Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Lanzhou Zhuangyuan Pasture / Event-Driven

<ul>
<li>Back on the 25 April, PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> announced a Conditional Cash Offer for all its H-shares at $10.89/share. The Offer Doc is now out.</li>
<li>This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. </li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.</li>
</ul>


Back on the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share. The Offer Doc is now out.
This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. 
This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.


Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> has announced a Conditional Cash Offer for all H-shares at $10.89/share.</li>
<li>The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.</li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. </li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) has announced a Conditional Cash Offer for all H-shares at $10.89/share.
The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.
This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. 


Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.</li>
<li>Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. </li>
<li>This is the second proposal in the Chinese dairy space in as many months, after infant-formula  firm <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a>'s Scheme</li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.
Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. 
This is the second proposal in the Chinese dairy space in as many months, after infant-formula  firm Ausnutria Dairy Corp (1717 HK)'s Scheme


Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting Offer

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> (DEC) achieved an encouraging 3Q21 with reported net profit increased 33.5% YoY and new orders signed reached Rmb12.6bn for 3Q21 and Rmb47bn for 9M21. Although recurring profit grew a slower 12.9%, it is still decent amid higher input costs. In particular, we are pleased to see its gross margin for 3Q21 expanded by 1.6pp YoY. Its solid financial position with 51% of share price being net cash is an added strength. We believe there is room for the Street to upgrade FY21 forecasts, as DEC's 9M21 result has already reached 79% of full-year consensus estimate. Earnings outlook appears to be secured as we estimate DEC's backlog enough to cover FY20 revenue at 2.63x. DEC's long-term exposure to pumped storage and hydrogen economy of China is very appealing and is yet to be captured in the earnings over the next two years. Even so, its valuations for FY21 and FY22 are still inexpensive, in our view.

Dongfang Electric (1072 HK) (DEC) achieved an encouraging 3Q21 with reported net profit increased 33.5% YoY and new orders signed reached Rmb12.6bn for 3Q21 and Rmb47bn for 9M21. Although recurring profit grew a slower 12.9%, it is still decent amid higher input costs. In particular, we are pleased to see its gross margin for 3Q21 expanded by 1.6pp YoY. Its solid financial position with 51% of share price being net cash is an added strength. We believe there is room for the Street to upgrade FY21 forecasts, as DEC's 9M21 result has already reached 79% of full-year consensus estimate. Earnings outlook appears to be secured as we estimate DEC's backlog enough to cover FY20 revenue at 2.63x. DEC's long-term exposure to pumped storage and hydrogen economy of China is very appealing and is yet to be captured in the earnings over the next two years. Even so, its valuations for FY21 and FY22 are still inexpensive, in our view. 

Dongfang Electric (1072 HK): Healthy 3Q21 Result with Positive Order Flow

While <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric Corporation (1072 HK)</a> (DEC) has witnessed excellent share price performance into 2H21, we believe there is still more room for the stock to go. Earnings revision momentum is positive, with FY21-22 forecasts revised up by 10-11% in the last month, but such magnitudes are likely to have still under-estimated DEC's earnings. The fact that its new orders for 1H21 reached a record high and grew by 32.9% adds comfort to our investment thesis. We estimate DEC's backlog at around Rmb96bn now, good enough to cover 2.6x its annual revenue, and this was up from 2.3x at end-FY20. New order momentum in 3Q21 looks sustaining strength, and with PER valuation at 15x for FY21 and 13.5x for FY22, it does not look demanding given its technical strengths and encouraging outlook. Longer-term, besides the benefits from hydrogen and pumped storage, we see DEC well positioned to gain from China's vigorous attitude towards nuclear generation as well.

While Dongfang Electric Corporation (1072 HK) (DEC) has witnessed excellent share price performance into 2H21, we believe there is still more room for the stock to go. Earnings revision momentum is positive, with FY21-22 forecasts revised up by 10-11% in the last month, but such magnitudes are likely to have still under-estimated DEC's earnings. The fact that its new orders for 1H21 reached a record high and grew by 32.9% adds comfort to our investment thesis. We estimate DEC's backlog at around Rmb96bn now, good enough to cover 2.6x its annual revenue, and this was up from 2.3x at end-FY20. New order momentum in 3Q21 looks sustaining strength, and with PER valuation at 15x for FY21 and 13.5x for FY22, it does not look demanding given its technical strengths and encouraging outlook. Longer-term, besides the benefits from hydrogen and pumped storage, we see DEC well positioned to gain from China's vigorous attitude towards nuclear generation as well. 

Dongfang Electric (1072 HK): Looks to Have More Room to Go

China

Harbin Electric Company Limited manufactures a comprehensive range of electric power generation equipment including thermal power generator sets, boilers, steam and hydro turbine and turbine generator sets.  The Company also provides power station engineering services and manufactures ancillary equipment for power stations as well as AC/DC motor and other products.

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Harbin Electric Co Ltd H (1133 HK)

Dongfang Electric (1072 HK): Healthy 3Q21 Result with Positive Order Flow

DEC achieved good 3Q21 earnings growth with healthy orders signed in 9M21. We see room for upgrade in Street forecasts, and continue to like its...

Osbert Tang, CFA

Dongfang Electric (1072 HK): Looks to Have More Room to Go

DEC has witnessed positive earnings revisions and encouraging new orders momentum, and we think there is more room for share price to go. Its edge...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer

Currently trading at gross/annualised spread of 8.6%/52.8%, incl. the final divi. That looks attractive. Although recent deal structures have...

David Blennerhassett

Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

Assuming late July payment, and inclusive of the FY21 dividend of RMB0.047/share, then I suggest buying up to ~HK$10.50/share or a gross/annualised...

David Blennerhassett

Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting Offer

PRC-Diary farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement....

David Blennerhassett

Dongfang Electric (1072 HK): Healthy 3Q21 Result with Positive Order Flow

DEC achieved good 3Q21 earnings growth with healthy orders signed in 9M21. We see room for upgrade in Street forecasts, and continue to like its...

Osbert Tang, CFA

Dongfang Electric (1072 HK): Looks to Have More Room to Go

DEC has witnessed positive earnings revisions and encouraging new orders momentum, and we think there is more room for share price to go. Its edge...

Osbert Tang, CFA