Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

China Tourism Group Duty Free Corp Ltd (601888 CH)

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.

China Tourism Group Duty Free Corp Ltd (601888 CH) (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

We have expressed our positive view on <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> in various Insights previously. In this Insight, we look at the proposed H-share IPO from the perspective of investors who do not know it well. For seasoned investors in this name, this Insight serves as a summary of our views and provides background details on the proposed IPO.Fundamentally speaking, the key positives for CTG Duty Free are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook, and 3.) solid profitability and financial position. Key negatives are: 1.) policy risk and rising competition, 2.) concern on payback of new projects, and 3.) risk of overseas expansion. If the IPO is being priced at the current average H-A discount, it will be on 32.7x FY21F PER, we see this not expensive relative to the premium retailers listed in Hong Kong.

We have expressed our positive view on China Tourism Group Duty Free Corp Ltd (601888 CH) in various Insights previously. In this Insight, we look at the proposed H-share IPO from the perspective of investors who do not know it well. For seasoned investors in this name, this Insight serves as a summary of our views and provides background details on the proposed IPO.Fundamentally speaking, the key positives for CTG Duty Free are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook, and 3.) solid profitability and financial position. Key negatives are: 1.) policy risk and rising competition, 2.) concern on payback of new projects, and 3.) risk of overseas expansion. If the IPO is being priced at the current average H-A discount, it will be on 32.7x FY21F PER, we see this not expensive relative to the premium retailers listed in Hong Kong. 

CTG Duty Free (601888 CH) H-Share Pre-IPO: Fundamentally Speaking

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Easyhome New Retail Group / Equity Bottom-Up

<ul><li><a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> formed a JV and a capital tie-up with <a href="https://www.smartkarma.com/entities/dufry-ag" target="_blank" data-smartkarma-citation="entities:22344:1" rel="noopener">Dufry AG (DUFN SW)</a> (an operator of more than 2,400 travel retail stores globally under several famous brands including Dufry and World Duty Free) in October last year. It shows that Alibaba is quite eager to capture a significant portion of the Chinese travel retail market.  Please refer: <a href="https://www.smartkarma.com/insights/alibaba-to-buy-10-of-dufry" target="_blank" rel="noopener">Alibaba to Buy 10% of Dufry</a> for details.</li></ul><ul>
<li><a href="https://www.smartkarma.com/entities/easyhome-new-retail-group-corporation-limited" target="_blank" data-smartkarma-citation="entities:15290:1" rel="noopener">Easyhome New Retail Group (000785 CH)</a> is a small Hypermarket chain in the home improvement, home furnishing, smart home and household products businesses and operates 416 chain stores and 706 franchised stores in 272 Chinese cities. Additionally, Easyhome operates a small finance business, which provides factoring, microfinance and financing guarantees mainly to its Hypermarket customers.</li>
<li>Alibaba is already the second-largest shareholder of Easyhome with 14.73% ownership share. Alibaba acquired Easyhome shares in February 2018 in a private market transaction. Easyhome was later listed on the Shenzhen Stock Exchange through a reverse merger with Wuhan Zhongnan Commercial Group.</li>
</ul>

Alibaba Group (9988 HK) formed a JV and a capital tie-up with Dufry AG (DUFN SW) (an operator of more than 2,400 travel retail stores globally under several famous brands including Dufry and World Duty Free) in October last year. It shows that Alibaba is quite eager to capture a significant portion of the Chinese travel retail market.  Please refer: Alibaba to Buy 10% of Dufry for details.
Easyhome New Retail Group (000785 CH) is a small Hypermarket chain in the home improvement, home furnishing, smart home and household products businesses and operates 416 chain stores and 706 franchised stores in 272 Chinese cities. Additionally, Easyhome operates a small finance business, which provides factoring, microfinance and financing guarantees mainly to its Hypermarket customers.
Alibaba is already the second-largest shareholder of Easyhome with 14.73% ownership share. Alibaba acquired Easyhome shares in February 2018 in a private market transaction. Easyhome was later listed on the Shenzhen Stock Exchange through a reverse merger with Wuhan Zhongnan Commercial Group.


