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
- Keepers Holdings: Exciting Soundbites From Management Call for H1 2022
- Hyundai Mobis: Plans to Spin Off Parts & Module Units
- 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
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.
Keepers Holdings: Exciting Soundbites From Management Call for H1 2022
- The management of The Keepers Holdings, Inc. (KEEPR PM) highlighted bullish trends from their call for H1 2022 for on-premise and travel retail that bode well for H2 2022.
- We believe the company is on the cusp of backward integration by acquiring its supplier, Bodegas William and Humbert (in Spain). We believe this is an exciting future catalyst.
- The stock trades at 6x PE FY22e (ex-cash) with seven bn+ pesos of cash on the balance sheet representing 37% of market capitalization. We see significant upside ahead.
Hyundai Mobis: Plans to Spin Off Parts & Module Units
- On 12 August, it was reported in numerous local media that Hyundai Mobis (012330 KS) plans to spin off its auto parts and module business units into two separate entities.
- Hyundai Mobis has not formally announced these spin offs although local media mentioned that these spin off plans have recently been finalized.
- These spin-offs by Hyundai Mobis also are likely to be preludes to the Hyundai Mobis/Hyundai Motor Group reorganization. We remain positive on Hyundai Mobis.
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.
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