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

Yashili International Holdings / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a>'s spread to <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.</li>
<li>We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.</li>
<li>Both <a href="https://www.smartkarma.com/entities/danone-sa" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.</li>
</ul>



Yashili International Holdings (1230 HK)'s spread to China Mengniu Dairy Co (2319 HK)’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.
We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.
Both Danone SA (BN FP) and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.


Yashili’s Widening Spread Is an Opportunity

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 28th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight inflows into Tencent Holding, Meituan, Wuxi Biologics, Kuaishou.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 28th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight inflows into Tencent Holding, Meituan, Wuxi Biologics, Kuaishou.


Hong Kong Connect Flows (Oct 28th): Tencent, Meituan, Wuxi Biologics, Kuaishou

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<div><div><div><div><ul><li>A non-eventful 3Q. While earnings cuts and de-ratings have taken place and reset market expectation across 1H results, in our view, earnings volatility for 3Q is unlikely to be drastic.</li><li>For items that we monitored, our channel checks suggested that sales momentum was largely on track to us - low-teen growth for CRB, double-digit growth for Nongfu, and particularly sequential double- digit recovery for Mengniu and Feihe.</li><li>Separately, the lockdown of Hainan since August could mean downside revision potential for CTGDF despite a well-maintained GPM.</li></ul></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

A non-eventful 3Q. While earnings cuts and de-ratings have taken place and reset market expectation across 1H results, in our view, earnings volatility for 3Q is unlikely to be drastic.For items that we monitored, our channel checks suggested that sales momentum was largely on track to us - low-teen growth for CRB, double-digit growth for Nongfu, and particularly sequential double- digit recovery for Mengniu and Feihe.Separately, the lockdown of Hainan since August could mean downside revision potential for CTGDF despite a well-maintained GPM.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer – Addressing Recent Investors’ Concerns

Equity Bottom-Up

<div><div><div><div><ul><li>We moderately trim our 2022/23E earnings by 6-7% p.a as we now attempt to factor-in 1) a lower GPM (by average 0.8pp) due to higher non-infant milk formula contribution and 2) a 1.5pp higher selling expense.</li><li>Our forecast in general is at the low end/ slightly below management guidance, as we believe a low birth rate could compound with an intensifying competition to weigh on margins and drive up promotion expenses.</li><li>Despite this, Feihe’s sequential sales recovery sustains our BUY rating.</li></ul></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

We moderately trim our 2022/23E earnings by 6-7% p.a as we now attempt to factor-in 1) a lower GPM (by average 0.8pp) due to higher non-infant milk formula contribution and 2) a 1.5pp higher selling expense.Our forecast in general is at the low end/ slightly below management guidance, as we believe a low birth rate could compound with an intensifying competition to weigh on margins and drive up promotion expenses.Despite this, Feihe’s sequential sales recovery sustains our BUY rating.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Feihe (6186 HK) – Completion of channel restructuring continues to drive a steady 2H recovery

<ul><li>1H ended with 3 beats, 3 misses and 5 in-lines. The wrap-up of 1H/ 2Q earnings season has largely reset market expectation with latest earnings forecasts, management guidance and hence a refreshed 2H outlook.</li><li>In the near term, in our view, when the PPI-CPI scissor gap continues to narrow, market likely refocuses on the legitimation of any GPM expansion for staple players.</li><li>Meanwhile, lockdown risks prompt us to reside with plays that enjoy high online sales mix, and more importantly, relevant to the upcoming Double 11 campaign.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

1H ended with 3 beats, 3 misses and 5 in-lines. The wrap-up of 1H/ 2Q earnings season has largely reset market expectation with latest earnings forecasts, management guidance and hence a refreshed 2H outlook.In the near term, in our view, when the PPI-CPI scissor gap continues to narrow, market likely refocuses on the legitimation of any GPM expansion for staple players.Meanwhile, lockdown risks prompt us to reside with plays that enjoy high online sales mix, and more importantly, relevant to the upcoming Double 11 campaign.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer Staples – A diverging 1H; mix upgrade and cost savings were keys to stay relevant

China

Heilongjiang Agriculture Co., Ltd. plants, processes, and sells rice, soybean, wheat, corn, and other grain products.  The Company also produces fertilizers and sells paper products.

MeiHua Holdings Group Co., Ltd. manufactures various pharmaceuticals. The Company manufactures monosodium glutamate, amino acids, L-Threonine L-Glutamine  L-Proline  and Natamycin.

Jiangxi Zhengbang Technology Co., Ltd. produces and markets forage and forage additive for livestock and poultry. The company also produces and markets livestock, poultry and aquatic products.

Uni-President China's products include beverages and food. 

The Group recorded a revenue of RMB22,761.8 million in 2020, representing an increase of 3.4% as compared with that of the corresponding period last year, and profits after tax of RMB1,625.7 million, representing an increase of 19.0% as compared with that of last year. 

