Management Buyout Offer at HK$6.30 Per Share, Sell

Transcription

1 Belle Int l (01810 HK) Equity Research Report Equity Research 股票研究 : Terry Hong 洪学宇 公司报告 : 百丽国际 (01880 HK) hongxueyu@gtjas.com Management Buyout Offer at HK$6.30 Per Share, Sell 管理层收购要约以每股 6.30 港元回购股份, 卖出 公司报告证券研究报告消费行业 服装百丽国际 Consumer Sector Apparel Management buyout ( MBO ) offer at a price of HK$6.30 per share. Belle announced on 28 April 2017 that the Company's management would buy the entire share capital from other shareholders at a price of HK$6.30 per share, which represents a premium of 19.5% to the closing price of HK$5.27 on the trading day immediately before this announcement, and a premium of 21.5% to the average share price during the past 30 trading days prior to this announcement. The total amount of required for the MBO is approximately HK$45.3 billion. About 85.28% of the Company s total issued shares held by the disinterested shareholders will be canceled in exchange for. The MBO will be financed through 1) debt facilities amounting to HK$28.0 billion provided by Bank of America, and 2) investment of HK$17.3 billion by Hillhouse Capital and CDH Group. The MBO proposal will be determined at the general meeting and the court meeting. The acting-in-concert shareholders control 40.46% of Belle s share capital, as at 28 April Raise TP to HK$6.30 and recommend Sell. The valuation of Belle has been under pressure in recent years, mainly due to challenging market conditions as well as Belle s bad performance in its footwear business. The buyout price of HK$6.30 represents 13.4x/14.7x/14.9x FY17/FY18/FY19 PER, respectively, and a 19.5% upside potential, which makes it quite attractive. Therefore we believe it is very likely that the disinterested shareholders will accept the buyout terms. Risk: the buyout proposal may not be approved, which may result in a slump in the Company's stock price. 管理层收购 ( MBO ) 要约以每股 6.30 港元回购股份 百丽于 2017 年 4 月 28 日公告 称公司的管理层将以每股 6.30 港元的价格收购所有其他股东的股份, 该价格相对于公告前 一个交易日的收市价格 5.27 港元有 19.5% 的溢价, 并相对于公告前 30 个交易日的平均股 价有 21.5% 的溢价 这次管理层收购的总现金需求约为 453 亿港元 由无利害关系股东持有的占公司总股本约 85.28% 的股份将被注销以获得现金补偿 这次管理层收购将按以下方式提供融资 :1) 由 美国银行提供的总额 280 亿港元的债务融资 ;2) 由高瓴资本和鼎晖集团提供的共计 173 亿港元的现金投资 该管理层收购要约将会在股东大会及法院会议上进行表决 截至 2017 年 4 月 28 日一致行动的股东共占百丽总股本的 40.46% 将目标价提升至 6.30 港元并建议 卖出 百丽的估值在过去几年中持续受压, 主要由于 Year End 年结 市场环境不佳, 并且百丽的鞋类业务表现糟糕 6.30 港元的收购价格分别相当于 13.4 倍 /14.7 倍 /14.9 倍的 2017 财年 /2018 财年 /2019 财年市盈率, 并反映了 19.5% 的上行空间, 使得该价格非常吸引 因此我们认为无利益关系股东很可能会同意这次的收购条款 风险 : 收购要约可能不会被通过, 或将导致股价大幅下跌 Turnover 收入 Profit 股东净利 EPS 每股净利 EPS 每股净利变动 PER 市盈率 BPS 每股净资产 Rating: Sell Downgraded 评级 : 卖出 ( 下调 ) 6-18m TP 目标价 : HK$6.30 Revised from 原目标价 : HK$4.30 Share price 股价 : Stock performance 股价表现 (5.0) (10.0) (15.0) % of return HK$5.270 Apr-16 Jul-16 Sep-16 Nov-16 Feb-17 Apr-17 Change in Share Price 股价变动 HSI Index Belle 1 M 1 个月 3 M 3 个月 1 Y 1 年 Abs. % 绝对变动 % Rel. % to HS index 相对恒指变动 % (6.1) Avg. share price(hk$) 平均股价 ( 港元 ) PBR 市净率 DPS 每股股息 Yield 股息率 ROE 净资产收益率 2/28 or 29 (RMB m) (RMB m) (RMB) ( %) (x) (RMB) (x) (RMB) (%) (%) FY15A 40,008 4, FY16A 40,790 2, (37.8) FY17F 40,569 3, FY18F 40,842 3, (9.1) FY19F 41,783 3, (1.1) Shares in issue (m) 总股数 (m) 8,434.2 Major shareholder 大股东 Merry Century 20.8% Market cap. (HK$ m) 市值 (HK$ m) 44,448.4 Free float (%) 自由流通比率 (%) month average vol. 3 个月平均成交股数 ( 000) 17,109.6 FY17 gearing (%) FY17 净负债 / 股东资金 (%) Cash 52 Weeks high/low (HK$) 52 周高 / 低 / FY17 Est. NAV (HK$) FY17 每股估值 ( 港元 ) 5.7 See the last page for disclaimer Page 1 of 5

