HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tam-jai-international-co-ltd" target="_blank" data-smartkarma-citation="entities:34227:1" rel="noopener">Tam Jai International (2217 HK)</a>'s privatisation price is lower than we expected, based on 1.37x 12-month forward P/B, against our expectation of 1.63x (the historical average).</li>
<li>The PER of 21.1x for CY25, a premiuim to sector average of 13.7x, however, looks attractive enough for investors that entered in the last 12 months. </li>
<li>The 52.6% discount to IPO price (HK$3.33) and huge net cash have made some early investors unhappy. There is already letter from a minority shareholder calling to vote against it.</li>
</ul>



Tam Jai International (2217 HK)'s privatisation price is lower than we expected, based on 1.37x 12-month forward P/B, against our expectation of 1.63x (the historical average).
The PER of 21.1x for CY25, a premiuim to sector average of 13.7x, however, looks attractive enough for investors that entered in the last 12 months. 
The 52.6% discount to IPO price (HK$3.33) and huge net cash have made some early investors unhappy. There is already letter from a minority shareholder calling to vote against it.


Tam Jai Intl (2217 HK): It Seems like Quite Some People Are Unhappy

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>MIXUE invited experts to conduct calculations based on population data. The result is a maximum of 45,000 stores can be opened. So, MIXUE has reached the growth ceiling in China.</li>
<li>The pain point is since MIXUE’s growth depends significantly on its ability to expand store network, once the growth of franchised stores slows down, a performance decline would be inevitable.</li>
<li>Due to larger scale effect/stronger supply chains/higher net profit margin, MIXUE’s valuation should be higher than peers. Higher valuation depends on whether MIXUE is able to make breakthrough in internationalization.</li>
</ul>


MIXUE invited experts to conduct calculations based on population data. The result is a maximum of 45,000 stores can be opened. So, MIXUE has reached the growth ceiling in China.
The pain point is since MIXUE’s growth depends significantly on its ability to expand store network, once the growth of franchised stores slows down, a performance decline would be inevitable.
Due to larger scale effect/stronger supply chains/higher net profit margin, MIXUE’s valuation should be higher than peers. Higher valuation depends on whether MIXUE is able to make breakthrough in internationalization.


Pre-IPO MIXUE Group Update - The Snow King Is Facing Headwinds

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tam-jai-international-co-ltd" target="_blank" data-smartkarma-citation="entities:34227:1" rel="noopener">Tam Jai International (2217 HK)</a> announced a scheme privatisation offer from <a href="https://www.smartkarma.com/entities/toridoll-holdings-corporation" target="_blank" data-smartkarma-citation="entities:8193:1" rel="noopener">TORIDOLL Holdings Corporation (3397 JP)</a> at HK$1.58 per share, a 75.6% premium to the last close price. </li>
<li>The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. </li>
<li>The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. </li>
</ul>



Tam Jai International (2217 HK) announced a scheme privatisation offer from TORIDOLL Holdings Corporation (3397 JP) at HK$1.58 per share, a 75.6% premium to the last close price. 
The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. 
The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. 


Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58

<ul>
<li>If based on the market value of HK$20.246 billion to HK$23.185 billion in this IPO, a single store market value is about HK$2-2.4 million, higher than that of <a href="https://www.smartkarma.com/entities/sichuan-baicha-baidao-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:40029:1" rel="noopener">Baicha Baidao</a>.</li>
<li>Our forecast of 2024 net profit is RMB1.4 billion. Based on IPO price range of HK$8.68-9.94 per share, P/E is about 13.5-15.5x. There is still some upside room for valuation.</li>
<li>Investors may need more “safety margins” on valuation due to the pressure of performance growth after IPO.The higher the IPO price, the greater the risk of future valuation downward revisions.</li>
</ul>


If based on the market value of HK$20.246 billion to HK$23.185 billion in this IPO, a single store market value is about HK$2-2.4 million, higher than that of Baicha Baidao.
Our forecast of 2024 net profit is RMB1.4 billion. Based on IPO price range of HK$8.68-9.94 per share, P/E is about 13.5-15.5x. There is still some upside room for valuation.
Investors may need more “safety margins” on valuation due to the pressure of performance growth after IPO.The higher the IPO price, the greater the risk of future valuation downward revisions.


Pre-IPO Guming Holdings - Thoughts on Valuation

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mixue-group" target="_blank" data-smartkarma-citation="entities:40623:1" rel="noopener">Mixue Group (MIX HK)</a> has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.</li>
<li>With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities' potential and the franchise model drives expansion.  </li>
<li>It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.</li>
</ul>



Mixue Group (MIX HK) has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.
With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities' potential and the franchise model drives expansion.  
It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.


MIXUE Group IPO: The Leading Player that Justifies a Premium

Hong Kong

Sichuan Baicha Baidao Industrial Co., Ltd. manufactures and distributes tea drink products. The Company produces seasonal tea drinks, local tea, and other products. Sichuan Baicha Baidao Industrial also offers enterprise management, supply chain management, and other services.

Sichuan Baicha Baidao Industrial (2555 HK)

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Sichuan Baicha Baidao Industrial (2555 HK)

Tam Jai Intl (2217 HK): It Seems like Quite Some People Are Unhappy

The privatisation price is lower than expected at 1.37x forward P/B, but CY25 PER of 21.1x is attractive for recent investors. A 52.6% discount to...

Osbert Tang, CFA

Pre-IPO MIXUE Group Update - The Snow King Is Facing Headwinds

MIXUE has hit growth ceiling in China with 45,000 store limit, faces performance decline if franchise growth slows. Valuation should be higher...

Xinyao (Criss) Wang

Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58

The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is...

Arun George

Pre-IPO Guming Holdings - Thoughts on Valuation

The IPO pricing of HK$9.94 is "aggressive" as upside may be limited due to the pressure of performance growth after IPO. The higher the IPO price,...

Xinyao (Criss) Wang

MIXUE Group IPO: The Leading Player that Justifies a Premium

Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tam Jai Intl (2217 HK): It Seems like Quite Some People Are Unhappy

​The privatisation price is lower than expected at 1.37x forward P/B, but CY25 PER of 21.1x is attractive for recent investors. A 52.6% discount to...

Osbert Tang, CFA

Pre-IPO MIXUE Group Update - The Snow King Is Facing Headwinds

​MIXUE has hit growth ceiling in China with 45,000 store limit, faces performance decline if franchise growth slows. Valuation should be higher...

Xinyao (Criss) Wang

Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58

The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is...

Arun George

Pre-IPO Guming Holdings - Thoughts on Valuation

The IPO pricing of HK$9.94 is "aggressive" as upside may be limited due to the pressure of performance growth after IPO. The higher the IPO price,...

Xinyao (Criss) Wang

MIXUE Group IPO: The Leading Player that Justifies a Premium

​Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....

Osbert Tang, CFA

The privatisation price is lower than expected at 1.37x forward P/B, but CY25 PER of 21.1x is attractive for recent investors. A 52.6% discount to...

MIXUE has hit growth ceiling in China with 45,000 store limit, faces performance decline if franchise growth slows. Valuation should be higher...

Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....