HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

<ul>
<li>At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of <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 (601888 CH)</a> is not attractive enough. </li>
<li>2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.</li>
<li>Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.</li>
</ul>


At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of China Tourism Group Duty Free Corp (601888 CH) is not attractive enough. 
2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.
Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.


CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>Phu Nhuan Jewelry Jsc (PNJ VN) is the number one jewelry company in Vietnam. </li>
<li>The company is benefiting from several key catalysts including reduced social distancing measures resulting in higher store visits and sales, hedge against rising inflation, and pent up demand for jewelry. </li>
<li>The combination of higher expected earnings this year along with stable recent prices have resulted in more attractive valuations for the company.</li>
</ul>


Phu Nhuan Jewelry Jsc (PNJ VN) is the number one jewelry company in Vietnam. 
The company is benefiting from several key catalysts including reduced social distancing measures resulting in higher store visits and sales, hedge against rising inflation, and pent up demand for jewelry. 
The combination of higher expected earnings this year along with stable recent prices have resulted in more attractive valuations for the company.


Vietnam Consumer Discretionary - Phu Nhuan Jewelry: Hedge Against Rising Inflation Rates

<ul>
<li>
<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> has revived its H-share IPO plan by re-submitting the Application Proof to the Hong Kong Stock Exchange on 1 Jul. </li>
<li>While there is no material changes in the Proof, weaker 1Q22 result, negative impact of pandemic and new agreements signed with Guangzhou Airport are recent developments that should be noted.</li>
<li>We think CDFC's H-shares, based on similar valuation before cancellation of the previous IPO plan, look less attractive given the sharp pull back of its peers in Hong Kong. </li>
</ul>



China Tourism Group Duty Free Corp Ltd (601888 CH) has revived its H-share IPO plan by re-submitting the Application Proof to the Hong Kong Stock Exchange on 1 Jul. 
While there is no material changes in the Proof, weaker 1Q22 result, negative impact of pandemic and new agreements signed with Guangzhou Airport are recent developments that should be noted.
We think CDFC's H-shares, based on similar valuation before cancellation of the previous IPO plan, look less attractive given the sharp pull back of its peers in Hong Kong. 


CTG Duty Free (601888 CH) Pre-IPO: Revival of H-Share IPO

<ul>
<li>
<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> has received approval from CSRC for H-share issue and the HK hearing may come as early as Tuesday.</li>
<li>There is report that funds raised will scale down to US$5bn, from US$7bn previously, and this will mean a price of about HK$200, or 26% discount to the A-shares.</li>
<li>Valuations (29.3x PER for FY21 and 22x for FY22) are not too stretched, but following a weak 3Q21, it may need a cheaper level to ensure attractive debut.  </li>
</ul>



China Tourism Group Duty Free Corp Ltd (601888 CH) has received approval from CSRC for H-share issue and the HK hearing may come as early as Tuesday.
There is report that funds raised will scale down to US$5bn, from US$7bn previously, and this will mean a price of about HK$200, or 26% discount to the A-shares.
Valuations (29.3x PER for FY21 and 22x for FY22) are not too stretched, but following a weak 3Q21, it may need a cheaper level to ensure attractive debut.  


CTG Duty Free (601888 CH): Green Light for H-Share IPO and Updated View on Valuation

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

Health And Happiness (H&H) / Equity Bottom-Up

<p><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> 1H 2019 result was better than its Australian competitor, Bellamy, whose product is perceived to be premium in China yet it is still trading at a 77% discount at 16x PER. Post the 100 days clean up operation in China that target the health supplement industry that contributes to 35% of the company's total revenue,  its share price weakened by circa  30%; creating a buying opportunity for investors with appetite for infant milk formula cum adult nutrition care business in China.  </p>

Health And Happiness (H&amp;H) (1112 HK) 1H 2019 result was better than its Australian competitor, Bellamy, whose product is perceived to be premium in China yet it is still trading at a 77% discount at 16x PER. Post the 100 days clean up operation in China that target the health supplement industry that contributes to 35% of the company's total revenue,  its share price weakened by circa  30%; creating a buying opportunity for investors with appetite for infant milk formula cum adult nutrition care business in China.  

Health & Happiness (1112): Buy - Unjustly Punished!

Hong Kong

Luk Fook Holdings (International) Limited retails jewellery. The Company engages in the sourcing, designing, wholesaling and retailing of a variety of platinum and gold jewellery, gold ornaments, gem-set jewellery, natural jadeites, gemstones, and other related products. Luk Fook offers its products in Hong Kong, Mainland China, Macau, Singapore, the United States and Canada.

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Luk Fook Holdings Intl (590 HK)

Vietnam Consumer Discretionary - Phu Nhuan Jewelry: Hedge Against Rising Inflation Rates

Phu Nhuan Jewelry is the number one jewelry company in Vietnam. The company is benefiting from several key catalysts including pent-up demand for...

Douglas Kim

Health & Happiness (1112): Buy - Unjustly Punished!

Health And Happiness (H&H) (1112 HK) 1H 2019 result was better than its Australian competitor, Bellamy, whose product is perceived to be...

Henry Soediarko

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views

We consider the indicated price range not attractive enough given current macroenvironment, market volatility and earnings uncertainty. Risk-return...

Osbert Tang, CFA

Vietnam Consumer Discretionary - Phu Nhuan Jewelry: Hedge Against Rising Inflation Rates

Phu Nhuan Jewelry is the number one jewelry company in Vietnam. The company is benefiting from several key catalysts including pent-up demand for...

Douglas Kim

CTG Duty Free (601888 CH) Pre-IPO: Revival of H-Share IPO

CDFC re-activated its H-share IPO by refreshing its Application Proof. If the issue details are unchanged, it is less attractive than previously...

Osbert Tang, CFA

CTG Duty Free (601888 CH): Green Light for H-Share IPO and Updated View on Valuation

CTG Duty Free may need to sweeten its upcoming IPO with cheaper multiples especially following a weak 3Q21 result and the pullback in share price...

Osbert Tang, CFA

Health & Happiness (1112): Buy - Unjustly Punished!

Health And Happiness (H&H) (1112 HK) 1H 2019 result was better than its Australian competitor, Bellamy, whose product is perceived to be...

Henry Soediarko