Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Despite a softening global demand backdrop, <strong><a href="https://www.smartkarma.com/entities/yue-yuen-industrial-holdings-limited" target="_blank" data-smartkarma-citation="entities:12281:1" rel="noopener">Yue Yuen Industrial (551 HK)</a></strong>, a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.</li>
<li>Yue Yuen's shares have only just recovered from a 20-year low.</li>
<li>From both a historical perspective and relative to peers, Yue Yuen is undemanding here. </li>
</ul>


Despite a softening global demand backdrop, Yue Yuen Industrial (551 HK), a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.
Yue Yuen's shares have only just recovered from a 20-year low.
From both a historical perspective and relative to peers, Yue Yuen is undemanding here. 


Yue Yuen (551 HK): Putting Their Best Feet Forward

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China's cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.</li>
<li>Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.</li>
<li>Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.</li>
</ul>


Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China's cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.
Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.
Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.


Yue Yuen Industrial Holdings (551.HK) - Challenging Prospects Overshadow Undervaluation

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. </p><p>Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. </p><div class="content-highlight">
<p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  </p>
<p>The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. </p>
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. 
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).</p><p>After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.</p><div class="content-highlight"><p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. </p></div>

Bestway Global Holding (3358 HK) is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. 

<div>
<p>On the 20 March, <a href="https://www.smartkarma.com/entities/li-fung-ltd" target="_blank" data-smartkarma-citation="entities:6290:1" rel="noopener">Li &amp; Fung Ltd (494 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0320/2020032000519.pdf" target="_blank" rel="noopener">announced</a> a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and Singapore's <a href="https://www.smartkarma.com/entities/global-logistic-properties-ltd" target="_blank" data-smartkarma-citation="entities:2894:1" rel="noopener">Global Logistic Properties (GLP SP)</a>), by way of a Scheme, at a Scheme Offer Price of HK$1.25, a 150% premium to last close. The Offer Price is final. No final FY19 dividend was declared.</p>
</div>
<div>
<p>Disinterested Shareholders comprise 5.701bn shares, or 66.77% of shares out. Therefore the blocking stake at the Scheme Meeting is 570.1mn shares or 6.677% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. </p>
<p>Silchester, with 10.9% of shares out, has the ability to torpedo the deal. </p>
<p>This is the key risk to the transaction. But I'm amending my prior conviction.</p>
<p>If concluding Li &amp; Fung is structurally, and permanently impaired, or facing ephemeral challenges (I would choose the former), this Offer Price is looking attractive.</p>
<p>As always, more below the fold.</p>
</div>
<div>
<p></p>
</div>


On the 20 March, Li &amp; Fung Ltd (494 HK) announced a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and Singapore's Global Logistic Properties (GLP SP)), by way of a Scheme, at a Scheme Offer Price of HK$1.25, a 150% premium to last close. The Offer Price is final. No final FY19 dividend was declared.


Disinterested Shareholders comprise 5.701bn shares, or 66.77% of shares out. Therefore the blocking stake at the Scheme Meeting is 570.1mn shares or 6.677% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. 
Silchester, with 10.9% of shares out, has the ability to torpedo the deal. 
This is the key risk to the transaction. But I'm amending my prior conviction.
If concluding Li &amp; Fung is structurally, and permanently impaired, or facing ephemeral challenges (I would choose the former), this Offer Price is looking attractive.
As always, more below the fold.





Hong Kong

Yue Yuen Industrial is the world's largest original design manufacturer (ODM) and original equipment manufacturer (OEM) of branded athletic and casual footwear for international brands such as Nike, Adidas, and New Balance. The company also engages in the retail and distribution of sportswear and footwear products through its subsidiary, Pou Sheng International. It was founded in 1988 and is headquartered in Hong Kong.

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Yue Yuen Industrial (551 HK)

Yue Yuen (551 HK): Putting Their Best Feet Forward

Shares have bounced off a two-decade low in tandem with its best 9M net profit results since 2017. The current yield is 7.2% Upside is 60% if...

David Blennerhassett

Yue Yuen Industrial Holdings (551.HK) - Challenging Prospects Overshadow Undervaluation

Due to high inventory of brand customers/global economy downward pressure, Yue Yuen's order visibility in 22Q4/23Q1 is low.Its valuation's lower...

Xinyao (Criss) Wang

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

Bestway Global’s Privatisation Bid

Bestway announced a privatisation offer from Mr Zhu Qiang (the Founder, Chairman & CEO) at HK$4.38 per scheme share. While not a knockout offer, we...

Arun George

Li & Fung: Another Think About The Offer

On the 20 March, Li & Fung Ltd (494 HK) announced a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and...

David Blennerhassett

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