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

China Mengniu Dairy Co / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/danone-sa" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> is looking to raise about US$2bn by selling its 9.8% stake in <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>. This is a clean-up trade.</p><p>In this note, we will discuss deal dynamics, briefly look at FY20 performance, and run the deal through our ECM framework.</p>

Danone SA (BN FP) is looking to raise about US$2bn by selling its 9.8% stake in China Mengniu Dairy Co (2319 HK). This is a clean-up trade.In this note, we will discuss deal dynamics, briefly look at FY20 performance, and run the deal through our ECM framework.

China Mengniu Placement - Danone's Expected Exit - One and Done

President, Vision Research

Robert C Prather Jr

President

Vision Research

Vision Research was formed in 2004 with the vision of generating the best possible fundamental analysis and investment research for smid cap US equities. In 2008, we broadened our coverage to include mid/large cap US stocks.  After researching a  few ideas outside the US each year for a number of years, we launched a dedicated non-US equity product at the end of 2015.  This was followed by the introduction of a product focused on IPOs in mid-2017.

Fundamental Insight

Equity Bottom-Up

<p>We issued a short recommendation on BN FP over 12 months ago when the stock was at 71 euros.  We closed the short when the stock was below 53 euros.  We should have stayed short longer as the stock ended up trading below 47 euros.  It has since rallied 24% over the past 4 months to almost 58 euros and is at the upper band on the RSI chart.  Some believe a turnaround story is in the works, but many of the issues we previously highlighted still exist.  The question is, at what price should you buy or short the turnaround?</p>

We issued a short recommendation on BN FP over 12 months ago when the stock was at 71 euros.  We closed the short when the stock was below 53 euros.  We should have stayed short longer as the stock ended up trading below 47 euros.  It has since rallied 24% over the past 4 months to almost 58 euros and is at the upper band on the RSI chart.  Some believe a turnaround story is in the works, but many of the issues we previously highlighted still exist.  The question is, at what price should you buy or short the turnaround?

Danone SA (BN FP): Is This A Turnaround Story Or Could Another Short Opportunity Be On The Horizon?

Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

<ul>
<li>According to our definition, A2 Milk is a wonderful business largely thanks to its superior return on capital guarded by a multi-layered moat, a megatrend-driven growth prospect, and the capability to compound earnings for shareholders;</li>
<li>Mr. Market displayed his short-termism in terms of the stock recently, which we think provides a rare entry point for investors interested in the company into 2021.</li>
</ul>


According to our definition, A2 Milk is a wonderful business largely thanks to its superior return on capital guarded by a multi-layered moat, a megatrend-driven growth prospect, and the capability to compound earnings for shareholders;
Mr. Market displayed his short-termism in terms of the stock recently, which we think provides a rare entry point for investors interested in the company into 2021.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Today after the close it was <a href="https://www.globenewswire.com/news-release/2020/10/06/2103999/0/en/Danone-intends-to-sell-its-stake-in-Yakult.html" target="_blank" rel="noopener">announced</a> that <a href="https://www.smartkarma.com/entities/danone-sa" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> - currently the largest shareholder in <a href="https://www.smartkarma.com/entities/yakult-honsha-co-ltd" target="_blank" data-smartkarma-citation="entities:17153:1" rel="noopener">Yakult Honsha (2267 JP)</a> - intended to sell down the last of its stake after a 20-year run.</p><p>The press release notes <em>"Danone's collaboration with Yakult began in 2004."</em></p><p>That's saying it nicely. Danone bought 5% in 2000 then bought up to 20% in the market in 2003 in an effort to get Yakult to collaborate. It was not done with Yakult's permission, but it got their attention.</p><div>
<p>Yakult and Danone signed an <em>Alliance Agreement</em> in March 2004. That agreement was renewed in 2008 so the agreement would stay in place until 2012. In 2012, negotiations on the future alliance were extended and extended and finally, in late April 2013 - after a year-plus of jawboning and speculation of a hostile bid, occasionally dampened by public promises to the contrary by Danone executives - the two companies decided they could not, in the end, agree, and they cancelled their <em>Strategic Alliance</em> and signed a <em>Memorandum of Understanding on a Collaborative Relationship</em>.</p>
<p>The lack of hostile action by Danone may have been the result of the fact that Yakult-friendly Japanese corporate investors bought shares in the meantime, lifting the share price by 60-70% in a year and lifting the friendly ownership to over 50%, making hostile action essentially futile. </p>
</div><div>
<p>That relationship basically stood as a standstill agreement with 3 Danone appointees named to the Yakult board, and ongoing JV operation in their 50/50 Vietnam and 80/20 (Yakult/Danone) Joint Ventures and ongoing 'collaboration' in the probiotics business. Since the big buy in 2003, including dividends, Danone was up 500% on its investment as of February 2018 when it decided to sell down a very large stake after activist Corvex Management had taken on Danone and urged it to reduce capital assets which didn't provide much. At the time, Yakult traded at 20x EV/EBITDA and 36x PER. </p>
<h2>The NEW News</h2>
<p>Danone is bailing on the rest of the stake while the existing commercial partnerships, "including joint-ventures in India and Vietnam remain in place" (according to the <a href="https://ml-eu.globenewswire.com/Resource/Download/768c55f8-a7c0-4ba7-b4e8-9f01bf4bef68" target="_blank" rel="noopener">announcement</a>).</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/665/original/Screenshot%202020-10-06%20at%204.58.37%20PM.png?1601974734" class="editor-image img-responsive" data-smartkarma-image-id="163665"></figure><p></p>
<p>The weekly chart shows they did not catch the top last time (14 Feb 2018 announcement when the stock was ¥7940/share), but they enjoyed a nice run-up from a year prior. At the time, both TOPIX and TOPIX FOOD Sector indices had taken a sharp drop.</p>
<p>After the announcement the last time, the shares fell 6.8% on the next day. That time was a Public Offering which required a book building phase and then delivery saw a couple of weeks of large volume. The shares traded in line with market and sector before falling in April and May 2018. Since then, the shares have largely underperformed both TOPIX and the sector.</p>
<p>This deal is an Accelerated Block Offering. It makes things more interesting. Valuations are different than last time and the shareholder structure is different too. </p>
<p>Much more below the fold.</p>
</div>

