IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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

China Youran Dairy Group Ltd / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/china-youran-dairy-group-ltd" target="_blank" data-smartkarma-citation="entities:31075:1" rel="noopener">China Youran Dairy Group Ltd (9858 HK)</a> is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> until PAG Capital’s investment in 2015.</p>
<p>At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.</p>
<p>The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.</p>
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<p>In <a href="https://www.smartkarma.com/insights/china-youran-dairy-group-ipo-initiation-ecownomics" target="_blank" data-smartkarma-citation="insights:51709" rel="noopener">China Youran Dairy Group IPO Initiation: Ecownomics</a>, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.</p>
<div class="content-highlight"><p>Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to <a href="https://www.smartkarma.com/entities/china-modern-dairy-holdings" target="_blank" data-smartkarma-citation="entities:6785:1" rel="noopener">China Modern Dairy (1117 HK)</a>, an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. </p></div>
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China Youran Dairy Group Ltd (9858 HK) is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (A) (600887 CH) until PAG Capital’s investment in 2015.
At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.
The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.

In China Youran Dairy Group IPO Initiation: Ecownomics, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.
Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to China Modern Dairy (1117 HK), an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. 


China Youran Dairy Group IPO: Valuation Insights

<div><p><a href="https://www.smartkarma.com/entities/china-youran-dairy-group-ltd" target="_blank" data-smartkarma-citation="entities:31075:1" rel="noopener">China Youran Dairy Group Ltd (1836774D CH)</a> is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> until PAG Capital’s investment in 2015. Youran is pre-marketing an HKEx IPO to raise $800 million, according to press reports.   </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-youran-dairy-group-ipo-initiation-ecownomics" target="_blank" data-smartkarma-citation="insights:51709" rel="noopener">China Youran Dairy Group IPO Initiation: Ecownomics</a>, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look. In this note, we present our forecasts and take the first look at Youran's potential valuation range. </p></div></div></div>

China Youran Dairy Group Ltd (1836774D CH) is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost &amp; Sullivan. Youran was once a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (A) (600887 CH) until PAG Capital’s investment in 2015. Youran is pre-marketing an HKEx IPO to raise $800 million, according to press reports.   In China Youran Dairy Group IPO Initiation: Ecownomics, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look. In this note, we present our forecasts and take the first look at Youran's potential valuation range. 

China Youran Dairy Group IPO: Valuation First-Look

<div><p><a href="https://www.smartkarma.com/entities/china-feihe" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a> will commence trading on Wednesday, 13 November. Feihe priced its IPO at HK$7.50 per share (at the low-end of the range). The allotment results showed that the international offer shares were "moderately over-subscribed" and the Hong Kong offer shares were "significantly over-subscribed."</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-feihe-ipo-valuation-is-good-for-you" target="_blank" rel="noopener">our valuation note</a>, we said that the IPO valuation is attractive and we would participate in the IPO. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is undemanding. </p></div></div></div>

China Feihe (6186 HK) will commence trading on Wednesday, 13 November. Feihe priced its IPO at HK$7.50 per share (at the low-end of the range). The allotment results showed that the international offer shares were "moderately over-subscribed" and the Hong Kong offer shares were "significantly over-subscribed."In our valuation note, we said that the IPO valuation is attractive and we would participate in the IPO. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is undemanding. 

China Feihe: Trading Debut, Valuation Scenario Analysis

<p><a href="https://www.smartkarma.com/entities/china-feihe" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (FEIHE HK)</a> is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to Frost &amp; Sullivan. Feihe has launched its IPO at an indicative price range of HK$7.50-10.00 per share. The price range implies a market cap range of $8.5-11.4 billion.</p><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-feihe-ipo-preview-the-winning-formula" target="_blank" rel="noopener">our initiation note</a>, we stated that the Feihe’s equity story offers more positives than negatives, and we would place it on our must-look IPO watchlist. We <a href="https://www.smartkarma.com/insights/china-feihe-ipo-uncowed" target="_blank" rel="noopener">furthered noted that the PHIP</a> which discloses 2Q19 metrics reinforces this view.  Our valuation analysis suggests that the IPO valuation is attractive and we would participate in the IPO. </p></div>

China Feihe (FEIHE HK) is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to Frost &amp; Sullivan. Feihe has launched its IPO at an indicative price range of HK$7.50-10.00 per share. The price range implies a market cap range of $8.5-11.4 billion.In our initiation note, we stated that the Feihe’s equity story offers more positives than negatives, and we would place it on our must-look IPO watchlist. We furthered noted that the PHIP which discloses 2Q19 metrics reinforces this view.  Our valuation analysis suggests that the IPO valuation is attractive and we would participate in the IPO. 

China Feihe IPO: Valuation Is Good for You

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/china-feihe" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (FEIHE HK)</a> is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to Frost &amp; Sullivan. It is backed by Morgan Stanley Private Equity Asia, which is a 21.7% shareholder. Feihe is set to start pre-marketing for a Hong Kong IPO to raise a potential $1 billion, according to press reports. </p><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-feihe-ipo-preview-the-winning-formula" target="_blank" rel="noopener">our initiation note</a>, we stated that the Feihe’s equity story offers more positives than negatives, and we would place it on our must-look IPO watchlist. The PHIP which discloses 2Q19 metrics reinforces this view.</p></div>

China Feihe (FEIHE HK) is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to Frost &amp; Sullivan. It is backed by Morgan Stanley Private Equity Asia, which is a 21.7% shareholder. Feihe is set to start pre-marketing for a Hong Kong IPO to raise a potential $1 billion, according to press reports. In our initiation note, we stated that the Feihe’s equity story offers more positives than negatives, and we would place it on our must-look IPO watchlist. The PHIP which discloses 2Q19 metrics reinforces this view.

China

Yashili International Holdings Ltd. produces dairy products.  The Company operates milk processing plants in Guangdong, Heilongjiang, Shanxi and Henan Provinces in China.

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Yashili International Holdings (1230 HK)

China Youran Dairy Group IPO: Valuation Insights

At the mid-point of the IPO price range, the gross proceeds are $722 million. Overall, we are inclined to participate at most at the low end of the...

Arun George

China Youran Dairy Group IPO: Valuation First-Look

Youran is pre-marketing an HKEx IPO to raise $800 million, according to press reports. In this note, we present our forecasts and take the first...

Arun George

China Feihe: Trading Debut, Valuation Scenario Analysis

China Feihe (6186 HK) will commence trading on Wednesday, 13 November. Feihe priced its IPO at HK$7.50 per share (at the low-end of the range). The...

Arun George

China Feihe IPO: Valuation Is Good for You

China Feihe (FEIHE HK) is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to...

Arun George

China Feihe IPO: Uncowed

China Feihe (FEIHE HK) is the leading player in the China IMF (infant milk formula) market as measured by retail sales value in 2018, according to...

Arun George

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