Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>Back on the 18 March, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> (KLN) <a href="http://www3.hkexnews.hk/listedco/listconews/SEHK/2019/0318/LTN20190318261.pdf" target="_blank" rel="noopener">announced</a> the possible spin-off and separate listing of 63%-held Kerry Express (Thailand) (KET) on the stock exchange of Thailand. KET is principally engaged in the business of express delivery business in Thailand. </p>
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<p>A strategic partnership was established with GI Global Media Public, a subsidiary of <a href="https://www.smartkarma.com/entities/15943" target="_blank" data-smartkarma-citation="entities:15943:1" rel="noopener">BTS Group Holdings (BTS TB)</a>, <a href="http://www3.hkexnews.hk/listedco/listconews/SEHK/2018/0424/LTN20180424095.pdf" target="_blank" rel="noopener">in July 2018</a>. GI Global paid THB5.9bn (HK$1.475bn) for 23% of KIT, implying a then market value of $6.4bn,  or ~HK$4bn for KLN's 63% stake.</p>
<p>Details of KET's December listing have now been issued - all <a href="https://market.sec.or.th/public/ipos/IPOSEQ01.aspx?TransID=305545" target="_blank" rel="noopener">relevant information</a> is in Thai. That stake in KET is now worth ~50% more, if using the mid-point of the IPO range. </p>
<p>More below the fold.</p>
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Back on the 18 March, Kerry Logistics Network (636 HK) (KLN) announced the possible spin-off and separate listing of 63%-held Kerry Express (Thailand) (KET) on the stock exchange of Thailand. KET is principally engaged in the business of express delivery business in Thailand. 


A strategic partnership was established with GI Global Media Public, a subsidiary of BTS Group Holdings (BTS TB), in July 2018. GI Global paid THB5.9bn (HK$1.475bn) for 23% of KIT, implying a then market value of $6.4bn,  or ~HK$4bn for KLN's 63% stake.
Details of KET's December listing have now been issued - all relevant information is in Thai. That stake in KET is now worth ~50% more, if using the mid-point of the IPO range. 
More below the fold.





Kerry Logistics (636 HK): Kerry Express' Spin-Off

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

Kerry Express Thailand / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> is the leading express delivery company in Thailand. It is backed by <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> (63.0% shareholder) and <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a> (23.0% shareholder).</p></div><div><p>Kerry Express has launched its IPO at a price range of THB25.00-28.00 per share to raise as much as THB8.4 billion ($278 million). Subscription will take place between 8-9 and 14 December for retail investors, and 16-18 December for institutional investors. The final price is expected to be announced on 15 December. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/kerry-express-ipo-initiation-a-recovery-play" target="_blank" data-smartkarma-citation="insights:45446" rel="noopener">Kerry Express IPO Initiation: A Recovery Play?</a>, we stated that while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. Overall, we think that a reasonable P/E valuation, a market-leading business and solid cornerstone support makes Kerry Express tempting at the proposed pricing range. </p></div></div></div>

Kerry Express Thailand (KEX TB) is the leading express delivery company in Thailand. It is backed by Kerry Logistics Network (636 HK) (63.0% shareholder) and VGI PCL (VGI TB) (23.0% shareholder).Kerry Express has launched its IPO at a price range of THB25.00-28.00 per share to raise as much as THB8.4 billion ($278 million). Subscription will take place between 8-9 and 14 December for retail investors, and 16-18 December for institutional investors. The final price is expected to be announced on 15 December. In Kerry Express IPO Initiation: A Recovery Play?, we stated that while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. Overall, we think that a reasonable P/E valuation, a market-leading business and solid cornerstone support makes Kerry Express tempting at the proposed pricing range. 

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<p>In an updated filing, <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> indicated it could sell as many as 300 mn new shares in its planned IPO. Many media reports have suggested the company hopes to raise about US$300 mn in the offering, suggesting KEX will come to market at around 30 baht per share.</p><p>In this note, we try to answer the following questions regarding KEX's valuation:</p><ul>
<li>What are the most useful 'comps' for KEX? </li>
<li>What are some appropriate valuation multiples to use in comparing KEX to peers?</li>
<li>How does KEX's valuation at 30 baht per share compare to the peer group we've identified?</li>
<li>What factors could support either a premium or discount valuation for KEX versus peers?</li>
</ul><p>At 30 baht per share (which implies market capitalization of US$1.7 bn), KEX would <em>not</em> be overvalued relative to peers, in our view, and there are reasons KEX could eventually demand a premium valuation relative to other express companies.</p>

In an updated filing, Kerry Express Thailand (KEX TB) indicated it could sell as many as 300 mn new shares in its planned IPO. Many media reports have suggested the company hopes to raise about US$300 mn in the offering, suggesting KEX will come to market at around 30 baht per share.In this note, we try to answer the following questions regarding KEX's valuation:
What are the most useful 'comps' for KEX? 
What are some appropriate valuation multiples to use in comparing KEX to peers?
How does KEX's valuation at 30 baht per share compare to the peer group we've identified?
What factors could support either a premium or discount valuation for KEX versus peers?
At 30 baht per share (which implies market capitalization of US$1.7 bn), KEX would not be overvalued relative to peers, in our view, and there are reasons KEX could eventually demand a premium valuation relative to other express companies.

