SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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 <div class='content-caption'>Sasseur REIT - CEO</div>
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Through his diverse career spanning more than three decades, engineer by training Anthony Ang has always tried to define success on his own terms. 
One dictum that resonates with him is the warning inherent in American Catholic monk and author Thomas Merton’s observation: “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.” 
“I wouldn’t want to try and prescribe the best definition of success, but many who have gone before have suggested that success and happiness do not generally consist of only having material wealth and status, but also of possessing the right values and goals in life,” said the CEO of the manager of SGX-listed Sasseur REIT. 
One of Ang’s role models is Austrian neurologist and psychiatrist Viktor Frankl – a Holocaust survivor and author of “Man’s Search for Meaning”, a bestseller that chronicles his experiences as a prisoner in Nazi concentration camps during World War II. 
“Frankl, one of my favourite authors, focused on the need for meaning and purpose in life – something that transcends our existence and taps the best energies within us,” he added. 
Although Ang graduated with a Bachelor of Science degree in Mechanical Engineering with First Class Honours from London’s Imperial College, he found that his interests lay elsewhere. 
“For my generation, studying engineering as a discipline was seen as the best way to unlock a great career and future, but I couldn’t envisage myself sitting at a drafting table for hours every day – I preferred a more frontline job,” he recalled. 
So in 1979, Ang began his career with Singapore’s Economic Development Board, rising up the ranks to become the Regional Director of EDB’s North America operations, during which he picked up effective policy-making and investment skills for a range of industries. 
That became a springboard for his subsequent career moves spanning a plethora of sectors: from Executive Director and Group General Manager of Armstrong Industrial Corporation running its manufacturing operations, to Senior Vice President of Vertex Management overseeing venture capital investments, and Executive Vice President of GIC Real Estate – which marked his first foray into the property sector. 
Ang, who also holds a Master of Business Administration degree from INSEAD, later went on to take up various CEO appointments within the ARA Group, including its flagship US$1.13 billion ARA Asia Dragon Fund, and Hong Kong-listed Fortune REIT. Buoyant Prospects 
Ang – currently Singapore’s Non-Resident Ambassador to the Republic of Tunisia – was appointed to helm the manager of Sasseur REIT in 2017. 
“Looking back, you realise that life can change very quickly, but there’s no point worrying about what is to come,” he pointed out. 
“Instead, just do your best, be resilient – find ways around problems – and most importantly, stay positive and enjoy the journey. A belief in God can also be a positive anchor.” 
Making its trading debut on SGX Mainboard in March 2018, Sasseur REIT is the first listed retail outlet mall REIT in Asia. With an initial portfolio of four retail outlet malls located in the cities of Chongqing, Kunming and Hefei, the REIT offers investors the opportunity to invest in China’s fast-growing retail outlet mall sector. 
Some of the most popular brands in its portfolio include Coach, +39 Space (with Prada, Dior, Gucci and other Italian luxury brands), FILA, Adidas and Nike. 
Sasseur REIT is managed by Sasseur Asset Management Pte Ltd. Its Sponsor – Sasseur Cayman Holding Ltd – was founded in 1989 by Vito Xu, Chairman of both the Sponsor and the REIT manager. The Sponsor is one of the leading premium outlet mall groups in China, focused on the development and operation of retail outlet malls in the country. 
The Sponsor’s strategic shareholders are L Catterton Asia – a private equity fund partnership between L Capital of the LVMH Group and Catterton of the US – and Ping An Real Estate Co Ltd, a subsidiary of Ping An Insurance (Group) Co of China Ltd, a Fortune Global 500 enterprise. 
Through these parties, the REIT can forge strategic partnerships, as well as leverage an extensive real estate network to grow its portfolio of brands and assets. 
Last September, Sasseur REIT won Best Retail REIT (Platinum), Best CEO (Platinum) and Best Investor Relations (Gold) at the Asia Pacific Best of the Breeds REITs Awards™ 2019. Three months later, the REIT was included in FTSE EPRA NAREIT Global Emerging Index. 
Sasseur REIT has outperformed many of its Singapore REIT peers, ranking amongst the top five performers with a total return of 52% in 2019. It also emerged as the top-performing China S-REIT for the financial year ended 31 December 2019. 
One of the REIT’s key value propositions is its unique Entrusted Management Agreement (EMA) model, Ang noted. Under this lease arrangement, rental income paid to the REIT comprises a fixed component rent as well as a variable rent that is tied to the performance of underlying tenant sales. 
“This model provides a stable fixed income that grows at 3% annually, offering downside protection in unexpected situations and disruptions, such as COVID-19, which resulted in temporary closure of our outlet malls,” he said. “There is also the variable component that is pegged to sales in our outlets, offering potential income upside.” 
