Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.</li>
<li>Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.</li>
<li>Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     </li>
</ul>


Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     


China Catering Sector: In Search of Alpha

<ul>
<li>China catering players have seen strong recovery during the Chinese New Year starting from Jan 22th, amidst a broad-based revival of the service sector as a whole.</li>
<li>For Xiabuxiabu, latest data points suggest significant progress in turnaround and higher visibility into 2023 performance.</li>
<li>We see upside to our financial projection for 2023 and are more confident that Xiabuxiabu is the most attractively-priced to play re-opening in China catering sector. Expect 50% upside.</li>
</ul>


China catering players have seen strong recovery during the Chinese New Year starting from Jan 22th, amidst a broad-based revival of the service sector as a whole.
For Xiabuxiabu, latest data points suggest significant progress in turnaround and higher visibility into 2023 performance.
We see upside to our financial projection for 2023 and are more confident that Xiabuxiabu is the most attractively-priced to play re-opening in China catering sector. Expect 50% upside.


Xiabuxiabu (520 HK): Strong CNY Bodes Well for the Year of 2023

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tao-heung" target="_blank" data-smartkarma-citation="entities:2668:1" rel="noopener">Tao Heung (573 HK)</a>, a Chinese cuisine restaurant operator, has lost significant shop-days in 1H22 due to the pandemic. However, this is behind us and 2H22 outlook is better.</li>
<li>The recovery of Hong Kong operations will be supported by further relaxation of social distancing measures while, for mainland China, business has rebounded following removal of lockdowns.   </li>
<li>Its Chairman has upped his stake, signaling a vote of confidence. The stock's valuations are not expensive, but given low turnover, there will be potential share price volatility.</li>
</ul>



Tao Heung (573 HK), a Chinese cuisine restaurant operator, has lost significant shop-days in 1H22 due to the pandemic. However, this is behind us and 2H22 outlook is better.
The recovery of Hong Kong operations will be supported by further relaxation of social distancing measures while, for mainland China, business has rebounded following removal of lockdowns.   
Its Chairman has upped his stake, signaling a vote of confidence. The stock's valuations are not expensive, but given low turnover, there will be potential share price volatility.


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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mixue-group" target="_blank" data-smartkarma-citation="entities:40623:1" rel="noopener">Mixue Group (2097 HK)</a>, a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO.</li>
<li>We previously discussed the IPO in <a href="https://www.smartkarma.com/insights/mixue-group-2097-hk-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:177152" rel="noopener">MIXUE Group (2097 HK) IPO: The Bull Case</a> and <a href="https://www.smartkarma.com/insights/mixue-group-2097-hk-ipo-the-bear-case" target="_blank" data-smartkarma-citation="insights:177307" rel="noopener">MIXUE Group (2097 HK) IPO: The Bear Case</a>. </li>
<li>There are five cornerstone investors. Our valuation analysis suggests Mixue is attractively valued at the IPO price range. Therefore, we would participate in the IPO.</li>
</ul>



Mixue Group (2097 HK), a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO.
We previously discussed the IPO in MIXUE Group (2097 HK) IPO: The Bull Case and MIXUE Group (2097 HK) IPO: The Bear Case. 
There are five cornerstone investors. Our valuation analysis suggests Mixue is attractively valued at the IPO price range. Therefore, we would participate in the IPO.


MIXUE Group (2097 HK) IPO: Valuation Insights

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tam-jai-international-co-ltd" target="_blank" data-smartkarma-citation="entities:34227:1" rel="noopener">Tam Jai International (2217 HK)</a> announced a scheme privatisation offer from <a href="https://www.smartkarma.com/entities/toridoll-holdings-corporation" target="_blank" data-smartkarma-citation="entities:8193:1" rel="noopener">TORIDOLL Holdings Corporation (3397 JP)</a> at HK$1.58 per share, a 75.6% premium to the last close price. </li>
<li>The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. </li>
<li>The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. </li>
</ul>



Tam Jai International (2217 HK) announced a scheme privatisation offer from TORIDOLL Holdings Corporation (3397 JP) at HK$1.58 per share, a 75.6% premium to the last close price. 
The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. 
The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. 


Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58

China

Xiabuxiabu Catering Management China Holdings Co Ltd  owns and operates a chain of restaurants in China. The company allows customers to choose from a selection of vegetables, meats, and seafood to cook in their own individual hot pot in its restaurants.

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Xiabuxiabu Catering (520 HK)

China Catering Sector: In Search of Alpha

Sentiment-driven rally is fading. We expect investors' focus to shift to company fundamental. Our store expansion framework points to Xiabu as the...

Eric Chen

Xiabuxiabu (520 HK): Strong CNY Bodes Well for the Year of 2023

Strong operating data of Xiabuxiabu Group during CNY highlighted not only very favorable industry tailwinds but also significant progress in...

Eric Chen

Tao Heung (573 HK): Bon Appetit

Tao Heung should have a better 2H22 given recovery of Hong Kong operations as consumer spending improves. Also, mainland China market is not...

Osbert Tang, CFA

MIXUE Group (2097 HK) IPO: Valuation Insights

Our valuation analysis suggests Mixue is attractively valued at the IPO price range. Therefore, we would participate in the IPO.

Arun George

Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58

The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is...

Arun George

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