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

<ul>
<li>A <a href="https://susong-item.taobao.com/auction/683969821701.htm?spm=a213w.7398554.paiList.1.51e41fa3epY51Y" target="_blank" rel="noopener">successful bidder</a> (identity unknown at the time of writing) has emerged for <a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a> controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.</li>
<li>As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the <a href="https://www.bankofchina.com/sourcedb/whpj/enindex_1619.html" target="_blank" rel="noopener">median BOC</a> FX of 0.9056).  </li>
<li>The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%. </li>
</ul>


A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).  
The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%. 


Fengxiang’s Judical Auction Successful, MGO Upcoming

<ul>
<li>On 16 September, the administrator published the details for the auction of <a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang Co Ltd-H (9977 HK)</a> controlling shareholder’s 70.92% stake in Alibaba Judicial Auction. </li>
<li>If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.</li>
<li>The base bid implies an MGO price of HK$1.563 per H Share, a 103.0% premium to the last close. The auction will be held from 10 October to 11 October.</li>
</ul>


On 16 September, the administrator published the details for the auction of Shandong Fengxiang Co Ltd-H (9977 HK) controlling shareholder’s 70.92% stake in Alibaba Judicial Auction. 
If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.
The base bid implies an MGO price of HK$1.563 per H Share, a 103.0% premium to the last close. The auction will be held from 10 October to 11 October.


Fengxiang’s Judicial Auction Set for 10 October, Potential MGO

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/mr-d-i-y-group" target="_blank" data-smartkarma-citation="entities:28430:1" rel="noopener">MR D.I.Y. Group (MRDIY MK)</a> raised US$364m at the fixed price of MYR1.60 per share in its Malaysia IPO.</p>
<p>The company is the largest home improvement retailer in Malaysia with a market share of about 29.3% in 2019 based on FY2019 revenue. We like the business for its resilient performance despite COVID-19 and reasonable valuation at the offered price.</p>
<p>In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.</p>
<div>
<p>We have covered the basics of the company in our previous three notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/mr-d-i-y-pre-ipo-largest-home-improvement-retailer-in-malaysia" target="_blank" data-smartkarma-citation="insights:35843" rel="noopener">Mr D.I.Y. Pre-IPO - Largest Home Improvement Retailer in Malaysia</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/mr-d-i-y-pre-ipo-store-walk-through-and-thoughts-on-value-proposition" target="_blank" data-smartkarma-citation="insights:36114" rel="noopener">Mr D.I.Y. Pre-IPO - Store Walk-Through and Thoughts on Value Proposition</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/mr-d-i-y-pre-ipo-small-stores-with-dominant-market-share" target="_blank" data-smartkarma-citation="insights:36402" rel="noopener">Mr D.I.Y. Pre-IPO - Peer Comparison - Small Stores with Dominant Market Share </a> </li>
<li>
<a href="https://www.smartkarma.com/insights/mr-diy-ipo-store-expansion-still-going-strong-undemanding-valuation" target="_blank" data-smartkarma-citation="insights:43929" rel="noopener">MR DIY IPO - Store Expansion Still Going Strong, Undemanding Valuation</a> </li>
</ul>
</div>

MR D.I.Y. Group (MRDIY MK) raised US$364m at the fixed price of MYR1.60 per share in its Malaysia IPO.
The company is the largest home improvement retailer in Malaysia with a market share of about 29.3% in 2019 based on FY2019 revenue. We like the business for its resilient performance despite COVID-19 and reasonable valuation at the offered price.
In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.

We have covered the basics of the company in our previous three notes:




Mr D.I.Y. Pre-IPO - Largest Home Improvement Retailer in Malaysia 

Mr D.I.Y. Pre-IPO - Store Walk-Through and Thoughts on Value Proposition 

Mr D.I.Y. Pre-IPO - Peer Comparison - Small Stores with Dominant Market Share  

MR DIY IPO - Store Expansion Still Going Strong, Undemanding Valuation 



MR DIY IPO Trading - Good Demand, Still Very Reasonable Valuation

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Shandong Fengxiang / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a> (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, raised US$150m in its Hong Kong IPO.</p><div><p>I had looked at the company background in my previous note,<a href="https://www.smartkarma.com/insights/shandong-fengxiang-ipo-looks-cheap-but-is-at-peak-margins" target="_blank" rel="noopener"> Shandong Fengxiang IPO - Looks Cheap but Is at Peak Margins</a>.</p></div><div><p>In those note, I'll run through the deal dynamics and provide a table with the implied p/e at different share price levels. </p></div>

Shandong Fengxiang (9977 HK) (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, raised US$150m in its Hong Kong IPO.I had looked at the company background in my previous note, Shandong Fengxiang IPO - Looks Cheap but Is at Peak Margins.In those note, I'll run through the deal dynamics and provide a table with the implied p/e at different share price levels. 

