Daily Brief China: L’Occitane, Water Oasis, Kayou, Guangzhou R&F Properties, Xiaocaiyuan International Holding and more

• Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
• Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
• Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.

• Water Oasis (1161 HK) just went ex-dividend on 6th Feb and is now trading at a 7.5x PE FY24e and a 10.7% dividend yield on trailing FY23 earnings.  
• The company has refurbished its flagship stores, and we believe it can perform 8-9% better year over year for FY24 than FY23.
• The company also has 230 mn HKD net cash (after netting dividends paid out), representing     26% of market capitalization.

• From 2018 onward, French beauty retailer L’Occitane (973 HK) has apparently drawn interest from the likes of Advent International and its controlling shareholder Chairman Reinold Geiger – amongst others. 
• There is substance to these “Offers” – Geiger confirmed in August 2023 he was contemplating a conditional voluntary general Offer. He holds 72.65% of shares out according to the HKEx. 
• The latest news, with no definitive source, is that Blackstone is mulling the possibility of teaming up with Geiger on a buyout.

• Kayou (000KAYOU CH) is looking to raise up to US$500m in its upcoming HK IPO. The deal will be run by CICC, Morgan Stanley and JP Morgan.
• Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product. 
• As of 9M23 (30th Sep 23), it had an IP matrix of 44 IPs through licensing from IP partners and the development of proprietary IPs. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Bharti Airtel
• Guangzhou R&F Properties
• UPL Ltd

• Based on effective strategic positioning, Xiaocaiyuan is able to seize the market’s demand for cost-effective catering during consumption downgrade and the trend of increasing restaurant chain rate in China.
• The key for Xiaocaiyuan to generate increasing profits at low spending-per-consumer is due to its strong supply chain, which will be favored by capital especially when Xiaocaiyuan enters community catering.
• Xiaocaiyuan International Holding (XCY HK) is better than peers. However, due to poor sentiment in HKEX, it’s not sure if Xiaocaiyuan’s valuation/share price performance could outperform peers as well.