IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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.

Equity Capital Markets

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

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<li>
<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> has launched its H Share listing at HK$143.50-165.50 per share. Pricing is on 18 August and listing on 25 August.</li>
<li>In <a href="https://www.smartkarma.com/insights/ctg-duty-free-h-share-listing-another-false-dawn" target="_blank" data-smartkarma-citation="insights:78718" rel="noopener">CTG Duty Free H Share Listing: Another False Dawn?</a>, we noted that on a fundamental view, we would prefer to remain on the sidelines.</li>
<li>Our valuation analysis suggests that the A Shares are trading close to fair value and the H Share valuation is unattractive compared to peers. We would pass on the listing.</li>
</ul>



China Tourism Group Duty Free Corp Ltd (601888 CH) has launched its H Share listing at HK$143.50-165.50 per share. Pricing is on 18 August and listing on 25 August.
In CTG Duty Free H Share Listing: Another False Dawn?, we noted that on a fundamental view, we would prefer to remain on the sidelines.
Our valuation analysis suggests that the A Shares are trading close to fair value and the H Share valuation is unattractive compared to peers. We would pass on the listing.


CTG Duty Free H Share Listing: Valuation Insights

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>/CTGDF, the largest travel retail operator in the world, aims to launch an H Share listing to raise US$2-3 billion on Friday.</li>
<li>CTGDF is a play on the normalization of domestic travel. However, the H Share listing timing is not ideal as a vital summer travel market, Sanya, is under renewed lockdown. </li>
<li>The recovery timing has again shifted, with expectations of a 4Q recovery, but 2022 consensus expectations look slightly optimistic. We prefer to remain on the sidelines.</li>
</ul>



China Tourism Group Duty Free Corp Ltd (601888 CH)/CTGDF, the largest travel retail operator in the world, aims to launch an H Share listing to raise US$2-3 billion on Friday.
CTGDF is a play on the normalization of domestic travel. However, the H Share listing timing is not ideal as a vital summer travel market, Sanya, is under renewed lockdown. 
The recovery timing has again shifted, with expectations of a 4Q recovery, but 2022 consensus expectations look slightly optimistic. We prefer to remain on the sidelines.


CTG Duty Free H Share Listing: Another False Dawn?

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> has revived its H-share IPO plan by re-submitting the Application Proof to the Hong Kong Stock Exchange on 1 Jul. </li>
<li>While there is no material changes in the Proof, weaker 1Q22 result, negative impact of pandemic and new agreements signed with Guangzhou Airport are recent developments that should be noted.</li>
<li>We think CDFC's H-shares, based on similar valuation before cancellation of the previous IPO plan, look less attractive given the sharp pull back of its peers in Hong Kong. </li>
</ul>



China Tourism Group Duty Free Corp Ltd (601888 CH) has revived its H-share IPO plan by re-submitting the Application Proof to the Hong Kong Stock Exchange on 1 Jul. 
While there is no material changes in the Proof, weaker 1Q22 result, negative impact of pandemic and new agreements signed with Guangzhou Airport are recent developments that should be noted.
We think CDFC's H-shares, based on similar valuation before cancellation of the previous IPO plan, look less attractive given the sharp pull back of its peers in Hong Kong. 


CTG Duty Free (601888 CH) Pre-IPO: Revival of H-Share IPO

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>In February 2022, Vivendi will file a public tender offer for all Lagardère shares at €24.10/share, identical to the price per share paid to Amber Capital.</li>
<li>Assuming some recovery in travel retail, the implied multiple of the publishing division would be 5.5x EV/22e EBITDA, which is cheap in my view. Comparables are trading at 6.6x.</li>
<li>The share price has gone below the offer price for the first time since 9 December. The 0.2% gross spread is still tight, but worth monitoring in case it widens.</li>
</ul>


In February 2022, Vivendi will file a public tender offer for all Lagardère shares at €24.10/share, identical to the price per share paid to Amber Capital.
Assuming some recovery in travel retail, the implied multiple of the publishing division would be 5.5x EV/22e EBITDA, which is cheap in my view. Comparables are trading at 6.6x.
The share price has gone below the offer price for the first time since 9 December. The 0.2% gross spread is still tight, but worth monitoring in case it widens.


