ANTA SPORTS (2020 HK) Spin off sub-brands and focus on core business of the JV January 4, 2021 283

PSR Recommendation: ACCUMULATE Status: Maintained
Target Price: HKDHKD144.94

Investment Summary
The joint venture company divested its sub-brands
The company announced on December 22 that the joint venture company Amer Sports
Holding (Cayman) Limited (AS Holding) sold its brand Precor to Peloton Interactive, Inc.
(PTON.US) for a total cash consideration of US$420 million (Approximately HKD 3.27 billion),
corresponding to the P/E of FY18/19 is 40.0x/6.7x respectively. Precor’s main business is the
design, production and sales of fitness equipment.
The transaction is expected to be completed in 2021, after completion, Precor will be 100%
owned by Peloton. As of October 31, 2020, the net asset value and intellectual property book
value of Precor’s business was approximately US$312 million. It is expected that after the
completion of the transaction, it will generate approximately US$20 million in profits for the
joint venture group. Based on a 52.70% shareholding ratio, the transaction is expected to
contribute approximately RMB 69 million in net profit to Anta in 2021.
Sub-brands are not closely related to the company’s core business
We believe that this disposal of sub-brands will help the joint venture to focus on its core
business in the future. When acquiring Amer, Anta plans to focus on the development of
footwear and apparel brands, while Precor’s main business is less connected to Amer’s core
business. The divestiture of non-core assets also enables Amer to focus its resources on the
three core brands (Arc’teryx, Solomon and Wilson) in the future. The proceeds from this
transaction will help improve Amer’s cash flow, build directly-operated stores for the three
core brands, and develop footwear and apparel product lines. On the other hand, the average
EBIT margin of the Precor brand for the past years is about 3%, which is lower than the loan
interest rate of the joint venture and the overall EBIT margin of Amer Sports. The profitability
of the joint venture is expected to increase after the disposal.

About the author

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Timothy Chong

Timothy Chong received Bachelor’s Degree with first class honor in Banking and Finance from University of Leicester. He is currently studying Master of investment management in Hong Kong Polytechnic University. Before joining Phillip Securities, Timothy worked at BOCOM international and he is equipped with years of experience in the capital market. Timothy is now a licensed research analyst at Phillip Securities and covers Consumer / Property Management sectors.

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