HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite some disgruntled investors, the privatisation of <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> is appealing. If it is successful, payment will be made on or before 26 Aug. </li>
<li>The proposed price of HK$1.58 equals a 24% premium to the peer CY25F PER. The poor reported peer results and earnings downgrades are the reasons for a narrower premium.</li>
<li>Since the announcement of privatisation, the sector has retreated by 7.8%, vs. a 5.2% gain in HSI, reflecting the industry's tough operating environment. It remains wise to exit. </li>
</ul>


Despite some disgruntled investors, the privatisation of Tam Jai International (2217 HK) is appealing. If it is successful, payment will be made on or before 26 Aug. 
The proposed price of HK$1.58 equals a 24% premium to the peer CY25F PER. The poor reported peer results and earnings downgrades are the reasons for a narrower premium.
Since the announcement of privatisation, the sector has retreated by 7.8%, vs. a 5.2% gain in HSI, reflecting the industry's tough operating environment. It remains wise to exit. 


Tam Jai Intl (2217 HK): Privatisation Stays Appealing Despite...

<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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tam-jai-international-co-ltd" target="_blank" rel="noopener">Tam Jai Intl (2217 HK)</a>'s suspension has led to speculation about a privatisation or takeover. Its huge net cash, equal to 115% of market capitalisation, makes it appealing. </li>
<li>Its controlling shareholder Toridoll Holding Limited owns a 74.61% stake and there is no shareholder with more than a 5% interest. This makes a deal seemingly simple.</li>
<li>Assuming priced at the average P/B of 1.63x, this means HK$1.90, or 110% premium to the latest close, which is costly to the major shareholder.</li>
</ul>



Tam Jai Intl (2217 HK)'s suspension has led to speculation about a privatisation or takeover. Its huge net cash, equal to 115% of market capitalisation, makes it appealing. 
Its controlling shareholder Toridoll Holding Limited owns a 74.61% stake and there is no shareholder with more than a 5% interest. This makes a deal seemingly simple.
Assuming priced at the average P/B of 1.63x, this means HK$1.90, or 110% premium to the latest close, which is costly to the major shareholder.


Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?

Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

<ul><li>With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment of the catering industry began to recover.</li><li>As a result, Tai Hing Group (“THG”) delivered a satisfactory recovery in 1H23 with revenue surging by 28.8% y/y to HK$1.6bn, while the bottom line turned to a profit of HK$45.3mn, from a loss of HK$52.5mn in 1H22.</li><li>An interim DPS of 3.40 HK cents was declared, translating into a payout ratio of 75%. </li></ul>

With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment of the catering industry began to recover.As a result, Tai Hing Group (“THG”) delivered a satisfactory recovery in 1H23 with revenue surging by 28.8% y/y to HK$1.6bn, while the bottom line turned to a profit of HK$45.3mn, from a loss of HK$52.5mn in 1H22.An interim DPS of 3.40 HK cents was declared, translating into a payout ratio of 75%. 

Tai Hing Group - Satisfactory Recovery After 3-Yr Pandemic

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tao-heung" target="_blank" data-smartkarma-citation="entities:2668:1" rel="noopener">Tao Heung (573 HK)</a>, a Chinese cuisine restaurant operator, has lost significant shop-days in 1H22 due to the pandemic. However, this is behind us and 2H22 outlook is better.</li>
<li>The recovery of Hong Kong operations will be supported by further relaxation of social distancing measures while, for mainland China, business has rebounded following removal of lockdowns.   </li>
<li>Its Chairman has upped his stake, signaling a vote of confidence. The stock's valuations are not expensive, but given low turnover, there will be potential share price volatility.</li>
</ul>



Tao Heung (573 HK), a Chinese cuisine restaurant operator, has lost significant shop-days in 1H22 due to the pandemic. However, this is behind us and 2H22 outlook is better.
The recovery of Hong Kong operations will be supported by further relaxation of social distancing measures while, for mainland China, business has rebounded following removal of lockdowns.   
Its Chairman has upped his stake, signaling a vote of confidence. The stock's valuations are not expensive, but given low turnover, there will be potential share price volatility.


Hong Kong

Tai Hing Group Holdings Limited operates as a restaurant group. The Company provides various prepared specialties, meals, and, drinks, as well as offers banquet arrangement, restaurant management, and other related services. Tai Hing Group Holdings serves customers in Hong Kong, China, Macau, and Taiwan.

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Tai Hing (6811 HK)

Tam Jai Intl (2217 HK): Privatisation Stays Appealing Despite...

Some investors may be unhappy, but Tam Jai's privatisation is attractive at HK$1.58, offering a 24% PER premium to peers. Given sector challenges,...

Osbert Tang, CFA

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

Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?

Tam Jai Intl's suspension sparks privatisation or takeover speculations, given its high net cash and simple ownership structure. However, a...

Osbert Tang, CFA

Tai Hing Group - Satisfactory Recovery After 3-Yr Pandemic

With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment...

Quam Securities

Tao Heung (573 HK): Bon Appetit

Tao Heung should have a better 2H22 given recovery of Hong Kong operations as consumer spending improves. Also, mainland China market is not...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tam Jai Intl (2217 HK): Privatisation Stays Appealing Despite...

Some investors may be unhappy, but Tam Jai's privatisation is attractive at HK$1.58, offering a 24% PER premium to peers. Given sector challenges,...

Osbert Tang, CFA

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

Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?

​Tam Jai Intl's suspension sparks privatisation or takeover speculations, given its high net cash and simple ownership structure. However, a...

Osbert Tang, CFA

Tai Hing Group - Satisfactory Recovery After 3-Yr Pandemic

With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment...

Quam Securities

Tao Heung (573 HK): Bon Appetit

Tao Heung should have a better 2H22 given recovery of Hong Kong operations as consumer spending improves. Also, mainland China market is not...

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...

Tam Jai Intl's suspension sparks privatisation or takeover speculations, given its high net cash and simple ownership structure. However, a...