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.

Equity Capital Markets

China Youran Dairy Group Ltd / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/china-youran-dairy-group-ltd" target="_blank" data-smartkarma-citation="entities:31075:1" rel="noopener">China Youran Dairy Group Ltd (9858 HK)</a> is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of <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> until PAG Capital’s investment in 2015.</p>
<p>At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.</p>
<p>The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.</p>
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<p>In <a href="https://www.smartkarma.com/insights/china-youran-dairy-group-ipo-initiation-ecownomics" target="_blank" data-smartkarma-citation="insights:51709" rel="noopener">China Youran Dairy Group IPO Initiation: Ecownomics</a>, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.</p>
<div class="content-highlight"><p>Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to <a href="https://www.smartkarma.com/entities/china-modern-dairy-holdings" target="_blank" data-smartkarma-citation="entities:6785:1" rel="noopener">China Modern Dairy (1117 HK)</a>, an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. </p></div>
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China Youran Dairy Group Ltd (9858 HK) is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (A) (600887 CH) until PAG Capital’s investment in 2015.
At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.
The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.

In China Youran Dairy Group IPO Initiation: Ecownomics, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.
Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to China Modern Dairy (1117 HK), an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. 


China Youran Dairy Group IPO: Valuation Insights

Asia Consumer Research, Investory

Devi Subhakesan

Asia Consumer Research

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.

Equity Bottom-Up

Health And Happiness (H&H) / Equity Bottom-Up

<p>In this insight, we discuss various socio-demographic factors which suggest that China's announced 3-child policy is unlikely to reverse the shifting demographic trends - accelerated aging and fall in the birth rate - in the medium term. We also discuss why <strong>we prefer companies like <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> that have a diverse product portfolio including adult/elder care Vs. pure-play Infant/child care stocks. </strong></p><p>The current trend of slow down in births in China will lead to slower growth in the market for Infant/child care products. <strong>Expect companies focussed predominantly on infant/child care in China to witness a slow down in growth rate and consequent derating in valuation. </strong></p><p>After its highly anticipated population data in early May, China has now announced a shift in policy allowing couples to have up to three children in an attempt to arrest the declining birth rate. It is unlikely to have much of an impact going by the experience from China's shift to the 2-child policy earlier (2016). There are multiple social and economic factors, apart from birth restrictions, that have led to China's extremely low birth rate of 1.3; these factors are unlikely to change easily. </p>

In this insight, we discuss various socio-demographic factors which suggest that China's announced 3-child policy is unlikely to reverse the shifting demographic trends - accelerated aging and fall in the birth rate - in the medium term. We also discuss why we prefer companies like Health And Happiness (H&amp;H) (1112 HK) that have a diverse product portfolio including adult/elder care Vs. pure-play Infant/child care stocks. The current trend of slow down in births in China will lead to slower growth in the market for Infant/child care products. Expect companies focussed predominantly on infant/child care in China to witness a slow down in growth rate and consequent derating in valuation. After its highly anticipated population data in early May, China has now announced a shift in policy allowing couples to have up to three children in an attempt to arrest the declining birth rate. It is unlikely to have much of an impact going by the experience from China's shift to the 2-child policy earlier (2016). There are multiple social and economic factors, apart from birth restrictions, that have led to China's extremely low birth rate of 1.3; these factors are unlikely to change easily. 

China's 3-Child Policy Unlikely to Reverse Trend. Child-Care Stocks Can Derate, Prefer Diverse Plays

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.

Jinxin Fertility Group  / Equity Bottom-Up

<p>China's Politburo hosted a meeting on May 31st to review the population policy (关于优化生育政策促进人口长期均衡发展的决定, hereafter Decision). The meeting pointed out that allowing couples to have third child will improve the demographic structure of China to counter the aging population. The meeting also mentioned that the government will start to implement policies to encourage the third child, with social and economic support. In this note, I take a brief look at the China's past child birth policy changes and three beneficiaries of the new birth policy. I am of the view that the benefit of the new policy will be marginal but the direction is plausible. </p>

China's Politburo hosted a meeting on May 31st to review the population policy (关于优化生育政策促进人口长期均衡发展的决定, hereafter Decision). The meeting pointed out that allowing couples to have third child will improve the demographic structure of China to counter the aging population. The meeting also mentioned that the government will start to implement policies to encourage the third child, with social and economic support. In this note, I take a brief look at the China's past child birth policy changes and three beneficiaries of the new birth policy. I am of the view that the benefit of the new policy will be marginal but the direction is plausible. 

