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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/chervon-holdings-limited" target="_blank" data-smartkarma-citation="entities:35309:1" rel="noopener">Chervon Holdings (CHL HK)</a> is a leading global provider of power tools and outdoor power equipment. It will launch an HKEx IPO to raise US$400m-450 million, according to press reports.</li>
<li>At first glance, the fundamentals look attractive with strong revenue growth, operating leverage and cash generation. </li>
<li>However, a tepid 3Q21 performance and the vanishing of the former largest customer is a worry. We take a safety-first approach in the current environment and pass on this IPO.  </li>
</ul>



Chervon Holdings (CHL HK) is a leading global provider of power tools and outdoor power equipment. It will launch an HKEx IPO to raise US$400m-450 million, according to press reports.
At first glance, the fundamentals look attractive with strong revenue growth, operating leverage and cash generation. 
However, a tepid 3Q21 performance and the vanishing of the former largest customer is a worry. We take a safety-first approach in the current environment and pass on this IPO.  


Chervon Holdings IPO Initiation: Not Quite Right

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Chervon Holdings Limited (CHL) plans to raise around US$500m in its Hong Kong IPO.</li>
<li>CHL is the largest China-based global provider of power tools and outdoor power equipment (OPE). </li>
<li>In this note, we will talk about the positive aspects of the deal.</li>
</ul>


Chervon Holdings Limited (CHL) plans to raise around US$500m in its Hong Kong IPO.
CHL is the largest China-based global provider of power tools and outdoor power equipment (OPE). 
In this note, we will talk about the positive aspects of the deal.


Chervon Holdings Pre-IPO - The Positives - Fast Growth, Good Reviews

Event-Driven

<a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. <div class="content-highlight">
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. 
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

<a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.<div class="content-highlight">The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. </div>

Bestway Global Holding (3358 HK) is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 21 May. The constituent changes will be effective after the close of trading on 4 June.For the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> there are 3 inclusions - <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> and <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a>.The 3 inclusions will increase the number of index constituents to 58. With the target of getting to 80 stocks by mid-2022, the expectation was for more stocks to be included at this review. What likely resulted in fewer stocks being added was the large turnover due to the capping changes.While we had expected the inclusion of <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> and <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a>, the inclusion of <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> will have a big impact since the stock has also been included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>. One-way turnover is estimated at 7.77% and will result in a one-way trade of HK$16.82bn.  The largest passive inflows will be on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> as a result of the capping change from 5% to 8%, while the largest outflows will be from <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> due to the capping change from 10% to 8%.There are only 10 trading days to implementation of the changes and we expect all 3 inclusions to open higher on Monday and continue to outperform the market over the period.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 21 May. The constituent changes will be effective after the close of trading on 4 June.For the Hong Kong Hang Seng Index (HSI INDEX) there are 3 inclusions - Xinyi Solar Holdings (968 HK), BYD (1211 HK) and Country Garden Services Holdings (6098 HK).The 3 inclusions will increase the number of index constituents to 58. With the target of getting to 80 stocks by mid-2022, the expectation was for more stocks to be included at this review. What likely resulted in fewer stocks being added was the large turnover due to the capping changes.While we had expected the inclusion of Xinyi Solar Holdings (968 HK) and Country Garden Services Holdings (6098 HK), the inclusion of BYD (1211 HK) will have a big impact since the stock has also been included in the Hang Seng China Enterprises Index (HSCEI INDEX). One-way turnover is estimated at 7.77% and will result in a one-way trade of HK$16.82bn.  The largest passive inflows will be on Meituan (3690 HK) and Alibaba Group (9988 HK) as a result of the capping change from 5% to 8%, while the largest outflows will be from AIA Group Ltd (1299 HK), Tencent (700 HK) and HSBC Holdings (5 HK) due to the capping change from 10% to 8%.There are only 10 trading days to implementation of the changes and we expect all 3 inclusions to open higher on Monday and continue to outperform the market over the period.

HSI Index Rebalance: Only 3 Additions but BIG Turnover

Hong Kong

Techtronic Industries designs, produces, and markets cordless power tools, outdoor power equipment, hand tools, and floor care appliances. Its diverse brand portfolio includes Milwaukee, Ryobi, AEG, Hoover, and Dirt Devil. The company was founded in 1985 and is headquartered in Hong Kong.

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Techtronic Industries (669 HK)

Chervon Holdings IPO Initiation: Not Quite Right

Chervon is set to launch an HKEx IPO to raise US$400m-450m, according to press reports. The fundamentals are far from perfect and we are inclined...

Arun George

Chervon Holdings Pre-IPO - The Positives - Fast Growth, Good Reviews

Chervon Holdings Limited (CHL) plans to raise around US$500m in its Hong Kong IPO. The company is the largest China based provider of power and OPE...

Sumeet Singh

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

Bestway Global’s Privatisation Bid

Bestway announced a privatisation offer from Mr Zhu Qiang (the Founder, Chairman & CEO) at HK$4.38 per scheme share. While not a knockout offer, we...

Arun George

HSI Index Rebalance: Only 3 Additions but BIG Turnover

There are 3 inclusions (BYD, Xinyi Solar, CG Services) to the HSI taking the number of constituents up to 58. Turnover is high at 7.77% and will...

Brian Freitas

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