In today’s briefing:
- China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
- Giordano (709 HK): Offer Doc Out. Terms Declared Final
- Merger Arb Mondays (15 Aug) – Lifestyle Intl, EVOC, Giordano, Yashili, Alliance Aviation, ResApp
- CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views
- China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong
- Huadong Medicine (000963.CH) 2022H1 – Huadong Is Back on Track. If Shares Pullback, Then Be Long
China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
- CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
- Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
- CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.
Giordano (709 HK): Offer Doc Out. Terms Declared Final
- On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK).
- The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.
- The Composite Document is now out with a first close on the 5 September. The Offer Price has now been declared final. That’s a surprise.
Merger Arb Mondays (15 Aug) – Lifestyle Intl, EVOC, Giordano, Yashili, Alliance Aviation, ResApp
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), Infomedia Ltd (IFM AU), Lifestyle International Holdings (1212 HK).
- Lowest gross spreads are Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), MyDeal.com.au Ltd (MYD AU), Cocoaland Holdings (COLA MK), Giordano International (709 HK), China VAST.
CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views
- At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of China Tourism Group Duty Free Corp (601888 CH) is not attractive enough.
- 2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.
- Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.
China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong
- Express parcels increased by 8% YoY in China in July.
- TikTok was still the top non-game app in the world in July.
- Meituan raised its prices of bike sharing on August 10.
Huadong Medicine (000963.CH) 2022H1 – Huadong Is Back on Track. If Shares Pullback, Then Be Long
- Huadong released encouraging 2022H1 results. After a significant decline due to the loss of VBP bid for core varieties, Huadong is out of trouble and back on track now.
- The future profit contribution would be on medical cosmetology and industrial microorganisms businesses. For 2022 forecast, revenue YoY growth is below 10%, and net profit YoY growth is above 15%.
- Due to unfriendly macro environment, Huadong’s share price could face a correction. But based on its promising outlook, we recommend that investors could take advantage of the pullback to long.
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