2 Management buyout ("MBO") offer at a price of HK$6.30 per share. Belle International ("Belle" or "the Company") made an announcement on 28 April 2017 that the Company s management has proposed to take the Company private. According to the proposal, Mr. Yu Wu, Mr. Sheng Fang and other management members agreed to buy the entire share capital from other shareholders at a price of HK$6.30 per share, which represents a premium of 19.5% to the closing price of HK$5.27 on the trading day immediately before this announcement, and a premium of 21.5% to the average share price during the past 30 trading days prior to this announcement. The buyout price also represents 18.7x PER based on the net profit of RMB2,509 million for the twelve months ended 31 August According to the announcement, the Company may implement a series of strategic transformations to improve its business. The transformation can be more effectively implemented if the Company is privatized and free from short-term distractions arising from the public equities market. If the buyout proposal is approved and implemented, Belle will be delisted from the Hong Kong Stock Exchange. The acting-in-concert shareholders control 40.46% of Belle s share capital, as at 28 April The management participating in the MBO proposal included ten of the Company s senior management members. These management shareholders in aggregate directly or indirectly hold 1,017,341,192 shares, representing 12.06% of the Company s total issued shares. Mr. Yu Wu and Mr. Sheng Fang, two of the Company s executive directors, in aggregate hold 2.66% of the Company s total issued shares. The remaining 7,192,291,808 shares (representing approximately 85.28% of the total issued shares) held by the disinterested shareholders will be canceled in exchange for at the buyout price of HK$6.30 per share. Mr. Tang Yiu and Mr. Tang Wai Lam, Belle s non-executive directors, as well as Mr. Sheng Baijiao, Belle s CEO, in aggregate hold 25.74% of the Company s total issued shares, and they have promised to act in favor of the MBO proposal. Table-1: Belle's Shareholding Structure as at 28 April 2017 Shareholder Controlling Person % of Total Shares SSL Mr. Yu Wu 2.20% Participating management SBL Mr. Sheng Fang 0.46% Other participating management 12.06% MCIL Mr. Tang Yiu, Mr. Tang Wai Lam 20.76% Acting-in-concert shareholders SCGL Mr. Sheng Baijiao 0.89% BRVL Mr. Sheng Baijiao 4.09% Other disinterested shareholders 59.54% The total amount of required for the MBO is approximately HK$45.3 billion. The MBO will be financed through 1) debt facilities amounting to HK$28.0 billion provided by Bank of America, and 2) investment of HK$17.3 billion by Hillhouse Capital and CDH Group. Assuming the successful implementation of the proposed MBO, Hillhouse Capital and CDH Group will become new shareholders of Belle, and in aggregate will own 68.87% of the Company s total share capital. The successful implementation of the MBO mainly depends on the disinterested shareholders. The share buyout arrangement will be effective and binding on the Company and all shareholders subject to the fulfillment of the following conditions: 1) the approval of the proposal by a majority number of the disinterested shareholders representing not less than 75% in value of the shares held by the disinterested shareholders; 2) the number