HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>After a solid FY23, <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>'s outlook for FY24 looks equally encouraging. Its various brands are expected to grow by 10-30% YoY still.  </li>
<li>Listing of <a href="https://www.smartkarma.com/entities/amer-sports-inc" target="_blank" data-smartkarma-citation="entities:21751:1" rel="noopener">Amer Sports (AS US)</a> will provide Rmb1.6bn non-recurring gain in 1H24. For the full year, there will be a positive swing in its profit contribution. </li>
<li>Anta Sports can be considered as a sportswear brand incubator, and its premium PERs of 18.3x and 15.9x for FY24 and FY25 reflect the ability to brew new brands. </li>
</ul>


After a solid FY23, Anta Sports Products (2020 HK)'s outlook for FY24 looks equally encouraging. Its various brands are expected to grow by 10-30% YoY still.  
Listing of Amer Sports (AS US) will provide Rmb1.6bn non-recurring gain in 1H24. For the full year, there will be a positive swing in its profit contribution. 
Anta Sports can be considered as a sportswear brand incubator, and its premium PERs of 18.3x and 15.9x for FY24 and FY25 reflect the ability to brew new brands. 


Anta Sports (2020 HK): Sustains Strengths into FY24

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.

Equity Capital Markets

Belle Fashion Group / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/belle-fashion-group" target="_blank" data-smartkarma-citation="entities:40959:1" rel="noopener">Belle Fashion Group (2007708D HK)</a>, the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO. </li>
<li>Belle Fashion originated from <a href="https://www.smartkarma.com/entities/belle-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:17174:1" rel="noopener">Belle International Holdings (2129452D HK)</a>, which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as <a href="https://www.smartkarma.com/entities/topsports-international-holdings" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International Holdings (6110 HK)</a>.</li>
<li>The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage. </li>
</ul>



Belle Fashion Group (2007708D HK), the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO. 
Belle Fashion originated from Belle International Holdings (2129452D HK), which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as Topsports International Holdings (6110 HK).
The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage. 


Event-Driven

<ul>
<li>Reuters <a href="https://www.reuters.com/markets/asia/chinas-champion-gymnast-li-ning-considers-taking-company-private-sources-say-2024-03-12/" target="_blank" rel="noopener">reported</a> that due to the steep share price declines, Mr Li Ning is considering leading a consortium to privatise <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning (2331 HK)</a>. </li>
<li>The shares have been weighed down by concerns about channel inventory, steep retail discounts, and unauthorised distributor sales. To counter this, Li Ning aims to achieve RMB50bn sales by 2028.</li>
<li>The probability of an offer is low as funding the scheme consideration could prove challenging. Nevertheless, the downside is low as Li Ning trades at an undemanding valuation. </li>
</ul>


Reuters reported that due to the steep share price declines, Mr Li Ning is considering leading a consortium to privatise Li Ning (2331 HK). 
The shares have been weighed down by concerns about channel inventory, steep retail discounts, and unauthorised distributor sales. To counter this, Li Ning aims to achieve RMB50bn sales by 2028.
The probability of an offer is low as funding the scheme consideration could prove challenging. Nevertheless, the downside is low as Li Ning trades at an undemanding valuation. 


Li Ning (2331 HK): Evaluating a Potential Privatisation

<ul>
<li>
<a href="https://www.smartkarma.com/entities/amer-sports-inc" target="_blank" data-smartkarma-citation="entities:21751:1" rel="noopener">Amer Sports (AS US)</a> is a global iconic sports and outdoor brand group. According to press reports, it has filed for a NYSE IPO to raise US$2 billion.</li>
<li>In <strong><em><a href="https://www.smartkarma.com/insights/amer-sports-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:124040" rel="noopener">Amer Sports IPO: The Bull Case</a></em></strong>, we highlighted the key elements of the bull case. In this note, we outline the bear case.</li>
<li>The bear case rests on ball &amp; racquet sports’ deteriorating performance, EBIT margin not materially improving under the consortium’s ownership, cash burn and high leverage.</li>
</ul>



Amer Sports (AS US) is a global iconic sports and outdoor brand group. According to press reports, it has filed for a NYSE IPO to raise US$2 billion.
In Amer Sports IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on ball &amp; racquet sports’ deteriorating performance, EBIT margin not materially improving under the consortium’s ownership, cash burn and high leverage.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/amer-sports-inc" target="_blank" data-smartkarma-citation="entities:21751:1" rel="noopener">Amer Sports (AS US)</a> is a global iconic sports and outdoor brand group. According to press reports, it has filed for a NYSE IPO to raise US$2 billion.</li>
<li>In 2019, a consortium of <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>, FountainVest, Anamered Investments and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> acquired Amer at an EV of €5.5 billion.  </li>
<li>The bull case rests on the rapid growth and gross margin improvement under the consortium's ownership, along with technical apparel and outdoor performance’s improving revenue and margin profile. </li>
</ul>



Amer Sports (AS US) is a global iconic sports and outdoor brand group. According to press reports, it has filed for a NYSE IPO to raise US$2 billion.
In 2019, a consortium of Anta Sports Products (2020 HK), FountainVest, Anamered Investments and Tencent (700 HK) acquired Amer at an EV of €5.5 billion.  
The bull case rests on the rapid growth and gross margin improvement under the consortium's ownership, along with technical apparel and outdoor performance’s improving revenue and margin profile. 


China

361 Degrees International Ltd. designs, develops, manufactures, markets and distributes sportswear products, including athletic footwear, apparel and accessories.

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361 Degrees International (1361 HK)

Anta Sports (2020 HK): Sustains Strengths into FY24

Anta's 1Q24 sales were lower than the full-year target, with ANTA brand up mid-single digit, FILA brand up high-single digit, and other brands up...

Osbert Tang, CFA

Belle Fashion IPO: The Investment Case

The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage.

Arun George

Li Ning (2331 HK): Evaluating a Potential Privatisation

The probability of an offer is low as funding the scheme consideration could prove challenging. Nevertheless, the downside is low as Li Ning trades...

Arun George

Amer Sports IPO: The Bear Case

The bear case rests on ball and racquet sports’ deteriorating performance, EBIT margin not materially improving under the consortium’s ownership,...

Arun George

Amer Sports IPO: The Bull Case

The bull case rests on the rapid growth and gross margin improvement under the consortium's ownership, along with technical apparel and outdoor...

Arun George

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