In today’s briefing:
- Fosun Tourism (1992.HK) Privatization – The Cancellation Price Is Not Good Enough
- China Tobacco Intl (6055 HK): A Bullish Expectation
- ECM Weekly (16th Dec 2024) – LG CNS, Mao Geping, Digico, Kioxia, Vishal Mega, IGI, Sai Life, Quantum
- Shortlist of High Conviction Philippines Equity Ideas – December 2024
- The Situation Is Different for REITs that Rely on Capital Increase, Despite the Same Low P/B Issue
Fosun Tourism (1992.HK) Privatization – The Cancellation Price Is Not Good Enough
- Fosun Tourism has emerged from its difficulties and started an upward trend.If it remains listed, it’s only a matter of time before its share price returns to the IPO price.
- Temasek was once in talks to buy a minority stake in Club Med from Fosun International for €500 million, based on which reasonable valuation for Fosun Tourism is RMB12.6 billion.
- Fosun has continued its style- When performance recovery hasn’t been reflected in stock price, it’s the right time to privatize valuable assets at cheap price. A share alternative is expected.
China Tobacco Intl (6055 HK): A Bullish Expectation
- Management of China Tobacco International (HK) (6055 HK) is bullish on earnings in the next two years, with tobacco leaf import and cigarette export being the key drivers.
- Elevated tobacco leaf price is positive to CTI while more re-opening of duty-free shops (currently only 50% of pre-COVID level) will add to revenue momentum.
- A light gearing of just 2% and potentially more parent asset injection are CTI’s strengths. The company plans to maintain a steady uptrend on absolute DPS annually.
ECM Weekly (16th Dec 2024) – LG CNS, Mao Geping, Digico, Kioxia, Vishal Mega, IGI, Sai Life, Quantum
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, a number of offerings were live in India, in a bid to beat the year-end lull.
- On the placements front, there was a large placement for SenseTime Group (20 HK) and a number of smaller deals in India.
Shortlist of High Conviction Philippines Equity Ideas – December 2024
- We are gradually building a high-conviction coverage of ideas for the mid and small-caps in the Philippines.
- We set criteria for high ROCE, reasonable growth (10-15% YoY), strong balance sheets, and reasonable capital allocation (dividend yields), all ingredients for being multi-baggers.
- We summarize some updates for our top year-end picks: DigiPlus Interactive (PLUS PM), Ginebra San Miguel (GSMI PM), and The Keepers Holdings (KEEPR PM)
The Situation Is Different for REITs that Rely on Capital Increase, Despite the Same Low P/B Issue
- Repurchasing investment units, increasing dividends through property sales, and increasing EPS through negative goodwill of M&A seem to be the share price raising measures necessary for capital increase for growth.
- When increasing capital amid stagnated REIT stock prices, it’s questionable whether the picture that is drawn after capital increase is reasonable in the face of rising required returns by investors.
- When the profitability of REIT investment companies is in question, it is not surprising that activist investors will focus on management issues, including cost of capital or corporate governance.
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