of votes against the proposal is not more than 10% of the total number of votes; 3) the approval of the proposal at the general meeting by not less than 75% of votes from shareholders present; and 4) other requirements and conditions. The MBO proposal will lapse if any of the aforesaid conditions are not fulfilled. Raise TP to HK$6.30 and recommend Sell. The valuation of Belle has been under pressure in recent years, mainly due to challenging market conditions as well as the Company s bad performance in its footwear business. Currently Belle is trading at 12.3x FY18 PER, which is a 9.7% discount to the industry average of 13.6x PER. The buyout price of HK$6.30 represents 13.4x/14.7x/14.9x FY17/FY18/FY19 PER, respectively, and a 19.5% upside potential, which makes it quite attractive. Therefore we believe it is very likely that the disinterested shareholders will accept the buyout terms, and so we raise our TP to the buyout price of HK$6.30. The Company's stock price will stay close to HK$6.30 before the MBO is effective, and so we recommend "Sell". Risk: the buyout proposal may not be approved, which may result in a slump in the Company's stock price. See the last page for disclaimer Page 2 of 5

3 Figure-1: Belle s PE Ratio (Next four Quarters) SD: 12.8x Average: 10.9x SD: 8.9x Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 PER Average 1SD -1SD Figure-2: Belle s PB Ratio (Current Annual) SD: 2.2x 2.0 Average: 1.8x SD: 1.3x 0.5 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 PB Average 1SD -1SD Table-2: Peers Comparison Company Stock Code Currency Last price Market Cap PE(x) PB(x) ROE(%) D/Y(%) EV/ EBITDA(x) Gross Margin(%) Operating Margin(%) HK$ mn 16A 17F 18F 19F 16A 17F 18F 19F 17F 17F 17F 17F 17F Ladies' Footwear Belle Int l** 1880 HK HKD , n.a n.a Daphne 210 HK HKD ,270 n.a. n.a n.a (7.3) n.a. n.a (4.1) Stella Intl 1836 HK HKD , Le Saunda** 738 HK HKD , n.a n.a. 7.9 n.a. n.a C.Banner Intl 1028 HK HKD , Simple Average Weighted Average Apparel China Lilang 1234 HK HKD , Trinity 891 HK HKD n.a. n.a. n.a. n.a (7.6) 0.0 n.a (10.7) I.T** 999 HK HKD , Giordano Intl 709 HK HKD , Esprit* 330 HK HKD , n.a (0.4) Simple Average Weighted Average Sportswear Anta 2020 HK HKD , Dongxiang 3818 HK HKD , Xtep Intl 1368 HK HKD , Degrees Intl 1361 HK HKD , Pou Sheng 3813 HK HKD , Lining* 2331 HK HKD , Simple Average Weighted Average All forecasts are based on Bloomberg consensus. * Note: Lining (2331) and Esprit (330) as outliers are excluded from the calculation of simple and weighted average. ** Note: The financial year end date of Belle Intl (1880), Le Saunda (738) and I.T (999) is the end of February. For easier comparison with peers, 16A means FY17A and 17F means FY18F and so on for the 3 companies mentioned. See the last page for disclaimer Page 3 of 5

4 Financial Statements and Ratios Income Statement Balance Sheet Year end Feb (RMB m) FY15A FY16A FY17F FY18F FY19F Year end Feb (RMB m) FY15A FY16A FY17F FY18F FY19F Turnover 40,008 40,790 40,569 40,842 41,783 PP&E 4,142 4,561 5,114 5,610 6,095 Cost of sales (16,998) (17,832) (18,598) (19,176) (19,949) Leasehold land and land use rights 1,558 1,525 1,619 1,711 1,804 Gross profit 23,010 22,958 21,971 21,667 21,834 Intangible assets 3,812 2,583 2,783 2,945 3,071 Structured bank deposits Selling & Distribution Expenses (13,920) (14,346) (14,722) (14,774) (14,986) Others 1,761 2,039 2,115 2,203 2,286 Administrative expenses (3,296) (3,516) (3,489) (3,349) (3,384) Total non-current assets 11,803 10,708 11,896 12,787 13,637 Other income Other expenses (22) (23) (22) (22) (22) Inventories 6,349 6,877 6,776 6,988 7,199 Impairment of intangible assets 0 (1,356) Trade receivables 4,798 4,327 4,353 4,396 4,420 Profit from operations 6,194 4,202 4,513 4,035 3,969 Other receivables, deposits and prepayments 1,200 1,361 1,374 1,402 1,430 Structured bank deposits 5,635 4,546 4,682 4,823 4,967 finance income Others Share of profit of associates & JV Cash balance 2,731 3,213 4,077 3,870 3,960 Profit before taxation 6,601 4,541 4,884 4,438 4,390 Total current assets 20,734 20,347 21,286 21,504 22,003 Income tax (1,851) (1,596) (1,343) (1,220) (1,207) Trade payables 1, ,311 1,360 1,428 Minority interests 13 (11) (4) (3) (3) Other payables, accruals and other current liabilities 1,881 2,112 2,046 2,109 2,194 Profit 4,764 2,934 3,538 3,214 3,180 Short-term borrowings 2, Current income tax liabilities 1,611 1,666 1,638 1,652 1,645 EPS (RMB) Total current liabilities 7,163 5,595 5,684 5,672 5,763 yoy 10.4% (37.8%) 17.0% (9.1%) (1.1%) Deferred tax liabilities Deferred income Cash Flow Statement Total non-current liabilities Year end Feb (RMB m) FY15A FY16A FY17F FY18F FY19F Profit before tax 6,601 4,541 4,884 4,438 4,390 Shareholders' equities 24,923 25,076 27,096 28,201 29,441 Depreciation and amortisation 1,085 1,084 1,253 1,418 1,574 Minority interest Others (169) 1,202 (352) (384) (401) BPS (RMB) Working capital change (625) (56) 331 (192) (132) Income tax paid (1,448) (1,629) (1,351) (1,197) (1,198) Key Financial Ratios Operating flow 5,444 5,143 4,766 4,084 4,234 Year end Feb (RMB m) FY15A FY16A FY17F FY18F FY19F Revenue growth (%) (0.5) Capital expenditure (1,470) (1,561) (2,109) (2,181) (2,288) Operating profit growth (%) 9.8 (32.2) 7.4 (10.6) (1.6) Interest received profit growth (%) 8.2 (38.4) 20.6 (9.1) (1.1) Structured bank deposits & others 467 1,269 (403) (195) (210) Investing flow (601) 190 (2,166) (2,008) (2,119) Gross margin (%) Operating margin (%) Dividend paid (4,386) (2,952) (1,518) (2,109) (1,940) profit margin (%) Interest paid (36) (46) (46) (36) (29) ROE (%) Change in borrowings 251 (1,861) (172) (138) (55) ROA (%) Contribution from non-controlling interests Payments for purchase of shares for share award (1,716) Inventory turnover days scheme Financing flow (5,821) (4,859) (1,736) (2,283) (2,024) Account receivable days Cash at beginning of year 3,705 2,731 3,213 4,077 3,870 Change in (978) (207) 90 gearing (%) Account payable days Effect on foreign exchange Current ratio (x) Cash balance at year end 2,731 3,213 4,077 3,870 3,960 Payout ratio (%) See the last page for disclaimer Page 4 of 5

5 Company Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable. Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable. Sector Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable. Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform Relative Performance <-5%; or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), Guotai Junan International Holdings Limited (01788 HK), Binhai Investment Company Limited (02886 HK), Link Holdings Limited (08237 HK), GFI MSCI A I-R (CNY) (83156 HK), GFI MSCI A I (03156 HK), CAM SCSMALLCAP (03157 HK) and GTJA (02611 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong. Tel.: (852) Fax: (852) Website: See the last page for disclaimer Page 5 of 5