And Sasseur REIT has a radically different business model, Ang added. “We have a hybrid lease structure, comprising 100% sales-based leases with no fixed rental – where rental income for the outlet is collected as a percentage of sales of the branded goods tenants – as well as a combination of both sales-based and fixed rentals for some special tenants in lifestyle activities or F&amp;B.” 
“We believe that this, together with the EMA income model, sets Sasseur apart from other REITs, as they align the interests of the manager with that of our tenants and the REIT, or our unitholders.” Conspicuous Consumption 
Medium to longer term growth drivers for the REIT include burgeoning demand for luxury brands from China’s mushrooming middle class, and potential acquisitions in the form of mall assets owned by the Sponsor. 
“The outlet mall business is one of the country’s fastest growing retail segments, supported by increased spending power and aspirations of middle-class Chinese consumers,” Ang said. 
China’s outlet malls are forecast to become the largest globally, exceeding that of the US by 2030, according to independent research data. 
Outlet malls also function as counter-cyclical elements in the economy, benefiting from downturns when budgets shrink and consumers seek better value-for-money bargains, he added. 
As for the potential assets that can be injected into Sasseur REIT, the Sponsor has two right-of-first-refusal (ROFR) and nine pipeline properties. These include four new mall assets located along the more affluent coastal cities of Shenzhen, Xiamen, Yangzhou and Shanghai – scheduled to open later this year and over the next few years, operated by the Sponsor. 
ROFR assets are those where the REIT has priority of choice when the Sponsor decides to sell, while pipeline assets are third-party owned but operated by the Sponsor, and become ROFR assets for the REIT if acquired by the Sponsor. 
“When you look at the REIT industry, size matters. Currently, we have S$1.6 billion worth of assets under management, and if you do not have at least S$3 billion in AUM, you’re not considered significant, so acquisitions are key to our growth,” Ang pointed out. 
“We want to make an acquisition every two to three years – this is the kind of consistency that investors look for. And it’s not a problem to acquire every other year in the future, due to the number of ROFR and pipeline assets available, and also because our Sponsor is a leader in this industry.” Lifestyle Destinations 
In terms of the challenges presented by the rise of e-commerce on the outlet mall industry, Ang sees mitigated impact. “We believe our outlets have competitive advantages over e-commerce, such as non-overlapping product segments, and lower sales commissions for merchants – they pay average sales commissions of approximately 20% on e-commerce platforms, versus 10%-16% on sales as rental at our outlet malls.” 
Sasseur’s outlet malls are also designed as lifestyle destinations, enhancing the shopping activity by offering multi-faceted experiences that include playgrounds, an indoor zoo and sports concepts. “That’s how we pull in our shoppers,” he added. 
Heightened marketing, robust safety measures at the outlets, as well as enhanced customer engagement efforts by the REIT, particularly during COVID-19 closures between January and March this year, have helped its outlet malls to reopen successfully and perform strongly. 
Its four outlet malls generated combined sales of 835.7 million yuan for the second quarter ended 30 June 2020, 18.6% lower year-on-year and comparing favourably with other retail businesses hit by the pandemic. 
This figure is also 56% higher than the combined sales of 534.5 million yuan in the first quarter, underscoring the fact that business recovery is well underway across its portfolio. 
“We believe the hit from COVID-19 on our outlet business will be short-lived,” Ang said. “As the situation in China continues to improve, we expect the remaining quarters of this year to deliver stronger performances, and sales to return to pre-pandemic levels.” 
China’s retail sales rose for the first time in August since the coronavirus pandemic began, gaining 0.5% year-on-year, reversing a drop of 1.1% in July and a plunge of 20.5% in the January to February period. 
Meanwhile, what keeps the genial 65-year-old going is the satisfaction he derives from playing the role of a rainmaker – effecting real and positive change, whether at work, at play, or just interacting with those who cross his path. 
“I enjoy solving a problem, figuring something out, or doing something completely new,” he said. “Of course, this involves human relationships – people must enjoy working with you, and be able to trust you, because that’s when things happen.” 
Key principles that he has passed on to his son, 28, and daughter 29, include a strong moral code, and the capacity to learn and adapt continually. “I always tell them, don’t worry about the future and stop comparing yourself with others,” he said with a chuckle. 
“In my mind, the key to success is very simple – have a goal but do not limit yourself; have the best possible education, gather as much life experience as you can, and always look for meaning in all you do.”