We recorded a double-digit growth in the food business as the increasing brand value of daily-consumed noodles “Soup Daren（湯達人）” was highly recognized by consumers and the brand philosophy of the high-end Chinese cuisine “Kai Xiao Zao （開小灶）” was continuously promoted to create and extend the consumption scenarios, thereby contributing to such multifold growth in revenue. 

The beverages business was gradually recovering despite the impacts caused by the epidemic. “Uni Assam Milk Tea（統一阿薩姆奶茶）” was favoured by consumers as
usual with a unwavering leading position in the milk tea market and positive growth in revenue. Sugar-free tea “Chai Li Won（茶裏王）” aligned with consumers’ lifestyle concept of “sugar-free” to improve its brand recognition. On its road to value marketing, the Group remained steadfast in developing brands that are loved and trusted by consumers.

Angel Yeast Co., Ltd. produces yeast and yeast products, including high-activity dry yeast, yeast monosodium glutamate, and special yeast.  The Company also manufactures dairy products, food additives, soy bean products, and other food products.

Shenzhen Shenxin Taifeng Group Co., Ltd. develops, manufactures, and sells communication products, as well as produces feedstuffs and breeds poultry.  The Company's products include feedstuffs, communication products and agricultural products as well as is involved in property development and management.

Shenzhen Shenxin Taifeng Group Co,Ltd. (000034 CH)

Beijing Dabeinong Technology Group Co.,Ltd produces and sells animal feeds, cultivates and promotes seed products.  The Company's products include mix feed, concentrate feed, compound feed, paddy seed, corn seed, and cotton seed.

Beijing Dabeinong Technology Grp (002385 CH)

Fujian Sunner Development Company Ltd. processes and markets poultry.  The Company's products include frozen chicken meat and other chicken parts.

Harbin High-tech Group Co., Ltd. is an investment holding company.  Through its subsidiaries, the Company processes soybeans, manufactures pharmaceuticals and water resistant coiled materials, develops and manages real estate, as well as operates in commercial trading.

New Hope Liuhe Co Ltd develops, produces, and markets a variety of animal feeds The Company also operates a commercial tradingbusiness, produces packing materials, chemicals and fish oil, and provides consulting services.

Nisshin Seifun Group Inc. produces and sells flour, fodder, processed foods, and medicines. The Company offers specialized pasta sauce, frozen foods, and gourmet soup. Nisshin Seifun Group also markets pet foods.

PPB Group Berhad is an investment holding company. The Company operations include grains trading, flour and animal feed milling industry as well as downstream activities including livestock farming, food processing and consumer products distribution with primary focus in Indonesia, Malaysia, China, India and Europe.

PT Indofood Sukses Makmur Tbk and its subsidiaries manufacture instant noodles, wheat flour, baby food, food seasonings, coffee, cooking oil, and snacks.

IOI Corporation Berhad cultivates and processes oil palm and rubber.  The Company, through its subsidiaries, operates in property development and investment, provides landscape services, and sells ornamental plants and turfing grass. IOI Corporation also manufactures industrial and medical gases, and provides building, engineering, and construction services.

CJ CheilJedang Corp. manufactures processed food products.  The Company's products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.  CJ CheilJedang also manufactures pharmaceutical and household products.

Flowers Foods, Inc. produces and markets packaged bakery foods for retail and foodservice customers. The Company offers fresh packaged and frozen bakery products, as well as pastries, doughnuts, and bakery snack products. Flowers Foods serves customers in the State of Georgia.

Universal Robina Corporation manufactures, markets, and distributes branded consumer foods. The Company's products include hogs and poultry farming, animal feeds, corn products, and animal health products.

NICHIREI CORPORATION produces and distributes frozen food, ice, and meat products.  The Company also provides a variety of cold storage services, as well as manages leasing business for buildings and parking garages.

YAMAZAKI BAKING CO., LTD. produces baking foods including bread, pastry, and cake.  The Company operates nationwide sales network.  YAMAZAKI BAKING also operates franchised cafeterias and convenience stores.

Hatsun Agro Products Limited manufactures skimmed milk powder, skimmed milk powd er blends, instant skimmed milk powder, whole milk powder, and full cream milk p owder.

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)

Yashili’s Widening Spread Is an Opportunity

While the pre-condition should be satisfied, both Danone and Mengniu have the incentive and the ability to waive conditions to satisfy the pre...

Arun George

Hong Kong Connect Flows (Oct 28th): Tencent, Meituan, Wuxi Biologics, Kuaishou

We analyzed southbound Hong Kong connect flows in the past week and highlight flows for Tencent, Meituan, Wuxi Biologics, Kuaishou.

Ke Yan, CFA, FRM

China Consumer – Addressing Recent Investors’ Concerns

A non-eventful 3Q. While earnings cuts and de-ratings have taken place and reset market expectation across 1H results, in our view, earnings...

CMB International