Today after the close it was announced that Danone SA (BN FP) - currently the largest shareholder in Yakult Honsha (2267 JP) - intended to sell down the last of its stake after a 20-year run.The press release notes "Danone's collaboration with Yakult began in 2004."That's saying it nicely. Danone bought 5% in 2000 then bought up to 20% in the market in 2003 in an effort to get Yakult to collaborate. It was not done with Yakult's permission, but it got their attention.
Yakult and Danone signed an Alliance Agreement in March 2004. That agreement was renewed in 2008 so the agreement would stay in place until 2012. In 2012, negotiations on the future alliance were extended and extended and finally, in late April 2013 - after a year-plus of jawboning and speculation of a hostile bid, occasionally dampened by public promises to the contrary by Danone executives - the two companies decided they could not, in the end, agree, and they cancelled their Strategic Alliance and signed a Memorandum of Understanding on a Collaborative Relationship.
The lack of hostile action by Danone may have been the result of the fact that Yakult-friendly Japanese corporate investors bought shares in the meantime, lifting the share price by 60-70% in a year and lifting the friendly ownership to over 50%, making hostile action essentially futile. 

That relationship basically stood as a standstill agreement with 3 Danone appointees named to the Yakult board, and ongoing JV operation in their 50/50 Vietnam and 80/20 (Yakult/Danone) Joint Ventures and ongoing 'collaboration' in the probiotics business. Since the big buy in 2003, including dividends, Danone was up 500% on its investment as of February 2018 when it decided to sell down a very large stake after activist Corvex Management had taken on Danone and urged it to reduce capital assets which didn't provide much. At the time, Yakult traded at 20x EV/EBITDA and 36x PER. 
The NEW News
Danone is bailing on the rest of the stake while the existing commercial partnerships, "including joint-ventures in India and Vietnam remain in place" (according to the announcement).

The weekly chart shows they did not catch the top last time (14 Feb 2018 announcement when the stock was ¥7940/share), but they enjoyed a nice run-up from a year prior. At the time, both TOPIX and TOPIX FOOD Sector indices had taken a sharp drop.
After the announcement the last time, the shares fell 6.8% on the next day. That time was a Public Offering which required a book building phase and then delivery saw a couple of weeks of large volume. The shares traded in line with market and sector before falling in April and May 2018. Since then, the shares have largely underperformed both TOPIX and the sector.
This deal is an Accelerated Block Offering. It makes things more interesting. Valuations are different than last time and the shareholder structure is different too. 
Much more below the fold.


Danone Sells The Last of Their Yakult - Buy the Cleanup

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

<div>
<p><a href="https://www.smartkarma.com/entities/21403" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> is selling its remaining 6.2% stake in <a href="https://www.smartkarma.com/entities/17153" target="_blank" data-smartkarma-citation="entities:17153:1" rel="noopener">Yakult Honsha Co Ltd (2267 JP)</a>.</p>
<p>Prior to this, Danone sold over 24.6m shares (some back to Yakult) in Feb 2018, which was done via an a global offering. We covered that deal in <a href="https://www.smartkarma.com/insights/yakult-honsha-placement-a-little-more-correction-would-be-ideal" target="_blank" rel="noopener">Yakult Honsha Placement - A Little More Correction Would Be Ideal</a>.</p>
</div><div><p>In this insight, I'll run the deal through our ECM framework and talk about the deal dynamics for the current placement.</p></div>


Danone SA (BN FP) is selling its remaining 6.2% stake in Yakult Honsha Co Ltd (2267 JP).
Prior to this, Danone sold over 24.6m shares (some back to Yakult) in Feb 2018, which was done via an a global offering. We covered that deal in Yakult Honsha Placement - A Little More Correction Would Be Ideal.
In this insight, I'll run the deal through our ECM framework and talk about the deal dynamics for the current placement.

Yakult Honsha Placement - Danone Heads for a Clean-Up

France

Danone SA is a food processing company. The Company produces dairy products, beverages, baby food and clinical/medical nutrition products.

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Danone SA (BN FP)

China Mengniu Placement - Danone's Expected Exit - One and Done

Danone SA (BN FP) is looking to raise about US$2bn by selling its 9.8% stake in China Mengniu Dairy Co (2319 HK). This is a clean-up trade.

Zhen Zhou, Toh

Danone SA (BN FP): Is This A Turnaround Story Or Could Another Short Opportunity Be On The Horizon?

While there is a future short opportunity if 2021 estimates and valuation increase, the stock may currently be neither attractive as a buy or a short.

Robert C Prather Jr

2021 High Conviction: A2 Milk

Buying quality businesses at or below fair prices and holding them for the long run is the key to generate alpha. A2 Milk at the current level...

Steven Chen

Danone Sells The Last of Their Yakult - Buy the Cleanup

Today after the close it was announced that $Danone

Travis Lundy

Yakult Honsha Placement - Danone Heads for a Clean-Up

Danone SA (BN FP) is selling 19.9m shares in Yakult Honsha Co Ltd (2267 JP). Prior to this, Danone was expected to sell 24.6m shares but, Yakult...

Sumeet Singh

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