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

<a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. <div class="content-highlight">
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. 
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

<a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.<div class="content-highlight">The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. </div>

Bestway Global Holding (3358 HK) is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. 

Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Equity Bottom-Up

Leading producers of tissue and personal care products <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a> and <a href="https://www.smartkarma.com/entities/vinda-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:475:1" rel="noopener">Vinda International Holdings (3331 HK)</a> have benefitted from fallen pulp prices last year. In this piece, we attempt to answer the following questions: 1. Can they ride on the tailwind and continue to deliver good profits in FY2020? 2. Why did their share prices run up recently? 3. Will Hengan be able to get past corporate governance concerns highlighted by a short-seller?

Leading producers of tissue and personal care products Hengan Intl Group (1044 HK) and Vinda International Holdings (3331 HK) have benefitted from fallen pulp prices last year. In this piece, we attempt to answer the following questions: 1. Can they ride on the tailwind and continue to deliver good profits in FY2020? 2. Why did their share prices run up recently? 3. Will Hengan be able to get past corporate governance concerns highlighted by a short-seller?  

Prefer Vinda Even If Hengan Surprises Near-Term; CG Issues Need More Light

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Goodbaby International Hldg / Equity Bottom-Up

<ul class="">
<li>The bankrupcy of Toys R Us Inc. negatively impacted the revenue growth in North America.</li>
<li>We believe newly acquired Oasis Dragon Limited did not contribute any operating profits.</li>
<li>Goodbaby issued a large number of new shares to acquire Oasis Dragon andt EPS has been significantly diluted.</li>
<li>The P/E band suggests downside of 5%. Downgrade to HOLD.</li>
</ul>


The bankrupcy of Toys R Us Inc. negatively impacted the revenue growth in North America.
We believe newly acquired Oasis Dragon Limited did not contribute any operating profits.
Goodbaby issued a large number of new shares to acquire Oasis Dragon andt EPS has been significantly diluted.
The P/E band suggests downside of 5%. Downgrade to HOLD.


Goodbaby (1086 HK) – Problems Emerge at Both Top Line and Bottom Line

<ul><li>Operating profits increased 52% in 2017.</li><li>The EPS decline is merely due to a tax law change.</li><li>The gross margin of both main business lines improved.</li><li>The Company overcame many difficulties in its history.</li><li>The P/E band suggests an upside of 94%.  BUY.</li></ul>

Operating profits increased 52% in 2017.The EPS decline is merely due to a tax law change.The gross margin of both main business lines improved.The Company overcame many difficulties in its history.The P/E band suggests an upside of 94%.  BUY.

Goodbaby Intl (1086 HK) – Price Surged After Annual Results, But Still Leaves Significant Upside

China

Goodbaby International Holdings Ltd. is an international durable juvenile products company.  The Company designs, researches and develops, manufactures, markets and sells strollers, children's car safety seats, cribs, bicycles and tricycles, and other durable juvenile products. Goodbaby markets its products in North America, Europe and China.

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Goodbaby International Hldg (1086 HK)

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

Bestway Global’s Privatisation Bid

Bestway announced a privatisation offer from Mr Zhu Qiang (the Founder, Chairman & CEO) at HK$4.38 per scheme share. While not a knockout offer, we...

Arun George

Prefer Vinda Even If Hengan Surprises Near-Term; CG Issues Need More Light

Leading producers of tissue and personal care products Hengan Intl Group (1044 HK) and Vinda International Holdings (3331 HK) have benefitted from...

Valerie Law, CFA

Goodbaby (1086 HK) – Problems Emerge at Both Top Line and Bottom Line

The bankrupcy of Toys R Us Inc. negatively impacted the revenue growth in North America. We believe newly acquired Oasis Dragon Limited did not...

Ming Lu

Goodbaby Intl (1086 HK) – Price Surged After Annual Results, But Still Leaves Significant Upside

Operating profits increased 52% in 2017. The EPS decline is merely due to a tax law change. The gross margin of both main business lines...

Ming Lu

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