 

Sasseur REIT 
Sasseur REIT is the first retail outlet mall REIT listed in Asia. Sasseur REIT offers investors the unique opportunity to invest in the fast-growing retail outlet mall sector in the People’s Republic of China through its initial portfolio of four quality retail outlet mall assets strategically located in fast-growing cities in China, such as Chongqing, Kunming and Hefei, with a net lettable area of 312,844 square metres. The REIT is established to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate, as well as real estate-related assets, which are used primarily for retail outlet mall purposes, with an initial focus on Asia.

Sasseur REIT is managed by the Manager, an indirect wholly owned subsidiary of the Sponsor, Sasseur Cayman Holding Ltd. The Sponsor Group is one of the leading premium outlet groups in China, and ranked within the top 500 service companies in the country. With about 30 years of experience in art-commerce, the Sponsor Group has attained recognition in Asia as a leading outlet operator that adopts the strategic approach of integrating emotion, aesthetics, scenario planning and prudent capital management. 
The company website is: <a href="http://www.sasseurreit.com">www.sasseurreit.com</a>. 
Click <a href="https://www.sgx.com/securities/equities/CRPU">here </a>for the company's StockFacts page. 
For the three months ended 30 June 2020 financial results, click <a href="http://ir.listedcompany.com/tracker.pl?type=6&amp;id=793096&amp;">here</a>.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="///C:/Users/tanje/Desktop/Working%20Files/kopi-C/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    Sasseur REIT - CEO


