[ET Net News Agency, 23 December 2019] Daiwa raised its target price for Tingyi Cayman
Islands (00322) to HK$13.2 from HK$11.5 and maintained its rating at "hold".
Tingyi announced it will acquire from Ting Hsin, its parent company, the latter's stake
in the beverage business unit (BBU), which is a JV among Tingyi, Ting Hsin and Pepsi. Ting
Hsin's stake in the BBU will decrease from 22.1% to 17.1%. The consideration is USD203m.
The acquisition will be financed by internal resources and is planned to be completed
before end-2019.
Compared with its acquisition undertaken in 2017, when it took a 20% stake in the BBU
for USD612m from Asahi Group, Tingyi is now paying a 30% premium. The research house
believes the premium reflects the BBU's strong earnings recovery.
They lift the 12-month TP to HK$13.2 from HK$11.5, based on a new 2020E PER multiple of
22x (from 20x) to reflect more efficient use of cash through M&A. They maintain "hold"
rating as they expect revenue weakness to linger for the beverage businesses and the
stock's prevailing valuation looks fair to them. (RC)