HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>It is difficult for <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> to return to its peak and IPO share prices over the next two years. The buyback proposal represents a good exit opportunity.</li>
<li>Net profit is unlikely to go back to FY19 level even in FY26F. The derating of the Chinese equities and Fosun Group, as well as its high gearing, are barriers.</li>
<li>Its PER multiples have already aligned back to the sector average from the extremely depressed level previously. Relative to global names, it is now only at slight discounts.</li>
</ul>


It is difficult for Fosun Tourism (1992 HK) to return to its peak and IPO share prices over the next two years. The buyback proposal represents a good exit opportunity.
Net profit is unlikely to go back to FY19 level even in FY26F. The derating of the Chinese equities and Fosun Group, as well as its high gearing, are barriers.
Its PER multiples have already aligned back to the sector average from the extremely depressed level previously. Relative to global names, it is now only at slight discounts.


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

<ul>
<li>A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.</li>
<li>ECM developments: <a href="https://www.smartkarma.com/entities/kioxia-holdings-corp" target="_blank" data-smartkarma-citation="entities:29243:1" rel="noopener">Kioxia Holdings (285A JP)</a> priced its IPO at JPY1,455, the midpoint of the IPO price range.</li>
<li>Event-Driven developments: <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a>, <a href="https://www.smartkarma.com/entities/fuji-soft-inc" target="_blank" data-smartkarma-citation="entities:17504:1" rel="noopener">Fuji Soft Inc (9749 JP)</a>, <a href="https://www.smartkarma.com/entities/nec-networks-system-integr" target="_blank" data-smartkarma-citation="entities:16396:1" rel="noopener">Nec Networks &amp; System Integr (1973 JP)</a>, <a href="https://www.smartkarma.com/entities/topcon-corp" target="_blank" data-smartkarma-citation="entities:738:1" rel="noopener">Topcon Corp (7732 JP)</a>, <a href="https://www.smartkarma.com/entities/insignia-financial-ltd" target="_blank" data-smartkarma-citation="entities:12349:1" rel="noopener">Insignia Financial (IFL AU)</a>. 
</li>
</ul>


A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Kioxia Holdings (285A JP) priced its IPO at JPY1,455, the midpoint of the IPO price range.
Event-Driven developments: Fosun Tourism (1992 HK), CPMC Holdings (906 HK), Fuji Soft Inc (9749 JP), Nec Networks &amp; System Integr (1973 JP), Topcon Corp (7732 JP), Insignia Financial (IFL AU). 



Weekly Deals Digest (15 Dec) - Fosun Tourism, CPMC, ESR, Fuji Soft, NEC Networks, Topcon, Kioxia

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>When <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>
</li>
<li>Not quite. We do have a Scheme, but it's being enacted by way of a buyback. Fosun Int'l still abstains from voting, but will control 100% if the Scheme completes.</li>
<li>The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question.  Clean deal.
</li>
</ul>


When Fosun Tourism (1992 HK), a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was Fosun International (656 HK)

Not quite. We do have a Scheme, but it's being enacted by way of a buyback. Fosun Int'l still abstains from voting, but will control 100% if the Scheme completes.
The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question.  Clean deal.



Fosun Tourism (1992 HK): Fosun Int'l's Indirect Takeover

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> disclosed a share buyback of the company through a scheme of arrangement at HK$7.80, a 95.0% premium to the last close price of HK$4.00. </li>
<li>The key condition is the scheme be approved by at least 75% of disinterested shareholders (rejection by &lt;10% of disinterested shareholders).</li>
<li>The timing is arguably opportunistic, as the shares are down 31% YTD. Nevertheless, the high takeover premium and a potential scrip option lower the vote risk.    </li>
</ul>



Fosun Tourism (1992 HK) disclosed a share buyback of the company through a scheme of arrangement at HK$7.80, a 95.0% premium to the last close price of HK$4.00. 
The key condition is the scheme be approved by at least 75% of disinterested shareholders (rejection by &lt;10% of disinterested shareholders).
The timing is arguably opportunistic, as the shares are down 31% YTD. Nevertheless, the high takeover premium and a potential scrip option lower the vote risk.    


Fosun Tourism (1992 HK): Scheme Buyback at HK$7.80 (95% Premium)

<ul>
<li>A partial disposal of Club Med is positive for <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>. The market is speculating <a href="https://www.smartkarma.com/entities/capitaland-investment-ltd-sing" target="_blank" data-smartkarma-citation="entities:33774:1" rel="noopener">CapitaLand Investment /Sing (CLI SP)</a> is paying EUR500m for a 20-30% stake.</li>
<li>Club Med generated 91.7% of its 1H24 operating profit. The rumoured valuation will boost its value by HK$6.9/share, 1.2x of the share price if true.</li>
<li>We see reasons for such disposal, and if happens, this will align the stock's valuation to international peers - 26.2x for FY24, vs. its 11.3x currently.</li>
</ul>


A partial disposal of Club Med is positive for Fosun Tourism (1992 HK). The market is speculating CapitaLand Investment /Sing (CLI SP) is paying EUR500m for a 20-30% stake.
Club Med generated 91.7% of its 1H24 operating profit. The rumoured valuation will boost its value by HK$6.9/share, 1.2x of the share price if true.
We see reasons for such disposal, and if happens, this will align the stock's valuation to international peers - 26.2x for FY24, vs. its 11.3x currently.


Fosun Tourism (1992 HK): Is Club Med Disposal Happening?

Hong Kong

Fosun Tourism Group operates as a leisure focused integrated tourism group. The Company provides resorts management, tourism destinations development, and other related services. Fosun Tourism Group offers its services worldwide.

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Fosun Tourism (1992 HK)