Through his diverse career spanning more than three decades, engineer by training Anthony Ang has always tried to define success on his own terms.  
One dictum that resonates with him is the warning inherent in American Catholic monk and author Thomas Merton’s observation: “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.”  
“I wouldn’t want to try and prescribe the best definition of success, but many who have gone before have suggested that success and happiness do not generally consist of only having material wealth and status, but also of possessing the right values and goals in life,” said the CEO of the manager of SGX-listed Sasseur REIT.  
One of Ang’s role models is Austrian neurologist and psychiatrist Viktor Frankl – a Holocaust survivor and author of “Man’s Search for Meaning”, a bestseller that chronicles his experiences as a prisoner in Nazi concentration camps during World War II.  
“Frankl, one of my favourite authors, focused on the need for meaning and purpose in life – something that transcends our existence and taps the best energies within us,” he added.  
Although Ang graduated with a Bachelor of Science degree in Mechanical Engineering with First Class Honours from London’s Imperial College, he found that his interests lay elsewhere.  
“For my generation, studying engineering as a discipline was seen as the best way to unlock a great career and future, but I couldn’t envisage myself sitting at a drafting table for hours every day – I preferred a more frontline job,” he recalled.  
So in 1979, Ang began his career with Singapore’s Economic Development Board, rising up the ranks to become the Regional Director of EDB’s North America operations, during which he picked up effective policy-making and investment skills for a range of industries.  
That became a springboard for his subsequent career moves spanning a plethora of sectors: from Executive Director and Group General Manager of Armstrong Industrial Corporation running its manufacturing operations, to Senior Vice President of Vertex Management overseeing venture capital investments, and Executive Vice President of GIC Real Estate – which marked his first foray into the property sector.  
Ang, who also holds a Master of Business Administration degree from INSEAD, later went on to take up various CEO appointments within the ARA Group, including its flagship US$1.13 billion ARA Asia Dragon Fund, and Hong Kong-listed Fortune REIT.  Buoyant Prospects  
Ang – currently Singapore’s Non-Resident Ambassador to the Republic of Tunisia – was appointed to helm the manager of Sasseur REIT in 2017.  
“Looking back, you realise that life can change very quickly, but there’s no point worrying about what is to come,” he pointed out.  
“Instead, just do your best, be resilient – find ways around problems – and most importantly, stay positive and enjoy the journey. A belief in God can also be a positive anchor.”  
Making its trading debut on SGX Mainboard in March 2018, Sasseur REIT is the first listed retail outlet mall REIT in Asia. With an initial portfolio of four retail outlet malls located in the cities of Chongqing, Kunming and Hefei, the REIT offers investors the opportunity to invest in China’s fast-growing retail outlet mall sector.  
Some of the most popular brands in its portfolio include Coach, +39 Space (with Prada, Dior, Gucci and other Italian luxury brands), FILA, Adidas and Nike.  
Sasseur REIT is managed by Sasseur Asset Management Pte Ltd. Its Sponsor – Sasseur Cayman Holding Ltd – was founded in 1989 by Vito Xu, Chairman of both the Sponsor and the REIT manager. The Sponsor is one of the leading premium outlet mall groups in China, focused on the development and operation of retail outlet malls in the country.  
The Sponsor’s strategic shareholders are L Catterton Asia – a private equity fund partnership between L Capital of the LVMH Group and Catterton of the US – and Ping An Real Estate Co Ltd, a subsidiary of Ping An Insurance (Group) Co of China Ltd, a Fortune Global 500 enterprise.  
Through these parties, the REIT can forge strategic partnerships, as well as leverage an extensive real estate network to grow its portfolio of brands and assets.  
Last September, Sasseur REIT won Best Retail REIT (Platinum), Best CEO (Platinum) and Best Investor Relations (Gold) at the Asia Pacific Best of the Breeds REITs Awards™ 2019. Three months later, the REIT was included in FTSE EPRA NAREIT Global Emerging Index.  
Sasseur REIT has outperformed many of its Singapore REIT peers, ranking amongst the top five performers with a total return of 52% in 2019. It also emerged as the top-performing China S-REIT for the financial year ended 31 December 2019.  
One of the REIT’s key value propositions is its unique Entrusted Management Agreement (EMA) model, Ang noted. Under this lease arrangement, rental income paid to the REIT comprises a fixed component rent as well as a variable rent that is tied to the performance of underlying tenant sales.  
“This model provides a stable fixed income that grows at 3% annually, offering downside protection in unexpected situations and disruptions, such as COVID-19, which resulted in temporary closure of our outlet malls,” he said. “There is also the variable component that is pegged to sales in our outlets, offering potential income upside.”  
And Sasseur REIT has a radically different business model, Ang added. “We have a hybrid lease structure, comprising 100% sales-based leases with no fixed rental – where rental income for the outlet is collected as a percentage of sales of the branded goods tenants – as well as a combination of both sales-based and fixed rentals for some special tenants in lifestyle activities or F&amp;B.”  
“We believe that this, together with the EMA income model, sets Sasseur apart from other REITs, as they align the interests of the manager with that of our tenants and the REIT, or our unitholders.”  Conspicuous Consumption   
Medium to longer term growth drivers for the REIT include burgeoning demand for luxury brands from China’s mushrooming middle class, and potential acquisitions in the form of mall assets owned by the Sponsor.  
“The outlet mall business is one of the country’s fastest growing retail segments, supported by increased spending power and aspirations of middle-class Chinese consumers,” Ang said.  
China’s outlet malls are forecast to become the largest globally, exceeding that of the US by 2030, according to independent research data.  
Outlet malls also function as counter-cyclical elements in the economy, benefiting from downturns when budgets shrink and consumers seek better value-for-money bargains, he added.  
As for the potential assets that can be injected into Sasseur REIT, the Sponsor has two right-of-first-refusal (ROFR) and nine pipeline properties. These include four new mall assets located along the more affluent coastal cities of Shenzhen, Xiamen, Yangzhou and Shanghai – scheduled to open later this year and over the next few years, operated by the Sponsor.  
ROFR assets are those where the REIT has priority of choice when the Sponsor decides to sell, while pipeline assets are third-party owned but operated by the Sponsor, and become ROFR assets for the REIT if acquired by the Sponsor.  
“When you look at the REIT industry, size matters. Currently, we have S$1.6 billion worth of assets under management, and if you do not have at least S$3 billion in AUM, you’re not considered significant, so acquisitions are key to our growth,” Ang pointed out.  
“We want to make an acquisition every two to three years – this is the kind of consistency that investors look for. And it’s not a problem to acquire every other year in the future, due to the number of ROFR and pipeline assets available, and also because our Sponsor is a leader in this industry.”  Lifestyle Destinations  
In terms of the challenges presented by the rise of e-commerce on the outlet mall industry, Ang sees mitigated impact. “We believe our outlets have competitive advantages over e-commerce, such as non-overlapping product segments, and lower sales commissions for merchants – they pay average sales commissions of approximately 20% on e-commerce platforms, versus 10%-16% on sales as rental at our outlet malls.”  
Sasseur’s outlet malls are also designed as lifestyle destinations, enhancing the shopping activity by offering multi-faceted experiences that include playgrounds, an indoor zoo and sports concepts. “That’s how we pull in our shoppers,” he added.  
Heightened marketing, robust safety measures at the outlets, as well as enhanced customer engagement efforts by the REIT, particularly during COVID-19 closures between January and March this year, have helped its outlet malls to reopen successfully and perform strongly.  
Its four outlet malls generated combined sales of 835.7 million yuan for the second quarter ended 30 June 2020, 18.6% lower year-on-year and comparing favourably with other retail businesses hit by the pandemic.  
This figure is also 56% higher than the combined sales of 534.5 million yuan in the first quarter, underscoring the fact that business recovery is well underway across its portfolio.  
“We believe the hit from COVID-19 on our outlet business will be short-lived,” Ang said. “As the situation in China continues to improve, we expect the remaining quarters of this year to deliver stronger performances, and sales to return to pre-pandemic levels.”  
China’s retail sales rose for the first time in August since the coronavirus pandemic began, gaining 0.5% year-on-year, reversing a drop of 1.1% in July and a plunge of 20.5% in the January to February period.  
Meanwhile, what keeps the genial 65-year-old going is the satisfaction he derives from playing the role of a rainmaker – effecting real and positive change, whether at work, at play, or just interacting with those who cross his path.  
“I enjoy solving a problem, figuring something out, or doing something completely new,” he said. “Of course, this involves human relationships – people must enjoy working with you, and be able to trust you, because that’s when things happen.”  
Key principles that he has passed on to his son, 28, and daughter 29, include a strong moral code, and the capacity to learn and adapt continually. “I always tell them, don’t worry about the future and stop comparing yourself with others,” he said with a chuckle.  
“In my mind, the key to success is very simple – have a goal but do not limit yourself; have the best possible education, gather as much life experience as you can, and always look for meaning in all you do.”