Kerry Express Thailand (KEX) IPO: Approach to Valuation

<p><a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> is the leading express delivery company in Thailand. It is backed by <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> (63.0% shareholder) and <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a> (23.0% shareholder). Kerry Express has kicked off pre-marketing for a Thai IPO to raise around $300 million, according to IFR.  </p><div class="content-highlight"><p>The timing of the IPO is not ideal as the weak consumer confidence in Thailand exacerbated by the lingering impact of the COVID-19 pandemic has wrecked Kerry Express’ topline in 3Q20. To its credit, Kerry Express has navigated poor market conditions by improving margin and remaining cash generative in 3Q20. Overall, while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. </p></div>

Kerry Express Thailand (KEX TB) is the leading express delivery company in Thailand. It is backed by Kerry Logistics Network (636 HK) (63.0% shareholder) and VGI PCL (VGI TB) (23.0% shareholder). Kerry Express has kicked off pre-marketing for a Thai IPO to raise around $300 million, according to IFR.  The timing of the IPO is not ideal as the weak consumer confidence in Thailand exacerbated by the lingering impact of the COVID-19 pandemic has wrecked Kerry Express’ topline in 3Q20. To its credit, Kerry Express has navigated poor market conditions by improving margin and remaining cash generative in 3Q20. Overall, while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. 

Kerry Express IPO Initiation: A Recovery Play?

Thematic (Sector/Industry)

<p>Back in April of this year, China's President Xi Jinping <a href="http://paper.people.com.cn/rmrb/html/2020-04/16/nw.D110000renmrb_20200416_1-09.htm" target="_blank" rel="noopener">mentioned</a> taking the initiative to seek change and turn "<em>crises into opportunities</em>".</p>
<p>This was expanded upon in a Politburo meeting on the <a href="http://cpc.people.com.cn/n1/2020/0515/c64094-31709627.html?mc_cid=28966ada58&amp;mc_eid=902fe70bde" target="_blank" rel="noopener">14 May</a> under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on <em>"internal circulation"</em> (domestic production, distribution, and consumption) for its future development. This <em>"internal circulation"</em> would be supplemented with <em>"external circulation"</em>. </p>
<p>During a 21 July <a href="https://web.archive.org/web/20200811045300/http://www.xinhuanet.com/politics/leaders/2020-07/21/c_1126267575.htm" target="_blank" rel="noopener">speech</a> to public and private business in Beijing, Xi emphasized that “<em>We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other</em>.</p>
<p>When  co-hosting a China-Germany-EU leaders last week, Xi Jinping <a href="https://news.cgtn.com/news/2020-09-14/Xi-attends-China-Germany-EU-leaders-meeting-via-video-link-TMA0kfp5lK/index.html" target="_blank" rel="noopener">reiterated</a> that "<em>China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each othe</em>r."</p>
<p>This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. </p>
<p>Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?</p>

Back in April of this year, China's President Xi Jinping mentioned taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the 14 May under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July speech to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping reiterated that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

China's Dual Circulation: Hedged Integration

Hong Kong

Kerry Logistics Network Limited provides logistics services in Asia and internationally. The Company offers integrated logistics services, as well as leases warehousing space in Hong Kong and provides international freight forwarding services.

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Kerry Logistics Network (636 HK)

Kerry Logistics (636 HK): Kerry Express' Spin-Off

Expect strong retail and institutional interest in KET, as e-commerce fuels the strong growth in the logistics sector, as this is the final...

David Blennerhassett

Kerry Express IPO: Valuation Insights

Kerry Express has launched its IPO at a price range of THB25.00-28.00 per share to raise as much as THB8.4 billion ($278 million). Overall, we...

Arun George

Kerry Express Thailand (KEX) IPO: Approach to Valuation

What's the right valuation approach to Kerry Express (KEX), which hopes to complete its IPO in Thailand in the coming weeks?

Tracking Traffic

Kerry Express IPO Initiation: A Recovery Play?

Kerry Express has kicked off pre-marketing to raise around $300 million. The 3Q20 revenue decline is a short-term market-specific issue, and Kerry...

Arun George

China's Dual Circulation: Hedged Integration

Back in April, Xi Jinping

David Blennerhassett

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