Easyhome New Retail Group: Could Become a Key Piece of Alibaba’s Chinese Travel Retail Puzzle

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to China Tourism Group Duty Free Corp Ltd (601888 CH) only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

During the Golden Week, average daily (for 1-7 Oct) duty free sales amounted to Rmb126m in Hainan, or an impressive 142.7% YoY growth. Since the start of the new Hainan duty free policy, average daily duty free sales has increased by 53%, suggesting a solid trend of improvement. Duty free sales in Hainan in 3Q20 has now equaled to its total sales in the island in 1H20. In our view, this solid performance will reflect positively on <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>'s quarterly result to be announced in late-Oct, and will serve as a positive share price catalyst. While rising competition is a valid concern, we believe any estimate of their impacts is overblown in the near term. The formation of a joint venture between <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> and <a href="https://www.smartkarma.com/entities/dufry-ag" target="_blank" data-smartkarma-citation="entities:22344:1" rel="noopener">Dufry AG (DUFN SW)</a> to explore travel retail business opportunities in China is no difference. We believe CTG Duty Free's solid SOE status, unparalleled procurement and logistics capabilities, huge volume demand and excellent infrastructure are advantages difficult to challenge.

During the Golden Week, average daily (for 1-7 Oct) duty free sales amounted to Rmb126m in Hainan, or an impressive 142.7% YoY growth. Since the start of the new Hainan duty free policy, average daily duty free sales has increased by 53%, suggesting a solid trend of improvement. Duty free sales in Hainan in 3Q20 has now equaled to its total sales in the island in 1H20. In our view, this solid performance will reflect positively on China Tourism Group Duty Free Corp Ltd (601888 CH)'s quarterly result to be announced in late-Oct, and will serve as a positive share price catalyst. While rising competition is a valid concern, we believe any estimate of their impacts is overblown in the near term. The formation of a joint venture between Alibaba Group (9988 HK) and Dufry AG (DUFN SW) to explore travel retail business opportunities in China is no difference. We believe CTG Duty Free's solid SOE status, unparalleled procurement and logistics capabilities, huge volume demand and excellent infrastructure are advantages difficult to challenge. 

CTG Duty Free Corp (601888 CH): Extending Solid Sales Track in the Golden Week

Switzerland

Avolta operates as a travel retailer. The Company manages duty-free and duty-paid shops, as well as convenience stores in airports, cruise lines, seaports, railway stations, and central tourist areas for consumer goods brands. Avolta serves customers worldwide.

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Avolta (AVOL SW)

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

China Tourism Group Duty Free Corp Ltd (601888 CH) aims to raise around US$5-10bn in its H-share listing in Hong Kong. It had 92.3% market share by...

Sumeet Singh

Easyhome New Retail Group: Could Become a Key Piece of Alibaba’s Chinese Travel Retail Puzzle

Easyhome is entering the Chinese travel retail business via a JV with Hainan Tourism Investment Heihu Science and Technology. If it is successful,...

Oshadhi Kumarasiri

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

New players to Hainan duty free market will not bring near-term impact to CTG Duty Free's leadership, but can be long-term challenges. However,...

Osbert Tang, CFA

CTG Duty Free Corp (601888 CH): Extending Solid Sales Track in the Golden Week

During the Golden Week, China Tourism Group Duty Free Corp Ltd (601888 CH) has recorded an average daily duty free sales of Rmb

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

China Tourism Group Duty Free Corp Ltd (601888 CH) aims to raise around US$5-10bn in its H-share listing in Hong Kong. It had 92.3% market share by...

Sumeet Singh

CTG Duty Free (601888 CH) H-Share Pre-IPO: Fundamentally Speaking

In relation to CTG Duty Free's H-share IPO, key positives are: 1.) absolute leadership in China's duty free market, 2.) encouraging growth outlook,...

Osbert Tang, CFA

Easyhome New Retail Group: Could Become a Key Piece of Alibaba’s Chinese Travel Retail Puzzle

Easyhome is entering the Chinese travel retail business via a JV with Hainan Tourism Investment Heihu Science and Technology. If it is successful,...

Oshadhi Kumarasiri

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

New players to Hainan duty free market will not bring near-term impact to CTG Duty Free's leadership, but can be long-term challenges. However,...

Osbert Tang, CFA

CTG Duty Free Corp (601888 CH): Extending Solid Sales Track in the Golden Week

During the Golden Week, China Tourism Group Duty Free Corp Ltd (601888 CH) has recorded an average daily duty free sales of Rmb

Osbert Tang, CFA