Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/yihai-int-l-holding-ltd" target="_blank" data-smartkarma-citation="entities:22803:1" rel="noopener">Yihai Int’L Holding (1579 HK)</a> was trading at par with <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a> although the former has previously been the market’s darling due to its less capital intensive and higher-margin business. But the fall during COVID was worse for Yihai compared to Haidialo as investors rushed to cash out their unrealized profit, ignoring the fact that Yihai’s previously smaller business in providing ready-to-eat food products which is essentially what the market wanted at that time, has grown bigger, and has become the differentiator during the difficult period hence maintaining respectable earnings multiples compared to Haidilao whose earnings multiple has gone through to the roof. Only recently, post the vaccine discovery, Haidilao’s earnings multiple normalized but it is still trading at almost twice as much of Yihai (92 to 50).</p>
<p>On a YTD basis, however, both share prices have been heavily correlated although 1<strong>) Haidilao’s revenue growth slowed considerably, 2) Yihai’s diversification away from being Haidilao’s supplier have shown result and 3) the earnings multiples differences are still persistent although it has narrowed.</strong> This begs to question that shouldn’t Yihai’s share price trading higher than Haidilao?</p>
<p>Yihai's share price is currently highly correlated to Haidilao although its business has become less and less correlated to the former and has pivoted away from providing condiments to Haidilao to manufacture ready-to-eat food products hence the business nature is more similar to <a href="https://www.smartkarma.com/entities/nissin-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:26062:1" rel="noopener">Nissin Foods (1475 HK)</a> although Yihai's share price is still massively underperforming Nissin Food Holdings'.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/237/131/original/image_48603681281635075064982.png?1635075064" class="editor-image img-responsive" data-smartkarma-image-id="237131"></figure>
<div class="content-remarks">
<p>source: Reuters</p>
</div>

Yihai Int’L Holding (1579 HK) was trading at par with Haidilao (6862 HK) although the former has previously been the market’s darling due to its less capital intensive and higher-margin business. But the fall during COVID was worse for Yihai compared to Haidialo as investors rushed to cash out their unrealized profit, ignoring the fact that Yihai’s previously smaller business in providing ready-to-eat food products which is essentially what the market wanted at that time, has grown bigger, and has become the differentiator during the difficult period hence maintaining respectable earnings multiples compared to Haidilao whose earnings multiple has gone through to the roof. Only recently, post the vaccine discovery, Haidilao’s earnings multiple normalized but it is still trading at almost twice as much of Yihai (92 to 50).
On a YTD basis, however, both share prices have been heavily correlated although 1) Haidilao’s revenue growth slowed considerably, 2) Yihai’s diversification away from being Haidilao’s supplier have shown result and 3) the earnings multiples differences are still persistent although it has narrowed. This begs to question that shouldn’t Yihai’s share price trading higher than Haidilao?
Yihai's share price is currently highly correlated to Haidilao although its business has become less and less correlated to the former and has pivoted away from providing condiments to Haidilao to manufacture ready-to-eat food products hence the business nature is more similar to Nissin Foods (1475 HK) although Yihai's share price is still massively underperforming Nissin Food Holdings'.


source: Reuters


Yihai International (1579): Diversified Away from Haidilao

<p>There are many reasons to like <a href="https://www.smartkarma.com/entities/vitasoy-intl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:2807:1" rel="noopener">Vitasoy Intl Holdings (345 HK)</a> as the go-to consumer stock in Hong Kong with a China expansion as the growth catalyst, healthy product that caters to plenty of Asians particularly those who are lactose intolerant.</p><p>Like a lot of Hong Kong-originated companies, <a href="https://www.smartkarma.com/entities/vitasoy-intl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:2807:1" rel="noopener">Vitasoy Intl Holdings (345 HK)</a> has been expanding its presence in Mainland China due to the sheer population size and Vitasoy has conquered the Hong Kong market. The question is in which market segment they are trying to compete - the plant-based drink or the dairy milk market? Both are filled with innovative competitors and customers who understand that dairy milk has a higher protein and calcium content. As China makes up more than 60% of the business, the performance in China matters more than the stable business in HK. I am less positive about this and there are more downside rather than upside for the time being. </p>

There are many reasons to like Vitasoy Intl Holdings (345 HK) as the go-to consumer stock in Hong Kong with a China expansion as the growth catalyst, healthy product that caters to plenty of Asians particularly those who are lactose intolerant.Like a lot of Hong Kong-originated companies, Vitasoy Intl Holdings (345 HK) has been expanding its presence in Mainland China due to the sheer population size and Vitasoy has conquered the Hong Kong market. The question is in which market segment they are trying to compete - the plant-based drink or the dairy milk market? Both are filled with innovative competitors and customers who understand that dairy milk has a higher protein and calcium content. As China makes up more than 60% of the business, the performance in China matters more than the stable business in HK. I am less positive about this and there are more downside rather than upside for the time being. 

