Excerpts from the excellent report issued on Jan 8:
Yangzijiang's peer in Taiwan is trading at 23X PE, or about thrice as much.
Midas, CFG, PAH, CAL and YZJ are possible names. Having already announced their intention, Midas could be next on the cards. As per our last report, we believe valuation continues tobe the main motivator for dual-listing.
While HK could be the natural choice, we think companies could choose other markets that offer the best valuations. For one, China Fishery and Pacific Andes Resources could look at Oslo Bors, a leading exchange for fishery and aquaculture sectors.
China Animal trades at >75% PE valuation discount to peers listed in China, which may prompt the controlling shareholder (chairman of the board) to chase for higher valuation in Shanghai.
Yangzijiang may dual-list in Taiwan, given its peer, CSBC Corporation, is trading at PE valuations more than double thatof YZJ’s.
Privatisation could be in play as well: China Hongxing and China Sports? Several counters have been privatized at between 10-27% premium. These companies generally had
(i)<40% free float; and
(ii) <S$500m market cap.
We note that China Hongxing, China Sports and Synear generally have these attributes, along with share prices trading 53-78% below their respective IPO prices and are in a net cash positions.
But not without risks/hurdles. While the benefits of dual listing/privatization look appealing, hurdles to consider include the ability to secure funding for privatization. Post successful listing of China XLX, we believe that a dual listing on the H-share market may be looked upon more favourably if it is accompanied by a fund raising initiative.
As such, they may have to be attractive enough and of good enough quality so as to garner sufficient institutional interests.
| Market cap S$ m | Relative to HK peers | Relative to China peers | Remarks (by DBS Vickers) | |||
| Current PE | Forward PE | Current PE | Forward PE | |||
China Sports | 147 | -77% | -74% | -88% | -86% | Dual-listing is not likely due to small market cap; Privatisation is a possibility, share price below IPO, net cash and low valuations. |
China Hongxing | 560 | -19% | -34% | -57% | -64% | Likely for privatisation, as the share price is trading below net cash per share. |
Hongguo | 131 | -40% | -52% | n.a. | n.a. | |
Raffles Education | 1,154 | -10% | -1% | n.a. | n.a. | Indicated plans to listed Oriental University City on Shanghai Exchange or Nasdaq |
| Pacific Andes | 807 | -62% | -52% | n.a. | n.a. | Possibility could be on the Oslo Exchange as there are more peer comparables |
China Fishery | 1,213 | -43% | -34% | n.a. | n.a. | Possibility could be on the Oslo Exchange as there are more peer comparables |
China Animal Healthcare | 405 | 11% | -10% | -81% | -75% | Possibly in search for better valuations and funding |
Yanlord | 4,224 | n.a. | n.a. | 2% | Not likely. Yanlord is trading at lower discount to RNAV compared to its comparable peer Shui On Land. | |
| Yangzijiang | 4,457 | -3% | 12% | -43% | -29% | Possibility for a dual-listing in Taiwan for better liquidity and valuation. Yangzijiang’s peer in Taiwan (CSBC Corporation, Taiwan) is trading at much higher average historical PE of 23x in 2009 vs Yangzijiang’s 8x |
Cosco | 2,821 | 156% | 153% | 50% | 61% | Not likely in the near term. As a state-owned enterprise, Cosco may be keen to dual-list its A-shares in order to enjoy some of the benefits privileged todomestic companies. However, this is pending relaxation of Chinese rules to allow foreign incorporated companies with China operations to list in China. |
| Epure | 1,064 | -61% | -43% | n.a. | n.a. | Already announced |
Midas | 951 | -14% | -24% | -2% | -3% | Already announced plans to dual list in HK. Associate Nanjing Puzhen could also be listed within 2 years |
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