Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

<ul>
<li>CDF’s 1H23 preliminary results suggest that business recovery remains on track. Voices of bottom-fishing are getting louder as free fall in its share price already erased 50% market cap YTD.</li>
<li>We believe the dynamics have fundamentally changed compared to three years ago when CDF was the stock market darling. Investors need be aware of the anchoring effect in making decisions.</li>
<li>Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for better entry point.</li>
</ul>


CDF’s 1H23 preliminary results suggest that business recovery remains on track. Voices of bottom-fishing are getting louder as free fall in its share price already erased 50% market cap YTD.
We believe the dynamics have fundamentally changed compared to three years ago when CDF was the stock market darling. Investors need be aware of the anchoring effect in making decisions.
Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for better entry point.


China Tourism Duty Free Corp (601888. CH): Is Now Good Time for Bottom-Fishing?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Event-Driven

<ul>
<li>On 28th Mar 2023, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba (ADR) (BABA US)</a> announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.</li>
<li>Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.</li>
<li>In this note, we will talk about some of the company’s investments and how the overall Holdco would look post restructuring.</li>
</ul>


On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
In this note, we will talk about some of the company’s investments and how the overall Holdco would look post restructuring.


Alibaba Potential IPOs - The Final Part - Quick Look at Investees and Eventual Holdco

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

S&P BSE SENSEX Index / Technical Analysis

<ul>
<li>Our 2023 outlook remains unchanged as we continue to expect broad-based consolidation with $93 capping upside on MSCI ACWI (ACWI-US), while important downside targets are $86, $84, and $75-77.</li>
<li>We still recommend tactical overweight to defensives including gold miners and MSCI ACWI Staples, Health Care, and Utilities, given ACWI-US remains near the top of our expected 2023 trading range.</li>
<li>We are now starting to see broad-based improvement, particularly in Japan and India, but also in Taiwan and South Korea. Most of today's buy recommendations are cyclicals in these countries.</li>
</ul>


Our 2023 outlook remains unchanged as we continue to expect broad-based consolidation with $93 capping upside on MSCI ACWI (ACWI-US), while important downside targets are $86, $84, and $75-77.
We still recommend tactical overweight to defensives including gold miners and MSCI ACWI Staples, Health Care, and Utilities, given ACWI-US remains near the top of our expected 2023 trading range.
We are now starting to see broad-based improvement, particularly in Japan and India, but also in Taiwan and South Korea. Most of today's buy recommendations are cyclicals in these countries.


Broad-Based Improvement in India, Add Exposure/Overweight. Buys: Cyclicals in Japan, India, & Taiwan

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<ul>
<li>Following conversion, the Benettons became the top Dufry's shareholders (27.5%). There'll be a mandatory offer for the minorities. The conversion ratio is 0.1583 DUFN/AGL with a cash alternative of €6.33.</li>
<li>A +1.1% share swap spread vs. +3.3% cash alternative spread means an all-share deal is most likely (with a 67% dilution to Dufry's shareholders). Still, minorities could refuse to tender.</li>
<li>The deal is not expensive. It resembles a debt for equity swap, with Autogrill's balance sheet rescuing Dufry's (rated B+) and the Benettons happily paying a nil control premium.</li>
</ul>


Following conversion, the Benettons became the top Dufry's shareholders (27.5%). There'll be a mandatory offer for the minorities. The conversion ratio is 0.1583 DUFN/AGL with a cash alternative of €6.33.
A +1.1% share swap spread vs. +3.3% cash alternative spread means an all-share deal is most likely (with a 67% dilution to Dufry's shareholders). Still, minorities could refuse to tender.
The deal is not expensive. It resembles a debt for equity swap, with Autogrill's balance sheet rescuing Dufry's (rated B+) and the Benettons happily paying a nil control premium.


Dufry/Autogrill: Potential Massive Dilution

<ul>
<li>The deal is done with the transfer of Edizione's 50.3% stake in Autogrill under way, and with  all main hurdles cleared. Dufry must launch and offer to buy out minorities. </li>
<li>Autogrill shares closed at €6.698 on 30 January, also the implied value of the 0.158 Autogrill/Dufry share swap is 5.8% above the €6.33/share "initial" cash offer. The market expects more.</li>
<li>The deal will not fall through but the price is still being negotiated, possibly around €6.8-6.9/share. The issue will now become what dilution/leverage will Dufry's patient shareholders endure.</li>
</ul>


The deal is done with the transfer of Edizione's 50.3% stake in Autogrill under way, and with  all main hurdles cleared. Dufry must launch and offer to buy out minorities. 
Autogrill shares closed at €6.698 on 30 January, also the implied value of the 0.158 Autogrill/Dufry share swap is 5.8% above the €6.33/share "initial" cash offer. The market expects more.
The deal will not fall through but the price is still being negotiated, possibly around €6.8-6.9/share. The issue will now become what dilution/leverage will Dufry's patient shareholders endure.


Switzerland

Dufry AG operates duty-free shops in countries such as Tunisia, Italy, Mexico, France, Russia, the United Arab Emirates, Singapore, the Caribbean and the United States.

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Dufry AG (DUFN SW)

China Tourism Duty Free Corp (601888. CH): Is Now Good Time for Bottom-Fishing?

Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for...

Eric Chen

Alibaba Potential IPOs - The Final Part - Quick Look at Investees and Eventual Holdco

Continuining with our series of notes on Alibaba's planned six way reorganisation, in this note, we talk about its investments and eventual holdco.

Sumeet Singh

Broad-Based Improvement in India, Add Exposure/Overweight. Buys: Cyclicals in Japan, India, & Taiwan

Seeing broad-based improvement in India #SENSEX -- overweight/add exposure. We still recommend a tactical overweight to ACWI defensives with $ACWI...

Vermilion Research

Dufry/Autogrill: Potential Massive Dilution

My original assumption was a debt-financed buyout, but considering the spreads, an all share-deal is more likely, but Autogrill's shareholders can...

Jesus Rodriguez Aguilar

Dufry/Autogrill: Deal Progress

The merger is proceeding according to plan with all main hurdles cleared. Edizione and Dufry expect to close the transfer of Edizione's 50.3% stake...

Jesus Rodriguez Aguilar

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