Vitasoy (345): Does the Chinese like Soymilk?

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

<div>
<p><a href="https://www.smartkarma.com/entities/nayuki-holdings" target="_blank" data-smartkarma-citation="entities:32149:1" rel="noopener">Nayuki Holdings (2150 HK)</a> is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC.</p>
<p>Nayuki will commence trading on Wednesday, 30 June. Nayuki priced its IPO at HK$19.80 and the shares <a href="https://inews.hket.com/article/2993858/%E3%80%90%E5%A5%88%E9%9B%AA%E7%9A%84%E8%8C%B6%E6%9A%97%E7%9B%A4%E3%80%91%E5%A5%88%E9%9B%AA%E7%9A%84%E8%8C%B62150%E5%A0%B4%E5%A4%96%E6%9A%97%E7%9B%A4%E5%8D%8711-%E3%80%80%E4%B8%80%E6%89%8B%E5%B8%B3%E9%9D%A2%E8%B3%BA1100%E5%85%83?mtc=40001&amp;srkw=IPO%E6%9C%80%E5%BF%AB%E6%9C%80%E9%BD%8A" target="_blank" rel="noopener">stood 11% higher</a> at HK$22.00 in the grey market.</p>
</div><div>
<p>In <a href="https://www.smartkarma.com/insights/nayuki-holdings-ipo-initiation-a-new-leaf" target="_blank" data-smartkarma-citation="insights:48532" rel="noopener">Nayuki Holdings IPO Initiation: A New Leaf</a>, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market. In <a href="https://www.smartkarma.com/insights/nayuki-holdings-ipo-drinking-habits" target="_blank" data-smartkarma-citation="insights:52873" rel="noopener">Nayuki Holdings IPO: Drinking Habits</a>, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play.</p>
<p>In <a href="https://www.smartkarma.com/insights/nayuki-holdings-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:53291" rel="noopener">Nayuki Holdings IPO: Valuation Insights</a>, we noted that Nayuki is attractively valued to its peer group for its forecasted earnings growth i.e. on a PEG basis. We recommended participating at the low end of the IPO price range due to the decent upside compared to our base-case DCF valuation.</p>
</div><div><div><div class="content-highlight"><p>Updating for the final IPO net raise and FX, our base-case DCF derived price target is HK$19.45 per share. Nevertheless, our DCF sensitivity and relative valuation analysis show that the grey market price is justifiable.  </p></div></div></div>


Nayuki Holdings (2150 HK) is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC.
Nayuki will commence trading on Wednesday, 30 June. Nayuki priced its IPO at HK$19.80 and the shares stood 11% higher at HK$22.00 in the grey market.

In Nayuki Holdings IPO Initiation: A New Leaf, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market. In Nayuki Holdings IPO: Drinking Habits, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play.
In Nayuki Holdings IPO: Valuation Insights, we noted that Nayuki is attractively valued to its peer group for its forecasted earnings growth i.e. on a PEG basis. We recommended participating at the low end of the IPO price range due to the decent upside compared to our base-case DCF valuation.
Updating for the final IPO net raise and FX, our base-case DCF derived price target is HK$19.45 per share. Nevertheless, our DCF sensitivity and relative valuation analysis show that the grey market price is justifiable.  

<p><a href="https://www.smartkarma.com/entities/nayuki-holdings" target="_blank" data-smartkarma-citation="entities:32149:1" rel="noopener">Nayuki Holdings (2150 HK)</a> is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC.</p><div><p>At the proposed IPO price range of HK$17.20-19.80 per share, Nayuki will have a market cap of HK$29,500.2-33,959.5 million ($3.8-4.4 billion). At the mid-point of the IPO price range, the net proceeds are HK$4,521.3 million ($582 million). </p></div><div>
<p>Five cornerstone investors will purchase $155 million worth of the offer shares (25.25% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are UBS Asset Management, China Universal Asset Management, GF Fund, China Southern Asset Management and CCB International. </p>
<div>
<p>In <a href="https://www.smartkarma.com/insights/nayuki-holdings-ipo-initiation-a-new-leaf" target="_blank" data-smartkarma-citation="insights:48532" rel="noopener">Nayuki Holdings IPO Initiation: A New Leaf</a>, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market. In <a href="https://www.smartkarma.com/insights/nayuki-holdings-ipo-drinking-habits" target="_blank" data-smartkarma-citation="insights:52873" rel="noopener">Nayuki Holdings IPO: Drinking Habits</a>, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play.</p>
<div class="content-highlight"><p>Based on our forecasts, Nayuki is attractively valued to its peer group for its forecasted earnings growth i.e. on a PEG basis. Overall, we are inclined to participate at the low end of the IPO price range due to the decent upside compared to our base-case DCF valuation of HK$19.49 per share.</p></div>
</div>
<p></p>
</div>