Vivendi/Lagardère: A Good Deal for Bolloré

<a href="https://www.smartkarma.com/entities/vivendi-sa" target="_blank" data-smartkarma-citation="entities:21076:1" rel="noopener">Vivendi SA (VIV FP)</a> will increase its stake in <a href="https://www.smartkarma.com/entities/lagardere-sca" target="_blank" data-smartkarma-citation="entities:21508:1" rel="noopener">Lagardere SCA (MMB FP)</a>, which implies the mandatory launch of a takeover bid for the whole share capital of Lagardere.
Vivendi has agreed to purchase a 17.9% stake from of Amber Holdings in Lagardere, thus raising its stake to 44.9%. Therefore Vivendi will exceed the 30% threshold that requires launching a full takeover bid.
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<li>
Both the 17.9% acquisition and the subsequent takeover bid are launched at a price of €24.10/share.
</li>
<li>
The premium paid amounts to 23.6% (18.4% to the 3-month VWAP).
</li>
<li>
The implied equity value is €3,401.3 mn.
</li>
</ul>
It was foreseeable that Vivendi would bet on inorganic growth after the UMG spin-off. However, the premium paid seems at first glance high for a business with a net loss forecast (Capital IQ consensus) for 2021 of c. €(22) mn and an estimated 2022e EBITDA and EPS of €515.2 mn and €1.0, still lower than the pre-pandemic levels (€610 mn and €1.46 respectively). This is mainly due to the performance of the travel retail division (4th largest travel retailer globally), which accounted for 59% of revenues and 40% of gross operating profit in 2019. In fact, the premium implies paying a 2022e P/E of c. 24.1x vs. 20.5x for Vivendi (source: Capital IQ consensus).
The deal will need approval from the competition authorities and will not be fully executed until the end of FY 2022. However, some significant shareholders, such as the Qatar Investment Authority, with 11.5% of the company appear to be willing to sell. At this price they will not hesitate to do so, in my view. Completion is expected by 15 December 2022.
Gross spread is 3.5%, a bit on the low side considering the 15 months to complete. Long MMB FP, TP €24.1.

Vivendi SA (VIV FP) will increase its stake in Lagardere SCA (MMB FP), which implies the mandatory launch of a takeover bid for the whole share capital of Lagardere.
Vivendi has agreed to purchase a 17.9% stake from of Amber Holdings in Lagardere, thus raising its stake to 44.9%. Therefore Vivendi will exceed the 30% threshold that requires launching a full takeover bid.


Both the 17.9% acquisition and the subsequent takeover bid are launched at a price of €24.10/share.


The premium paid amounts to 23.6% (18.4% to the 3-month VWAP).


The implied equity value is €3,401.3 mn.


It was foreseeable that Vivendi would bet on inorganic growth after the UMG spin-off. However, the premium paid seems at first glance high for a business with a net loss forecast (Capital IQ consensus) for 2021 of c. €(22) mn and an estimated 2022e EBITDA and EPS of €515.2 mn and €1.0, still lower than the pre-pandemic levels (€610 mn and €1.46 respectively). This is mainly due to the performance of the travel retail division (4th largest travel retailer globally), which accounted for 59% of revenues and 40% of gross operating profit in 2019. In fact, the premium implies paying a 2022e P/E of c. 24.1x vs. 20.5x for Vivendi (source: Capital IQ consensus).
The deal will need approval from the competition authorities and will not be fully executed until the end of FY 2022. However, some significant shareholders, such as the Qatar Investment Authority, with 11.5% of the company appear to be willing to sell. At this price they will not hesitate to do so, in my view. Completion is expected by 15 December 2022.
Gross spread is 3.5%, a bit on the low side considering the 15 months to complete. Long MMB FP, TP €24.1.

Vivendi/Lagardere: Mandatory Friendly Offer

France

Lagardere S.C.A. operates communications and media, and high technology businesses. The Company publishes newspapers, magazines, and books, operates radio broadcasting stations, produces movies and television programming.

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Lagardere SCA (MMB FP)

Vivendi/Lagardère: A Good Deal for Bolloré

In February 2022, Vivendi will file a public tender offer at €24.10/share (price paid to Amber Capital). Whether Bolloré will able to turn...

Jesus Rodriguez Aguilar

Vivendi/Lagardere: Mandatory Friendly Offer

Some significant shareholders appear willing to cash out and at this price they will not hesitate to do so. Gross spread is 3.5%, a bit low...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

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Dividend (Yield)

CTG Duty Free H Share Listing: Valuation Insights

Our valuation analysis suggests that the A Shares are trading close to fair value and the H Share valuation is unattractive compared to peers. We...

Arun George

CTG Duty Free H Share Listing: Another False Dawn?

We are inclined to avoid the H Share listing as with a renewed lockdown in a key summer travel region, CTGDF has had one too many false dawns of...

Arun George

CTG Duty Free (601888 CH) Pre-IPO: Revival of H-Share IPO

CDFC re-activated its H-share IPO by refreshing its Application Proof. If the issue details are unchanged, it is less attractive than previously...

Osbert Tang, CFA

Vivendi/Lagardère: A Good Deal for Bolloré

In February 2022, Vivendi will file a public tender offer at €24.10/share (price paid to Amber Capital). Whether Bolloré will able to turn...

Jesus Rodriguez Aguilar

Vivendi/Lagardere: Mandatory Friendly Offer

Some significant shareholders appear willing to cash out and at this price they will not hesitate to do so. Gross spread is 3.5%, a bit low...

Jesus Rodriguez Aguilar