Daily China: Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go and more

In this briefing:

1. Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go
2. Japan Display: Squeezing Up 36% As Chinese Investment Could Solve Balance Sheet Troubles
3. Starbucks (SBUX): China Strategy Reaped by Luckin’s Parasitical Tactic, a Visit and Case Study
4. Hengan Intl. (1044 HK): Our Analysis Suggests that Bonitas’ Allegations Have Some Substance

1. Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go

Fosun Tourism (1992 HK)‘s IPO was priced at the low-end, HKD15.60/share. The retail tranche was undersubscribed while the institutional tranche was said to be moderately over-subscribed. I have covered most aspects of the deal in my earlier insights:

• Fosun Tourism Pre-IPO – No Improvement or Major Changes in Club Med Since the Acquisition
• Fosun Tourism IPO – Fair Value Is Probably Below Low-End

In this insight, I’ll provide an update on the deal dynamics, valuations and provide a table with the implied valuations at different share price levels.

2. Japan Display: Squeezing Up 36% As Chinese Investment Could Solve Balance Sheet Troubles

As we mentioned in a comment in  Japan Display: Cost Structure Improvement Is Good but Shipment Delay and IPhone XR Cloud Outlook the NHK reported last night that JDI was in talks with a Chinese consortium to secure something in the region of ¥50bn in funding (more than its market cap yesterday) for a more than 33% stake in the company. The Nikkei shed light on the identities of some of the consortium this morning mentioning investment fund Silk Road, Minth Group Ltd (425 HK) and  Shenzhen O Film Tech Co A (002456 CH). Bloomberg has also mentioned that the consortium could invest a further ¥500bn to establish a new facility in China for the production of OLED panels.

We spoke to the company this morning to get colour on these announcements.

3. Starbucks (SBUX): China Strategy Reaped by Luckin’s Parasitical Tactic, a Visit and Case Study

• We believe Luckin copies SBUX’s site selection, but chooses low rental places close to Starbucks shops.
• Starbucks plans to add delivery business to raise margins and comparable store sales, but Luckin has focused on delivery since inception.
• Starbucks needs the China market as its growth momentum, but we believe Luckin’s parasitical tactic will be a major resistance.

4. Hengan Intl. (1044 HK): Our Analysis Suggests that Bonitas’ Allegations Have Some Substance

Hengan Intl Group (1044 HK), China’s leading sanitary towel and nappy producer, has been targeted by a short seller, Bonitas Research. Hengan has denied Bonitas’ allegations to which Bonitas has responded that Hengan’s response was weak and evasive. The shares have continued to slide suggesting that investors are less than convinced with Hengan’s rebuttal.