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?

APAC IPOs & Placements

Zhen Zhou, Toh

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 Capital Markets

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<p><a href="https://www.smartkarma.com/entities/nayuki-holdings" target="_blank" data-smartkarma-citation="entities:32149:1" rel="noopener">Nayuki Holdings (NYK HK)</a> raised US$656m at HK$19.80 per share, the top-end of its IPO price range.</p>
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<p>Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.</p>
<p>In this note, we will discuss deal dynamics and update valuation.</p>
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<p>We had previously covered the IPO in:</p>
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<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/nayuki-pre-ipo-fast-growing-cash-flow-positive-teahouse-chain" target="_blank" data-smartkarma-citation="insights:49798" rel="noopener">Nayuki (奈雪) Pre-IPO - Fast-Growing, Cash Flow Positive Teahouse Chain</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/nayuki-pre-ipo-phip-updates-4q20-results-shows-improvement" target="_blank" data-smartkarma-citation="insights:52793" rel="noopener">Nayuki (奈雪) Pre-IPO - PHIP Updates - 4Q20 Results Shows Improvement</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/nayuki-pre-ipo-industry-landscape-and-peer-comparison" target="_blank" data-smartkarma-citation="insights:52797" rel="noopener">Nayuki (奈雪) Pre-IPO - Industry Landscape and Peer Comparison</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/nayuki-pre-ipo-forecast-and-thoughts-on-valuation" target="_blank" data-smartkarma-citation="insights:52992" rel="noopener">Nayuki (奈雪) Pre-IPO - Forecast and Thoughts on Valuation</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/nayuki-ipo-not-cheap-but-should-still-do-well" target="_blank" data-smartkarma-citation="insights:53247" rel="noopener">Nayuki (奈雪) IPO - Not Cheap but Should Still Do Well</a> </li>
</ul>
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Nayuki Holdings (NYK HK) raised US$656m at HK$19.80 per share, the top-end of its IPO price range.


Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.
In this note, we will discuss deal dynamics and update valuation.


We had previously covered the IPO in:




Nayuki (奈雪) Pre-IPO - Fast-Growing, Cash Flow Positive Teahouse Chain 

Nayuki (奈雪) Pre-IPO - PHIP Updates - 4Q20 Results Shows Improvement 

Nayuki (奈雪) Pre-IPO - Industry Landscape and Peer Comparison 

Nayuki (奈雪) Pre-IPO - Forecast and Thoughts on Valuation 

Nayuki (奈雪) IPO - Not Cheap but Should Still Do Well 



Nayuki (奈雪) IPO Trading - Good Demand

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> (CYD) raised about US$643m at HK$6.98 per share, the bottom-end of its IPO price range. </p>
<p>CYD is an integrated provider of products and services in the upstream dairy industry. The company is a leader in the various upstream industries that it operates in even though they are mostly fragmented.</p>
<p>In this note, we will discuss deal dynamics and update valuation.</p>
<p>We have previously covered the IPO in:</p>
</div>
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<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/china-youran-dairy-pre-ipo-a-leader-pulling-ahead-in-a-fragmented-market" target="_blank" rel="noopener">China Youran Dairy(悠然牧业) Pre-IPO - A Leader Pulling Ahead in a Fragmented Market<br></a></li>
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<a href="https://www.smartkarma.com/insights/china-youran-dairy-pre-ipo-phip-updates-much-better-disclosure" target="_blank" data-smartkarma-citation="insights:51794" rel="noopener">China Youran Dairy(悠然牧业) Pre-IPO - PHIP Updates - Much Better Disclosure</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-youran-dairy-pre-ipo-peer-comparison-youran-is-the-leader" target="_blank" data-smartkarma-citation="insights:51796" rel="noopener">China Youran Dairy(悠然牧业) Pre-IPO - Peer Comparison - Youran Is the Leader</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-youran-dairy-ipo-reasonable-valuation-but-there-will-be-significant-overhang" target="_blank" data-smartkarma-citation="insights:52634" rel="noopener">China Youran Dairy(悠然牧业) IPO - Reasonable Valuation but There Will Be Significant Overhang</a> </li>
</ul>
</div>


China Youran Dairy Group Ltd (9858 HK) (CYD) raised about US$643m at HK$6.98 per share, the bottom-end of its IPO price range. 
CYD is an integrated provider of products and services in the upstream dairy industry. The company is a leader in the various upstream industries that it operates in even though they are mostly fragmented.
In this note, we will discuss deal dynamics and update valuation.
We have previously covered the IPO in:



China Youran Dairy(悠然牧业) Pre-IPO - A Leader Pulling Ahead in a Fragmented Market 

China Youran Dairy(悠然牧业) Pre-IPO - PHIP Updates - Much Better Disclosure 

China Youran Dairy(悠然牧业) Pre-IPO - Peer Comparison - Youran Is the Leader 

China Youran Dairy(悠然牧业) IPO - Reasonable Valuation but There Will Be Significant Overhang 



China Youran Dairy(悠然牧业) IPO Trading - Weak Demand

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>According to Reuters, <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> has priced its IPO at HK$6.98 per share, at the lower end of the proposed price range. The offer price will be officially announced on 17<sup>th</sup> June 2021 and shares will commence trading on the Hong Kong stock exchange on the following day.</p><p>An analysis of past upstream dairy IPOs on the Hong Kong and Mainland China stock exchanges shows that none of the previous IPOs had strong openings, despite offering huge earnings growth potential.</p><p>Weak investor demand for the Youran IPO could be due to its pricing premium over peers and the lack of interest shown by investors towards the dairy sector in general. We think shares could have a weak opening on 18<sup>th</sup> June 2021. Nevertheless, it could lead to an opportunity to buy Youran, a company at the forefront of China’s upstream dairy market consolidation, at a bargain.</p>

According to Reuters, China Youran Dairy Group Ltd (9858 HK) has priced its IPO at HK$6.98 per share, at the lower end of the proposed price range. The offer price will be officially announced on 17th June 2021 and shares will commence trading on the Hong Kong stock exchange on the following day.An analysis of past upstream dairy IPOs on the Hong Kong and Mainland China stock exchanges shows that none of the previous IPOs had strong openings, despite offering huge earnings growth potential.Weak investor demand for the Youran IPO could be due to its pricing premium over peers and the lack of interest shown by investors towards the dairy sector in general. We think shares could have a weak opening on 18th June 2021. Nevertheless, it could lead to an opportunity to buy Youran, a company at the forefront of China’s upstream dairy market consolidation, at a bargain.

China Youran Dairy IPO: First Day Trading

China

China Youran Dairy Group Ltd operates as a dairy products manufacturing company. The Company conducts feed business, raw milk produ tion, and other buisinesses. China Youran Dairy Group markets its products throughout China.

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China Youran Dairy Group Ltd (9858 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

Nayuki (奈雪) IPO Trading - Good Demand

Nayuki Holdings (NYK HK) raised US$656m at HK$19.80 per share, the top-end of its IPO price range. Nayuki is the operator of Nayuki teahouses, a...

Zhen Zhou, Toh

China Youran Dairy(悠然牧业) IPO Trading - Weak Demand

China Youran Dairy Group Ltd (9858 HK) (CYD) raised about US$643m at HK$6.98 per share, the bottom-end of its IPO price range.

Zhen Zhou, Toh

China Youran Dairy IPO: First Day Trading

We think shares could have a weak opening. Nevertheless, it could lead to an opportunity to buy Youran, a company at the forefront of China’s...

Oshadhi Kumarasiri

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