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

<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?

<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.


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

Urbem Capital

Quality-first, Business-perspective, Long-term

<ul>
<li>Another victim of the pandemic, Tang Palace, appears attractive with a single-digit P/E and a juicy FCF yield based on pre-COVID financials;</li>
<li>However, investors should, by no means, draw their deep-value conclusion without a full examination of the business economics;</li>
<li>We employ the same framework as we did with other names previously to assess the value-trap risks.</li>
</ul>


Another victim of the pandemic, Tang Palace, appears attractive with a single-digit P/E and a juicy FCF yield based on pre-COVID financials;
However, investors should, by no means, draw their deep-value conclusion without a full examination of the business economics;
We employ the same framework as we did with other names previously to assess the value-trap risks.


Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Equity Capital Markets

<p>My recent visits to Hong Kong 's F&amp;B outlets and chat with managers on the ground indicates that headwinds facing Hong Kong's restaurant operators are not over. </p>
<p>This piece does not cover Tai Hing's financial metrics in-depth, as they are already covered by fellow insight provider <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh.</a> Instead, I highlight three structural factors within HK's F&amp;B industry such as staff issues and competition that investors must consider before buying into these businesses.</p>

My recent visits to Hong Kong 's F&amp;B outlets and chat with managers on the ground indicates that headwinds facing Hong Kong's restaurant operators are not over. 
This piece does not cover Tai Hing's financial metrics in-depth, as they are already covered by fellow insight provider Zhen Zhou, Toh. Instead, I highlight three structural factors within HK's F&amp;B industry such as staff issues and competition that investors must consider before buying into these businesses.

Tai Hing Pre-IPO Review: HK Restaurants' Margin Pressure Unlikely To Go Away Soon

Hong Kong

Tao Heung is an investment holding company primarily engaged in food and beverage businesses, operating a chain of restaurants and bakeries. The company provides food catering services, produces and distributes food products, and engages in poultry farm operations. Tao Heung Holdings Limited was founded in 1991 and is headquartered in Tai Po, Hong Kong.

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Tao Heung (573 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

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

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

Tang Palace: Deep Value or Value Trap

Current share price points to juicy yields on a pre-COVID basis, but is there any value trap? We examine business economics in detail.

Urbem Capital

Tai Hing Pre-IPO Review: HK Restaurants' Margin Pressure Unlikely To Go Away Soon

My recent visits to Hong Kong 's F&B outlets and chat with managers on the ground indicates that headwinds facing Hong Kong's restaurant...

Valerie Law, 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

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

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

Tang Palace: Deep Value or Value Trap

Current share price points to juicy yields on a pre-COVID basis, but is there any value trap? We examine business economics in detail.

Urbem Capital

Tai Hing Pre-IPO Review: HK Restaurants' Margin Pressure Unlikely To Go Away Soon

My recent visits to Hong Kong 's F&B outlets and chat with managers on the ground indicates that headwinds facing Hong Kong's restaurant...

Valerie Law, 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...