 

Sasseur REIT  
Sasseur REIT is the first retail outlet mall REIT listed in Asia. Sasseur REIT offers investors the unique opportunity to invest in the fast-growing retail outlet mall sector in the People’s Republic of China through its initial portfolio of four quality retail outlet mall assets strategically located in fast-growing cities in China, such as Chongqing, Kunming and Hefei, with a net lettable area of 312,844 square metres. The REIT is established to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate, as well as real estate-related assets, which are used primarily for retail outlet mall purposes, with an initial focus on Asia.

Sasseur REIT is managed by the Manager, an indirect wholly owned subsidiary of the Sponsor, Sasseur Cayman Holding Ltd. The Sponsor Group is one of the leading premium outlet groups in China, and ranked within the top 500 service companies in the country. With about 30 years of experience in art-commerce, the Sponsor Group has attained recognition in Asia as a leading outlet operator that adopts the strategic approach of integrating emotion, aesthetics, scenario planning and prudent capital management.  
The company website is: www.sasseurreit.com.  
Click here for the company's StockFacts page.  
For the three months ended 30 June 2020 financial results, click here.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Sasseur REIT Taps Aspirations of China’s Middle Class

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

Steven Chen

Quality-first, Business-perspective Strategy

Thematic (Sector/Industry)