China: 3rd Child Policy and 3 Beneficiaries

Quantitative Analysis

<p>Hong Kong SFC reported aggregate short position as of May 21. The aggregate short value for equities increased by $2,320m (+3.4%) WoW but decreased by $150m (-0.2%) over the preceding four weeks.</p><p>Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($5,704m, -1.6% WoW), Tencent Holdings Limited/700 HK($2,192m, +10.7% WoW), China Merchants Bank Co., Ltd./3968 HK($1,733m, +2.5% WoW), Zhongsheng Group Holdings Limited/881 HK($1,611m, +4.3% WoW), Kuaishou-W/1024 HK($1,430m, +12.6% WoW).</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/129/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292021-05-31+10_50_08.png?1622429960" class="editor-image img-responsive" data-smartkarma-image-id="210129"></figure></section>

Hong Kong SFC reported aggregate short position as of May 21. The aggregate short value for equities increased by $2,320m (+3.4%) WoW but decreased by $150m (-0.2%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($5,704m, -1.6% WoW), Tencent Holdings Limited/700 HK($2,192m, +10.7% WoW), China Merchants Bank Co., Ltd./3968 HK($1,733m, +2.5% WoW), Zhongsheng Group Holdings Limited/881 HK($1,611m, +4.3% WoW), Kuaishou-W/1024 HK($1,430m, +12.6% WoW).

HK Short Interest: Short Covers for Alibaba, China Feihe

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Weilong Delicious Global Holdi / Equity Capital Markets

<p>Weilong Delicious Global (WDG), a spicy snack food company in China, aims to raise around US$1bn in its Hong Kong IPO. </p><p>WDG sells products across three categories: seasoned flour products,  vegetable products and Bean-based and other products. According to Frost &amp; Sullivan (F&amp;S), in terms of retail sales value in 2020, WDG ranked first among all spicy snack food enterprises in China, with a market share of 5.7%, and ranked first in each of the seasoned flour product and spicy vegetable snack product categories.</p><p>Overall revenue growth has been strong at 23% YoY in 2019 and 21.7% in 2020 driven both by an increase in volumes and prices over 2019-20. Vegetable products have been the fastest growing category with a CAGR of 98% over FY18-20.</p><p>Along with strong revenue growth, WDG gross profit growth has been even stronger, with gross profit growing by 25-31% YoY over 2018-20. PAT grew at 25-38% over 2018-20.</p>

Weilong Delicious Global (WDG), a spicy snack food company in China, aims to raise around US$1bn in its Hong Kong IPO. WDG sells products across three categories: seasoned flour products,  vegetable products and Bean-based and other products. According to Frost &amp; Sullivan (F&amp;S), in terms of retail sales value in 2020, WDG ranked first among all spicy snack food enterprises in China, with a market share of 5.7%, and ranked first in each of the seasoned flour product and spicy vegetable snack product categories.Overall revenue growth has been strong at 23% YoY in 2019 and 21.7% in 2020 driven both by an increase in volumes and prices over 2019-20. Vegetable products have been the fastest growing category with a CAGR of 98% over FY18-20.Along with strong revenue growth, WDG gross profit growth has been even stronger, with gross profit growing by 25-31% YoY over 2018-20. PAT grew at 25-38% over 2018-20.

Weilong Delicious Global Pre-IPO - The Positives - Fast Growth, Strong Backers

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)

China Youran Dairy Group IPO: Valuation Insights

At the mid-point of the IPO price range, the gross proceeds are $722 million. Overall, we are inclined to participate at most at the low end of the...

Arun George

China's 3-Child Policy Unlikely to Reverse Trend. Child-Care Stocks Can Derate, Prefer Diverse Plays

Expect slow down in China's population growth to persist. Pure play child care stocks could derate from slowing market growth. Prefer stocks with...

Devi Subhakesan

China: 3rd Child Policy and 3 Beneficiaries

I take a brief look at the China's past child birth policy changes and three beneficiaries of the exposure to the new birth policy.

Ke Yan, CFA, FRM

HK Short Interest: Short Covers for Alibaba, China Feihe

We highlight the short covers for Alibaba (9988 HK) and China Feihe (6186 HK) in the latest short aggregate position report released by Hong Kong SFC.

Ke Yan, CFA, FRM

Weilong Delicious Global Pre-IPO - The Positives - Fast Growth, Strong Backers

Weilong Delicious Global, a spicy snack food company in China, aims to raise around US$1bn in its Hong Kong IPO. It recently undertook a pre-IPO...

Sumeet Singh

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