Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<div class="content-highlight">
<p>One of the biggest trends that COVID-19 has resulted has been the impact on the global population as millions of people delay having babies due to so many uncertainties associated with virus. China has been no exception. As such, the <a href="https://www.cnbc.com/2021/04/15/chinas-central-bank-pboc-paper-suggests-dropping-childbirth-limits.html" target="_blank" rel="noopener">People's Bank of China</a> released a working paper on 14 April that suggested that China faces severe population problems and that <strong>China allow three or more children per household. </strong></p>
<p>All in all, despite this urgent message from the People's Bank of China regarding the need to scrap the restriction in childbirth policy, this is not yet official. Nonetheless, given the fact that this document is coming from the People's Bank of China combined with the need to combat the big negative impact of COVID-19 on people having children, there could be an increasing probability that the Chinese government could indeed announce a change its policy to allow three or more children in 2021.</p>
</div><p>Some of the key infant formula related stocks that could benefit from the Chinese government allowing three or more children include <a href="https://www.smartkarma.com/entities/a2-milk-co-ltd-95d4fbed-afa1-41e9-bafb-a5f1ef97622e" target="_blank" data-smartkarma-citation="entities:22775:1" rel="noopener">A2 Milk Co Ltd (A2M AU)</a>, Beingmate Baby &amp; Child Food (002570 CH), and <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>.</p>


One of the biggest trends that COVID-19 has resulted has been the impact on the global population as millions of people delay having babies due to so many uncertainties associated with virus. China has been no exception. As such, the People's Bank of China released a working paper on 14 April that suggested that China faces severe population problems and that China allow three or more children per household. 
All in all, despite this urgent message from the People's Bank of China regarding the need to scrap the restriction in childbirth policy, this is not yet official. Nonetheless, given the fact that this document is coming from the People's Bank of China combined with the need to combat the big negative impact of COVID-19 on people having children, there could be an increasing probability that the Chinese government could indeed announce a change its policy to allow three or more children in 2021.
Some of the key infant formula related stocks that could benefit from the Chinese government allowing three or more children include A2 Milk Co Ltd (A2M AU), Beingmate Baby &amp; Child Food (002570 CH), and China Mengniu Dairy Co (2319 HK).

China May Scrap The Restriction of Childbirths - Impact on Baby Formula Related Stocks in China

Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

<ul>
<li>According to our definition, A2 Milk is a wonderful business largely thanks to its superior return on capital guarded by a multi-layered moat, a megatrend-driven growth prospect, and the capability to compound earnings for shareholders;</li>
<li>Mr. Market displayed his short-termism in terms of the stock recently, which we think provides a rare entry point for investors interested in the company into 2021.</li>
</ul>


According to our definition, A2 Milk is a wonderful business largely thanks to its superior return on capital guarded by a multi-layered moat, a megatrend-driven growth prospect, and the capability to compound earnings for shareholders;
Mr. Market displayed his short-termism in terms of the stock recently, which we think provides a rare entry point for investors interested in the company into 2021.


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

<p><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. </p><div class="content-highlight"><p>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.  </p></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

China

New Hope Dairy Co., Ltd. manufactures milk products. The Company produces low temperature milk, yogurts, milk beverages, pure milk, milk powders, and other products. New Hope Dairy also operates dairy base development.

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New Hope Dairy Co Ltd (002946 CH)

2021 High Conviction: A2 Milk

Buying quality businesses at or below fair prices and holding them for the long run is the key to generate alpha. A2 Milk at the current level...

Urbem Capital

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

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China May Scrap The Restriction of Childbirths - Impact on Baby Formula Related Stocks in China

The People's Bank of China released a paper on 14 April that suggested that China allow three or more children per household. In this insight, we...

Douglas Kim

2021 High Conviction: A2 Milk

Buying quality businesses at or below fair prices and holding them for the long run is the key to generate alpha. A2 Milk at the current level...

Urbem Capital

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