Nayuki Holdings (2150 HK) is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC.At the proposed IPO price range of HK$17.20-19.80 per share, Nayuki will have a market cap of HK$29,500.2-33,959.5 million ($3.8-4.4 billion). At the mid-point of the IPO price range, the net proceeds are HK$4,521.3 million ($582 million). 
Five cornerstone investors will purchase $155 million worth of the offer shares (25.25% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are UBS Asset Management, China Universal Asset Management, GF Fund, China Southern Asset Management and CCB International. 

In Nayuki Holdings IPO Initiation: A New Leaf, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market. In Nayuki Holdings IPO: Drinking Habits, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play.
Based on our forecasts, Nayuki is attractively valued to its peer group for its forecasted earnings growth i.e. on a PEG basis. Overall, we are inclined to participate at the low end of the IPO price range due to the decent upside compared to our base-case DCF valuation of HK$19.49 per share.




HK/China Equity Long-Short

Osbert Tang, CFA

<p><a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang Group Co (3818 HK)</a> is due to announce its FY21 result (Year end Mar) on next Wednesday (23 Jun). Its share price has rallied by 32.2% since we wrote <a href="https://www.smartkarma.com/insights/china-dongxiang-3818-hk-it-s-not-a-sportswear-company-it-s-a-cheap-investment-fund" target="_blank" data-smartkarma-citation="insights:48560" rel="noopener">China Dongxiang (3818 HK): It's Not a Sportswear Company....It's a Cheap Investment Fund</a>. Despite so, we still like the stock and believe it will report an encouraging recovery story in next week.</p><p>Specifically, we highlight in this Insight three things to expect in the result: 1.) solid rebound in sportswear business with 30%+ YoY gross profit growth for China in 2H FY21; 2.) investment income stays good based on its equity holdings' performance; and 3.) high dividend payout with potential resumption of special dividends after passed in 1H FY21. </p>

China Dongxiang Group Co (3818 HK) is due to announce its FY21 result (Year end Mar) on next Wednesday (23 Jun). Its share price has rallied by 32.2% since we wrote China Dongxiang (3818 HK): It's Not a Sportswear Company....It's a Cheap Investment Fund. Despite so, we still like the stock and believe it will report an encouraging recovery story in next week.Specifically, we highlight in this Insight three things to expect in the result: 1.) solid rebound in sportswear business with 30%+ YoY gross profit growth for China in 2H FY21; 2.) investment income stays good based on its equity holdings' performance; and 3.) high dividend payout with potential resumption of special dividends after passed in 1H FY21. 

China Dongxiang (3818 HK): What Can We Expect from the Final Result?

China

Yihai International Holding Ltd. engages in the condiment industry. The Company produces hot pot seasonings and other sauce products. Yihai markets worldwide.

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Yihai Int’L Holding (1579 HK)

Yihai International (1579): Diversified Away from Haidilao

Mispriced Yihai Intl - share price highly correlated with Haidilao although it has diversified away by growing its ready-to-eat food business that...

Henry Soediarko

Vitasoy (345): Does the Chinese like Soymilk?

The question is in which market segment they are trying to compete - the plant-based drink or the dairy milk market. Vitasoy may want to be clearer...

Henry Soediarko

Nayuki Holdings IPO: Trading Debut

Nayuki priced its IPO at HK$19.80 and the shares stood 11% higher at HK$22.00 in the grey market. Our DCF sensitivity and relative valuation...

Arun George

Nayuki Holdings IPO: Valuation Insights

We are inclined to participate at the low end of the IPO price range due to the decent upside compared to our base-case DCF valuation of HK$19.49...

Arun George

China Dongxiang (3818 HK): What Can We Expect from the Final Result?

We see CNDX to post good FY21 result next Weds, with things to watch include good recovery at sportswear business, solid performance from...

Osbert Tang, CFA

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