HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

Foshan Haitian Flavouring and Food / Equity Capital Markets

Foshan Haitian Flavouring and Food (3288 HK)

<ul>
<li>Fundamentals first, <a href="https://www.smartkarma.com/entities/foshan-haitian-flavouring-food-company" target="_blank" data-smartkarma-citation="entities:44279:1" rel="noopener">Foshan Haitian Flavouring &amp; Food Company (3288 HK)</a>'s IPO is interesting given a positive growth outlook - 1Q25 growth accelerated to 14.8% with margin expansion. </li>
<li>We value the H-share at HK$39.35, 8.4% higher than the high-end of the IPO price based on 28.2x FY25F PER to reflect its significantly stronger 3-year earnings growth.  </li>
<li>It equals 5.9x pre-money FY25F P/B, justified by ROE of 21.8-22%, sharply ahead of peers. Net cash equals 12.4% of its A-share market cap. </li>
</ul>


Fundamentals first, Foshan Haitian Flavouring &amp; Food Company (3288 HK)'s IPO is interesting given a positive growth outlook - 1Q25 growth accelerated to 14.8% with margin expansion. 
We value the H-share at HK$39.35, 8.4% higher than the high-end of the IPO price based on 28.2x FY25F PER to reflect its significantly stronger 3-year earnings growth.  
It equals 5.9x pre-money FY25F P/B, justified by ROE of 21.8-22%, sharply ahead of peers. Net cash equals 12.4% of its A-share market cap. 


Foshan Haitian Flavouring (3288 HK) IPO: The Valuation Perspective

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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/foshan-haitian-flavouring-food-company" target="_blank" data-smartkarma-citation="entities:44279:1" rel="noopener">Foshan Haitian Flavouring &amp; Food Company (3288 HK)</a> has launched its H Share listing at HK$35.00 to HK$36.30 per H Share. Pricing will be on 17 June.</li>
<li>I discussed the H Share listing in <strong><em><a href="https://www.smartkarma.com/insights/foshan-haitian-flavouring-h-share-listing-the-investment-case" target="_blank" data-smartkarma-citation="insights:187902" rel="noopener">Foshan Haitian Flavouring H Share Listing: The Investment Case</a></em></strong>.</li>
<li>The proposed AH discount can be argued as either light or attractive. I lean toward the latter and would participate in the H Share listing.</li>
</ul>



Foshan Haitian Flavouring &amp; Food Company (3288 HK) has launched its H Share listing at HK$35.00 to HK$36.30 per H Share. Pricing will be on 17 June.
I discussed the H Share listing in Foshan Haitian Flavouring H Share Listing: The Investment Case.
The proposed AH discount can be argued as either light or attractive. I lean toward the latter and would participate in the H Share listing.


Foshan Haitian Flavouring H Share Listing (3288 HK): Valuation Insights

<ul>
<li>
<a href="https://www.smartkarma.com/entities/foshan-haitian-flavouring-food-company" target="_blank" data-smartkarma-citation="entities:44279:1" rel="noopener">Foshan Haitian Flavouring &amp; Food Company (FHF HK)</a>, the largest condiment company in China, is seeking an H-share IPO in Hong Kong. </li>
<li>It has established brand recognition and leadership positions, product innovation and diversification, opportunities from industry consolidation, and steady earnings with net cash.</li>
<li>Assuming a 28% HA discount, the same as the HS Stock Connect, this implies an FY25 PER of 23.2x. Versus <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1" rel="noopener">Kikkoman Corp (2801 JP)</a>'s 23.8x, this seems not attractive enough. </li>
</ul>



Foshan Haitian Flavouring &amp; Food Company (FHF HK), the largest condiment company in China, is seeking an H-share IPO in Hong Kong. 
It has established brand recognition and leadership positions, product innovation and diversification, opportunities from industry consolidation, and steady earnings with net cash.
Assuming a 28% HA discount, the same as the HS Stock Connect, this implies an FY25 PER of 23.2x. Versus Kikkoman Corp (2801 JP)'s 23.8x, this seems not attractive enough. 


Foshan Haitian Flavouring Pre-IPO: A Stable Breed

Equity Derivatives Broker - Delta One Japan, Vantage Capital Markets Japan

François-Xavier Pustoc'h

Equity Derivatives Broker - Delta One Japan

Independent Financial Broker

Vantage Capital Markets Japan

We provide world class financial solutions to our extensive institutional client base including rapidly growing corporations, leading investment banks, commercial banks, asset managers, private equity funds, family offices and hedge funds.

Our services include capital market offerings and placements, wholesale brokerage and execution of cash and derivative products (both listed and OTC) across a range of asset classes.

VCM has offices in London, Hong Kong, Tokyo and Dubai from where we service our global client base. Our strength lies in the experience and quality of our teams, supported by excellent operations and infrastructure.