<ul class="">
<li>The consumer sector in China has been a complex and dynamic one, with both consumption upgrade and downgrade going on across different categories and segments;</li>
<li>In the meantime, we see the consumer space as being a decent source for high-quality, relatively predictable Chinese companies;</li>
<li>To enjoy the long-term tailwind of consumption upgrade, investors may need to look for superior returns on capital, signs of an economic moat, stable market-share leaders/gainers, and solid structural trends.</li>
<li>We list our quick picks (three domestic and three overseas) that are hopeful of keeping delighting Chinese consumers in the long run.</li>
</ul>


The consumer sector in China has been a complex and dynamic one, with both consumption upgrade and downgrade going on across different categories and segments;
In the meantime, we see the consumer space as being a decent source for high-quality, relatively predictable Chinese companies;
To enjoy the long-term tailwind of consumption upgrade, investors may need to look for superior returns on capital, signs of an economic moat, stable market-share leaders/gainers, and solid structural trends.
We list our quick picks (three domestic and three overseas) that are hopeful of keeping delighting Chinese consumers in the long run.


Quick Picks that Are Hopeful of Keeping Delighting Chinese Consumers

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Despite outperforming <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> in the 10 year period, <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> share price this year has underperformed Li Ning due to the COVID-19 which has dried up offline sales while online sales have increased. Li Ning's share price has performed 48% YTD while Anta has returned 18%. With a spread of +30% so far, is it time to collapse the pair trade and book profit?
Changing from wholesale to retail model, the company expects to operate a hybrid model (along with franchisees) in 11 regions in China including Changchun, Changsha, Chengdu, Chongqing, Guangdong, Kunming, Nanjing, Shanghai, Wuhan, Xian, and Zhejiang.
<div>The company is expected to pick up a gross margin expansion on Anta's product by around 5-10 ppts thus in the next year. FILA brand has a higher margin by 29ppts compared to the Anta brand while its sales contribution to the group has increased from 35% to 43% in FY 2019. If the FILA brand's revenue growth will be back to FY 2019 or half of it, the company's gross profit margin will increase by around 3-4% to 58-59%, a good 10% higher to Li Ning. </div>
<div></div>
<div>Anta is trading at 24% PER discount and 18% EV/EBITDA discount to <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> although the former's share has underperformed the latter. With a transformation on the way that will hike margin and a potentially strong contribution from FILA, Anta is a buy. It is time to book profit from short Anta and long Li Ning and long Anta. 
</div>

Despite outperforming Li Ning Co Ltd (2331 HK) in the 10 year period, Anta Sports Products (2020 HK) share price this year has underperformed Li Ning due to the COVID-19 which has dried up offline sales while online sales have increased. Li Ning's share price has performed 48% YTD while Anta has returned 18%. With a spread of +30% so far, is it time to collapse the pair trade and book profit?
Changing from wholesale to retail model, the company expects to operate a hybrid model (along with franchisees) in 11 regions in China including Changchun, Changsha, Chengdu, Chongqing, Guangdong, Kunming, Nanjing, Shanghai, Wuhan, Xian, and Zhejiang.
The company is expected to pick up a gross margin expansion on Anta's product by around 5-10 ppts thus in the next year. FILA brand has a higher margin by 29ppts compared to the Anta brand while its sales contribution to the group has increased from 35% to 43% in FY 2019. If the FILA brand's revenue growth will be back to FY 2019 or half of it, the company's gross profit margin will increase by around 3-4% to 58-59%, a good 10% higher to Li Ning. 

Anta is trading at 24% PER discount and 18% EV/EBITDA discount to Li Ning Co Ltd (2331 HK) although the former's share has underperformed the latter. With a transformation on the way that will hike margin and a potentially strong contribution from FILA, Anta is a buy. It is time to book profit from short Anta and long Li Ning and long Anta. 


Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Japanese sporting goods company <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a>’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our previous insight on 12th June 2020: <a href="https://www.smartkarma.com/insights/asics-at-a-20-year-forward-ev-op-peak" target="_blank" rel="noopener">ASICS: At a 20-Year Forward EV/​OP Peak</a>. However, the company is still trading at <a target="_blank">23.9x </a>FY+2 EV/OP, 28% higher than the 52-week average.The company posts sales trends for its direct retail outlets in chart format every two weeks and according to the latest charts, sales trends in Japan, Europe, and the U.S have materially weakened over the last 3-4 weeks. However, the consensus FY+2 OP estimate was increased 6% during that time, possibly due to the positive news flows about the progress of the COVID-19 vaccine trials and the postponement of the Tokyo Olympics till July 2021.The economic impact of COVID-19 is expected to outlast the health impact, and we believe the recent upward revision of the consensus FY+2 OP is untimely, especially given the weakening own store retail sales trend.

