Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a> may have outperformed <a href="https://www.smartkarma.com/entities/health-and-happiness-h-h-int" target="_blank" data-smartkarma-citation="entities:20582:1" rel="noopener">Health And Happiness (H&amp;H) (1112 HK)</a> but the pair trade of long <a href="https://www.smartkarma.com/entities/yuanshengtai-dairy-farm-ltd" target="_blank" data-smartkarma-citation="entities:17091:1" rel="noopener">Yuanshengtai Dairy Farm (1431 HK)</a> and short <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a> have made 42% since the initiation in <a href="https://www.smartkarma.com/insights/china-feihe-6186-flying-no-more" target="_blank" data-smartkarma-citation="insights:39842" rel="noopener">China Feihe (6186): Flying No More?</a> .
The recent news that China Feihe is buying out YST has effectively collapsed the previously available valuation gap therefore it is time to also close the trade by selling YST and buy-to-cover China Feihe. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/619/original/image_10140919521599523419732.png?1599523420" class="editor-image img-responsive" data-smartkarma-image-id="157619"></figure>

China Feihe (6186 HK) may have outperformed Health And Happiness (H&amp;H) (1112 HK) but the pair trade of long Yuanshengtai Dairy Farm (1431 HK) and short China Feihe (6186 HK) have made 42% since the initiation in China Feihe (6186): Flying No More? .
The recent news that China Feihe is buying out YST has effectively collapsed the previously available valuation gap therefore it is time to also close the trade by selling YST and buy-to-cover China Feihe. 


YST (1431) VS China Feihe (6186): Time to Close

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

<a href="https://www.smartkarma.com/entities/yuanshengtai-dairy-farm-ltd" target="_blank" data-smartkarma-citation="entities:17091:1" rel="noopener">Yuanshengtai Dairy Farm (1431 HK)</a>/YST Diary is one of the leading dairy farming companies in China as measured by herd size and production volume. YST has six dairy farms in Heilongjiang Province and one dairy farm in Jilin Province. On Sunday, <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a> announced a conditional voluntary general offer to acquire all the YST shares at HK$0.63 in cash per share. The offer is conditional on the offeror and its concert parties holding at least 50% of the voting rights. The offeror and its concert parties currently hold 0.13% of the outstanding shares and have not received irrecovables. <div class="content-highlight">The offer is unlikely to see shareholders clamouring to accept the offer as the shares are up 110% YTD and the offer is a marginal 1.6% premium to the share price on the last trading date (3 September). China Feihe is YST’s largest customer and the offer is largely defensive move to limit <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>’s growing importance to YST, in our view. China Feihe’s offer price is final and there is a good chance the offer could fail due to the small premium. However, several of China Feihe’s peers including Mengniu have invested in raw milk suppliers to secure sufficient supply. Consequently, we would be inclined to have a long position as there is some chance that China Feihe’s bid could force out rival bidders.  </div>

Yuanshengtai Dairy Farm (1431 HK)/YST Diary is one of the leading dairy farming companies in China as measured by herd size and production volume. YST has six dairy farms in Heilongjiang Province and one dairy farm in Jilin Province. On Sunday, China Feihe (6186 HK) announced a conditional voluntary general offer to acquire all the YST shares at HK$0.63 in cash per share. The offer is conditional on the offeror and its concert parties holding at least 50% of the voting rights. The offeror and its concert parties currently hold 0.13% of the outstanding shares and have not received irrecovables. The offer is unlikely to see shareholders clamouring to accept the offer as the shares are up 110% YTD and the offer is a marginal 1.6% premium to the share price on the last trading date (3 September). China Feihe is YST’s largest customer and the offer is largely defensive move to limit China Mengniu Dairy Co (2319 HK)’s growing importance to YST, in our view. China Feihe’s offer price is final and there is a good chance the offer could fail due to the small premium. However, several of China Feihe’s peers including Mengniu have invested in raw milk suppliers to secure sufficient supply. Consequently, we would be inclined to have a long position as there is some chance that China Feihe’s bid could force out rival bidders.  

Chine Feihe Lobs a Conditional Voluntary Offer for YST Dairy

Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

China Shengmu Organic Milk / Equity Bottom-Up

China Shengmu's share price has plunged more than 16% in the last two days. On the surface, it appears that the price fall is mainly due to the canceled offer by Yili announced on 28 April 2017 (See this <a href="https://www.bloomberg.com/news/articles/2017-04-27/china-s-yili-scraps-667-million-deal-for-organic-milk-company" target="_blank">Bloomberg article </a>for a quick recap). However, the main reason given for the termination of the offer - they have not received approval from the Anti-Monopoly Bureau of the Ministry of Commerce - appears insufficient for me. The MOFCOM has officially said they did not block the transaction, but they did not approve it before the Long Stop Date (the 'deadline').In this article, I hope to address the following questions:1) Have higher inter-segment sales masked weakening net sales? 2) Are its higher-than-peer profit margins sustainable? 3) What are the less obvious risks lurking in the background?

