltd (1928 HK), HKD 14 for Wynn Macau Ltd (1128 HK), USD 17 for Melco Crown Entertainment ADR (MPEL US), HKD 36 for Galaxy Entertainment Group Limited (27 HK), HKD 6.6 for SJM Holdings Ltd (880 HK), $133 for Wynn Resorts Ltd (WYNN US), $56 for Las Vegas Sands Corp (LVS US), and $29.50 for MGM Resorts International (MGM US). We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

Asia Frontier Capital Travel Report: Laos

China

Belle International Holdings Limited retails woman's footwear.  The Company operates retail stores in the Peoples Republic of China, Hong Kong, Macau, and the United States.

Belle International Holdings (2129452D HK)

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Belle International Holdings (2129452D HK)

Privatization a Good Way Out of Belle Which Has Little Earnings Growth Prospects

We suggest shareholders vote in favor of the privatization of no-moat Belle. The consideration price of the privatization is HKD 6.3 per share, 20%...

Morningstar, Inc.

Belle International - Privatization Offer at HKD 6.30 from Management and PE Backers

Before the opening bell on Tuesday, 18 April 2017, Belle International Holdings Limited (1880 HK), requested a trading halt pending the release of...

Crispin Francis

Anta Sports - Raising for Hopefully a Good Acquisition, Great Track Record Helps

Anta Sports plans to raise around US$500m in order to fund acquisition of yet to be announced international brand to aid its expansion plans.The...

Sumeet Singh

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in...

Morningstar, Inc.

Asia Frontier Capital Travel Report: Laos

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos...

Asia Frontier Capital

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)