Japanese sporting goods company ASICS Corp (7936 JP)’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our previous insight on 12th June 2020: ASICS: At a 20-Year Forward EV/​OP Peak. However, the company is still trading at 23.9x FY+2 EV/OP, 28% higher than the 52-week average.The company posts sales trends for its direct retail outlets in chart format every two weeks and according to the latest charts, sales trends in Japan, Europe, and the U.S have materially weakened over the last 3-4 weeks. However, the consensus FY+2 OP estimate was increased 6% during that time, possibly due to the positive news flows about the progress of the COVID-19 vaccine trials and the postponement of the Tokyo Olympics till July 2021.The economic impact of COVID-19 is expected to outlast the health impact, and we believe the recent upward revision of the consensus FY+2 OP is untimely, especially given the weakening own store retail sales trend.

ASICS: Near 20-Year Forward EV/​OP Peak

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.

Equity Capital Markets

Topsports International Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/belle-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:17174:1" rel="noopener">Belle International Holdings (1880 HK)</a> the parent of <a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (6110 HK)</a> aims to raise around US$310m via selling 3.57% of the company. <div>I've covered various aspects of the company in my earlier insights, links to which are below. In this insight, I'll talk about the deal dynamics.</div><div>Links to my earlier insights:</div><div><ul>
<li>The company's fundamentals and some of the related party issues: <a href="https://www.smartkarma.com/insights/topsports-international-holdings-pre-ipo-performing-well-but-all-proceeds-will-likely-go-to-belle" target="_blank" rel="noopener">Topsports International Holdings Pre-IPO - Performing Well but All Proceeds Will Likely Go to Belle</a>
</li>
<li>Historic growth and its implication for current operations: <a href="https://www.smartkarma.com/insights/topsports-international-pre-ipo-history-has-a-lot-to-tell-about-growth-and-margins" target="_blank" rel="noopener">Topsports International Pre-IPO - History Has a Lot to Tell About Growth and Margins</a>
</li>
<li>Compared the company's reported growth numbers with those of its two principal brands: <a href="https://www.smartkarma.com/entities/nike-inc-cl-b" target="_blank" data-smartkarma-citation="entities:6658:1" rel="noopener">Nike Inc Cl B (NKE US)</a> and <a href="https://www.smartkarma.com/entities/adidas-ag" target="_blank" data-smartkarma-citation="entities:21578:1" rel="noopener">adidas AG (ADS GR)</a>: <a href="https://www.smartkarma.com/insights/topsports-pre-ipo-quick-take-nike-adidas-data-throws-up-some-interesting-nuggets" target="_blank" rel="noopener">Topsports Pre-IPO - Quick Take - Nike &amp; Adidas Data Throws up Some Interesting Nuggets</a>
</li>
<li>Compared the company's performance with that of its main listed peer:  <a href="https://www.smartkarma.com/insights/topsports-pre-ipo-way-ahead-of-its-peer-on-most-counts" target="_blank" rel="noopener">Topsports Pre-IPO - Way Ahead of Its Peer on Most Counts</a>
</li>
<li>Commented on earnings outlook and valuation: <a href="https://www.smartkarma.com/insights/topsports-pre-ipo-thoughts-on-valuation" target="_blank" rel="noopener">Topsports Pre-IPO - Thoughts on Valuation</a>
</li>
<li>Updates from PHIP: <a href="https://www.smartkarma.com/insights/topsports-pre-ipo-phip-not-very-encouraging-updates-shifting-more-towards-adidas" target="_blank" rel="noopener">Topsports Pre-IPO - PHIP (Not Very Encouraging) Updates - Shifting More Towards Adidas</a>
</li>
<li>Comments on IPO price range: <a href="https://www.smartkarma.com/insights/topsports-international-ipo-looks-reasonable-towards-the-lower-end" target="_blank" rel="noopener">Topsports International IPO - Looks Reasonable Towards the Lower End</a>
</li>
<li>IPO trading update: <a href="https://www.smartkarma.com/insights/topsports-international-ipo-trading-cheap-at-the-ipo-price" target="_blank" rel="noopener">Topsports International IPO Trading - Cheap at the IPO Price</a>
</li>
<li>1H Results: <a href="https://www.smartkarma.com/insights/topsports-international-ipo-trading-1h-results-inline-but-not-very-encouraging-results" target="_blank" rel="noopener">Topsports International IPO Trading - 1H Results - Inline but Not Very Encouraging Results</a>
</li>
<li>Lock-up expiry: <a href="https://www.smartkarma.com/insights/topsports-lock-up-hasn-t-corrected-as-much-watch-out-for-the-debt-at-parent-level" target="_blank" rel="noopener">Topsports Lock-Up - Hasn’t Corrected as Much, Watch Out for the Debt at Parent Level</a>
</li>
<li>Update on Implication from Nike Results: <a href="https://www.smartkarma.com/insights/topsports-nike-results-are-encouraging-for-the-short-term-but-not-so-for-the-long-term" target="_blank" rel="noopener">Topsports - Nike Results Are Encouraging for the Short-Term but Not so for the Long Term</a>
</li>
</ul></div>

