VESYNC(2148.HK)：PRIVATIZATION AMID TRADE HEADWINDS AND CHALLENGING CAPITAL MARKET CONDITIONS-格隆汇

机构：招银国际
研究员：Walter WOO

　　What is new? Vesync (2148 HK) has proposed a privatization by a cash or stock offer. Vesync (2148 HK) has announced its plan to privatize the Company by the scheme of arrangement. The offer to current shareholders is HK$ 5.6 per share or a share swap to 1 TopCo Share per share. The total consideration could be as much as around HK$ 938mn, if holders of all the Non-Offeror Concert Parties’ shares (about 186.5mn shares, accounting for 16.4% of total shares issued) choose to take the cash offer. The offer price of HK$ 5.6 is 33% higher than the last trading price and is equal to about 9.7x/ 8.7x FY24E/ 25E P/E, based on CMBI estimates.
　　Our view: We believe the risk-averse investors may take the cash offer while long-term investors may take the shares.
　　1) Dividends paid in the past should also be considered. Some investors may argue that the offer price of HK$ 5.6 is not that attractive, because that is not far from its IPO price of HK$ 5.52 back in late 2020. However, if we also include the dividend paid of HK$ 0.555 in the past, the total return could be upgraded to 12%.
　　2) Valuation of the offer price still has a discount vs peers’ average (the implied valuation is at around 9x FY25E P/E, at 29%/ 43% discounts to China/ international small appliances peers average of 13.6x/ 17.0x), but given the near-term headwinds, such as i) the potential pressure from the additional import tariffs, which is especially negative for those with limited Southeast Asia exposure, ii) relatively high channel inventories, iii) relatively high freight rates and metal prices, iv) potential slowdown in GDP growth and retail sales growth in the US, and v) rising competition from various competitors like SharkNinja, Dyson or SEB, we believe the offer is reasonable for those risk-averse investors.
　　3) Option to do a stock swap is still available for those long-term investors. Despite the short-term uncertainties, we are still positive about the long-term outlook, supported by: i) its attractive valuation (if the capital market sentiment is in an upcycle or more inclusive, we would not be surprised to see Vesync’s valuation be re-rated to 15x, where SharkNinja was a very good example (now trading at 20x in the US market vs below 10x in the HK market in the past)), ii) the low penetration rate of air-purifiers in the US, and iii) decent track records (Vesync has a lot of successes in developing new brands and new product categories). Besides, Vesync does have the option to be listed in the US market in the future.
　　Since the share alternative option is still on the table, we maintain BUY with a new target price of HK$ 6.40, based on a 10x FY25E (rolled over from 11x FY24E P/E), considering the 5-year (FY23-28E) net profit CAGR of 10%. It is now trading at 8.2x FY25E P/E.