China Shengmu's share price has plunged more than 16% in the last two days. On the surface, it appears that the price fall is mainly due to the canceled offer by Yili announced on 28 April 2017 (See this Bloomberg article for a quick recap). However, the main reason given for the termination of the offer - they have not received approval from the Anti-Monopoly Bureau of the Ministry of Commerce - appears insufficient for me. The MOFCOM has officially said they did not block the transaction, but they did not approve it before the Long Stop Date (the 'deadline').In this article, I hope to address the following questions:1) Have higher inter-segment sales masked weakening net sales? 2) Are its higher-than-peer profit margins sustainable? 3) What are the less obvious risks lurking in the background? 

Why Did Yili Scrap Its USD 667m Offer for Shengmu?

Fonterra Shareholders Fund / Equity Bottom-Up

The quote is by Helen Hayes and suits Fonterra, a New-Zealand listed dairy co-operative with a long history of developing products and markets since the 1960s. Today, the Co-op's products enjoy a strong reception in Asia, but this is not reflected in its valuation. At a 6.6% dividend yield, it is hard to pass up the Crème de la crème.In this piece, I will discuss the following: 1. The company's history and portfolio of brands 2. Its improving margins from a five-year perspective, if we look past near-term volatility 3.  How sales to Greater China are picking up the drop in Latam, and set to grow further.

The quote is by Helen Hayes and suits Fonterra, a New-Zealand listed dairy co-operative with a long history of developing products and markets since the 1960s. Today, the Co-op's products enjoy a strong reception in Asia, but this is not reflected in its valuation. At a 6.6% dividend yield, it is hard to pass up the Crème de la crème.In this piece, I will discuss the following: 1. The company's history and portfolio of brands 2. Its improving margins from a five-year perspective, if we look past near-term volatility 3.  How sales to Greater China are picking up the drop in Latam, and set to grow further.

Age Is Not Important Unless You're a Cheese: Buy an Aged Dairy Co At 12X PE and 6.6% Div Yield

Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.Risk arbitrage trades we have our eyes on are:<ul><li><a href="https://www.smartkarma.com/entities/15914" target="_blank" data-smartkarma-citation="entities:15914:1">Calsonic Kansei Corp (7248 JP)</a> / KKR</li><li><a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson (2651 JP)</a> / <a href="https://www.smartkarma.com/entities/20668" target="_blank" data-smartkarma-citation="entities:20668:1">Mitsubishi Corp (8058 JP)</a></li><li><a href="https://www.smartkarma.com/entities/13301" target="_blank" data-smartkarma-citation="entities:13301:1">ARA Asset Management (ARA SP)</a> / Consortium</li><li><a href="https://www.smartkarma.com/entities/610" target="_blank" data-smartkarma-citation="entities:610:1">Huabao International Holdings Limited (336 HK)</a> / Chairwoman Chu Lam Yiu</li><li><a href="https://www.smartkarma.com/entities/8117" target="_blank" data-smartkarma-citation="entities:8117:1">Innovalues Ltd (IP SP)</a> / Northstar Group</li></ul>Have a great weekend!

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.Risk arbitrage trades we have our eyes on are:Calsonic Kansei Corp (7248 JP) / KKRLawson (2651 JP) / Mitsubishi Corp (8058 JP)ARA Asset Management (ARA SP) / ConsortiumHuabao International Holdings Limited (336 HK) / Chairwoman Chu Lam YiuInnovalues Ltd (IP SP) / Northstar GroupHave a great weekend!

Smartkarma - Special Situations Weekly Update (12 December 2016)

China

China Shengmu Organic Milk is an investment holding company primarily engaged in the production and distribution of raw milk and dairy products. The company's principal business includes dairy farming, production, and sales of desert-based organic and non-organic raw milk, as well as beef cow breeding. It was founded in 2009 and is headquartered in Bayannur, Inner Mongolia, China.

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China Shengmu Organic Milk (1432 HK)

YST (1431) VS China Feihe (6186): Time to Close

China Feihe (6186 HK) may have outperformed Health And Happiness (H&H) (1112 HK) but the pair trade of long Yuanshengtai Dairy Farm (1431 HK)...

Henry Soediarko

Chine Feihe Lobs a Conditional Voluntary Offer for YST Dairy

$ is the one of the leading dairy farming companies in China as measured by herd size and production volume. YST has six dairy farms in...

Arun George

Why Did Yili Scrap Its USD 667m Offer for Shengmu?

China Shengmu's share price has plunged more than 16% in the last two days. On the surface, it appears that the price fall is mainly due to...

Valerie Law, CFA

Age Is Not Important Unless You're a Cheese: Buy an Aged Dairy Co At 12X PE and 6.6% Div Yield

The quote is by Helen Hayes and suits Fonterra, a New-Zealand listed dairy co-operative with a long history of developing products and markets...

Valerie Law, CFA

Smartkarma - Special Situations Weekly Update (12 December 2016)

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in...

Crispin Francis

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