Belle International Holdings (1880 HK) the parent of Topsports International (6110 HK) aims to raise around US$310m via selling 3.57% of the company. I've covered various aspects of the company in my earlier insights, links to which are below. In this insight, I'll talk about the deal dynamics.Links to my earlier insights:
The company's fundamentals and some of the related party issues: Topsports International Holdings Pre-IPO - Performing Well but All Proceeds Will Likely Go to Belle

Historic growth and its implication for current operations: Topsports International Pre-IPO - History Has a Lot to Tell About Growth and Margins

Compared the company's reported growth numbers with those of its two principal brands: Nike Inc Cl B (NKE US) and adidas AG (ADS GR): Topsports Pre-IPO - Quick Take - Nike &amp; Adidas Data Throws up Some Interesting Nuggets

Compared the company's performance with that of its main listed peer:  Topsports Pre-IPO - Way Ahead of Its Peer on Most Counts

Commented on earnings outlook and valuation: Topsports Pre-IPO - Thoughts on Valuation

Updates from PHIP: Topsports Pre-IPO - PHIP (Not Very Encouraging) Updates - Shifting More Towards Adidas

Comments on IPO price range: Topsports International IPO - Looks Reasonable Towards the Lower End

IPO trading update: Topsports International IPO Trading - Cheap at the IPO Price

1H Results: Topsports International IPO Trading - 1H Results - Inline but Not Very Encouraging Results

Lock-up expiry: Topsports Lock-Up - Hasn’t Corrected as Much, Watch Out for the Debt at Parent Level

Update on Implication from Nike Results: Topsports - Nike Results Are Encouraging for the Short-Term but Not so for the Long Term



Topsports Placement - Parent Selling but Discount Is Enticing at the Low-End

United States

NIKE, Inc. designs, develops, and markets athletic footwear, apparel, equipment, and accessory products for men, women, and children. The Company sells its products worldwide to retail stores, through its own stores, subsidiaries, and distributors.

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Nike (NKE US)

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Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sasseur REIT Taps Aspirations of China’s Middle Class

Through his diverse career spanning more than three decades, engineer by training Anthony Ang has always tried to define...

Singapore Exchange Ltd (SGX)

Quick Picks that Are Hopeful of Keeping Delighting Chinese Consumers

The consumer sector in China has been a complex and dynamic one in recent years, with two totally opposing trends (of both consumption upgrade and...

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Despite outperforming Li Ning Co Ltd (2331 HK) in the 10 year period, Anta Sports Products (2020 HK) share price this year has underperformed Li...

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Japanese sporting goods company ASICS Corp (7936 JP)’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our...

Oshadhi Kumarasiri

Topsports Placement - Parent Selling but Discount Is Enticing at the Low-End

Belle International Holdings (1880 HK) the parent of Topsports International (6110 HK) aims to raise around US$310m via selling 3.57% of the...

Sumeet Singh

ASICS: Near 20-Year Forward EV/OP Peak