Shandong Fengxiang IPO Trading - Lack of Over-Allocation Won't Help Post Deal Performance

<p><a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a>  Shandong Fengxian (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, is looking to raise upto US$220m in its Hong Kong listing. SF has a market share of 3.1% in 2019, by volume. SF is also the largest white-feathered broiler meat exporter in the PRC in terms of revenue and volume with a market share of 8.6% and 10.4% in 2018.</p><p>The company caters mostly to the B2B segment with some of the largest quick-service restaurant chains (Yum China, and McDonald's) as its customers. It has long term relationships with some stretching for more than 15 years.</p><p>Earnings have grown rapidly over the reporting period of FY16-19, revenue grew at 18.6% CAGR while PAT (without bio gains) grew at 94% CAGR or was up 7.3x, although the growth hasn’t been even.</p><p>Earnings growth has mostly been driven by the industry-wide price increase, as processed meat is the only segment that has consistently grown its volumes. </p><p>The industry overall has been shrinking since 2015 due to supply issues, as per the industry report. This is expected to reverse in 2020, although the forecasts appear rosy. There are also related party issues with SF entering into many transactions with related entities.</p>

Shandong Fengxiang (9977 HK)  Shandong Fengxian (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, is looking to raise upto US$220m in its Hong Kong listing. SF has a market share of 3.1% in 2019, by volume. SF is also the largest white-feathered broiler meat exporter in the PRC in terms of revenue and volume with a market share of 8.6% and 10.4% in 2018.The company caters mostly to the B2B segment with some of the largest quick-service restaurant chains (Yum China, and McDonald's) as its customers. It has long term relationships with some stretching for more than 15 years.Earnings have grown rapidly over the reporting period of FY16-19, revenue grew at 18.6% CAGR while PAT (without bio gains) grew at 94% CAGR or was up 7.3x, although the growth hasn’t been even.Earnings growth has mostly been driven by the industry-wide price increase, as processed meat is the only segment that has consistently grown its volumes. The industry overall has been shrinking since 2015 due to supply issues, as per the industry report. This is expected to reverse in 2020, although the forecasts appear rosy. There are also related party issues with SF entering into many transactions with related entities.

Shandong Fengxiang IPO - Looks Cheap but Is at Peak Margins

Malaysia

Leong Hup International Berhad provides poultry services. The Company offers breeding, egg production, broiler, and livestock feeding solutions, as well as manufactures chicken products. Leong Hup International serves customers in Asian.

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Leong Hup International (LHIB MK)

Fengxiang’s Judical Auction Successful, MGO Upcoming

The succesful bid will result in an MGO at HK$1.526 (at the median BOC FX of 0.9056). Our best guess is the offer completes end-January 2023. At...

Arun George

Fengxiang’s Judicial Auction Set for 10 October, Potential MGO

If the auction is successful, it will result in an MGO. The base bid implies an MGO price of HK$1.563 per H Share, a 103.0% premium to the last close.

Arun George

MR DIY IPO Trading - Good Demand, Still Very Reasonable Valuation

The company is the largest home improvement retailer in Malaysia. We like the business for its resilient performance despite COVID-19 and...

Zhen Zhou, Toh

Shandong Fengxiang IPO Trading - Lack of Over-Allocation Won't Help Post Deal Performance

Shandong Fengxiang (9977 HK) (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, raised US$150m in its Hong Kong...

Sumeet Singh

Shandong Fengxiang IPO - Looks Cheap but Is at Peak Margins

Shandong Fengxiang (9977 HK) Shandong Fengxian (SF), the second-largest fully integrated white-feathered broiler producer in the PRC, is looking...

Sumeet Singh

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