Event-Driven

<ul>
<li>On January 31st, Nikkei released a note “<a href="https://indexes.nikkei.co.jp/nkave/archives/news/20250131E_1.pdf" target="_blank" rel="noopener">Regarding the Capping Ratio of Fast Retailing in Nikkei </a><a href="https://indexes.nikkei.co.jp/nkave/archives/news/20250131E_1.pdf" target="_blank" rel="noopener">225</a>” about the change in capping ratio of Fast Retailing (9983.T) in the Nikkei 225 index.</li>
<li>As per the <a href="https://indexes.nikkei.co.jp/nkave/archives/file/nikkei_stock_average_guidebook_en.pdf" target="_blank" rel="noopener">Nikkei Stock Average Index Guidebook</a> (cf. below) the capping ratio will be changed from 0.9 to 0.8 from April 1st, 2025.</li>
<li>The change in the capping ratio is meant to change the weight of the shares from the current 11.18% to below the cap threshold of 10%. </li>
</ul>


On January 31st, Nikkei released a note “Regarding the Capping Ratio of Fast Retailing in Nikkei 225” about the change in capping ratio of Fast Retailing (9983.T) in the Nikkei 225 index.
As per the Nikkei Stock Average Index Guidebook (cf. below) the capping ratio will be changed from 0.9 to 0.8 from April 1st, 2025.
The change in the capping ratio is meant to change the weight of the shares from the current 11.18% to below the cap threshold of 10%. 


Capping Ratio of Fast Retailing in Nikkei 225

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 Index</a> March rebalance ends in 3 weeks. There could be one outright change and one or two others driven by sector balance.</li>
<li>
<a href="https://www.smartkarma.com/entities/shift-inc" target="_blank" data-smartkarma-citation="entities:7266:1" rel="noopener">Shift Inc (3697 JP)</a> will have a 15:1 stock split next week and that puts the stock in the list of potential inclusions over the next couple of rebalances.</li>
<li>The recent drop in <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s stock price will lead to a single step drop in the PAF. That means less passive selling and a smaller funding buy.</li>
</ul>


The review period for the Nikkei 225 Index March rebalance ends in 3 weeks. There could be one outright change and one or two others driven by sector balance.

Shift Inc (3697 JP) will have a 15:1 stock split next week and that puts the stock in the list of potential inclusions over the next couple of rebalances.
The recent drop in Fast Retailing (9983 JP)'s stock price will lead to a single step drop in the PAF. That means less passive selling and a smaller funding buy.


Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding

Japan

KIKKOMAN CORPORATION produces and markets soy sauce, alcoholic beverages, and other food products.  The Company has marketing rights for Del Monte brand products outside of the United States.  Kikkoman also operates restaurants in Japan and other countries.

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Kikkoman Corp (2801 JP)

Foshan Haitian Flavouring (3288 HK) IPO: The Valuation Perspective

Foshan Haitian H-share's IPO is attractive given a positive outlook with accelerated growth and margin expansion, valued at HK$39.35 based on...

Osbert Tang, CFA

Foshan Haitian Flavouring Pre-IPO: A Stable Breed

Foshan Haitian Flavouring has proceeded through the Exchange hearing, with the impending IPO targeting to raise as much as US$1bn. We recirculate...

Osbert Tang, CFA

Capping Ratio of Fast Retailing in Nikkei 225

On January 31st, Nikkei released a note “Regarding the Capping Ratio of Fast Retailing in Nikkei 225” about the change in capping ratio of Fast...

Vantage Capital Markets Japan

Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding

With 4 days left in the review period, Fast Retailing is now in double capping zone which would require passives to sell 13.3m shares in March. If...

Brian Freitas

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52-week Range

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Foshan Haitian Flavouring (3288 HK) IPO: The Valuation Perspective

​Foshan Haitian H-share's IPO is attractive given a positive outlook with accelerated growth and margin expansion, valued at HK$39.35 based on...

Osbert Tang, CFA

Foshan Haitian Flavouring H Share Listing (3288 HK): Valuation Insights

Haitian has launched its H Share listing at HK$35.00 to HK$36.30 per H Share. The proposed AH discount is attractive, and I recommend participating...

Arun George

Foshan Haitian Flavouring Pre-IPO: A Stable Breed

Foshan Haitian Flavouring has proceeded through the Exchange hearing, with the impending IPO targeting to raise as much as US$1bn. We recirculate...

Osbert Tang, CFA

Capping Ratio of Fast Retailing in Nikkei 225

On January 31st, Nikkei released a note “Regarding the Capping Ratio of Fast Retailing in Nikkei 225” about the change in capping ratio of Fast...

Vantage Capital Markets Japan

Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding

With 4 days left in the review period, Fast Retailing is now in double capping zone which would require passives to sell 13.3m shares in March. If...

Brian Freitas

Foshan Haitian H-share's IPO is attractive given a positive outlook with accelerated growth and margin expansion, valued at HK$39.35 based on...