Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Japan Post Ins, Straits Trad., Invesco Office, Chong Hing, Toshiba, JD.com

Equity Bottom-Up

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<p>As discussed in <em><a href="https://skr.ma/p8tiS" target="_blank" rel="noopener">Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light</a></em>, Yue Xiu has made an Offer for <a href="https://www.smartkarma.com/entities/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a> shares not owned, at HK$20.80/share, which is a 10.1% discount to its NAV.</p>
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<p>This privatisation renews interest in Hong Kong's remaining  "family"-owned banks, such as <a href="https://www.smartkarma.com/entities/dah-sing-banking-group-ltd" target="_blank" data-smartkarma-citation="entities:342:1" rel="noopener">Dah Sing Banking (2356 HK)</a> and <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a>.</p>
<p>Of the two, DSB is the most obvious candidate. It is 74.4% held by <a href="https://www.smartkarma.com/entities/dah-sing-financial-holdings" target="_blank" data-smartkarma-citation="entities:589:1" rel="noopener">Dah Sing Financial (440 HK)</a>, which in turn is controlled by the Wong family with 42.96%.</p>
<p>More below the fold.</p>
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As discussed in Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light, Yue Xiu has made an Offer for Chong Hing Bank (1111 HK) shares not owned, at HK$20.80/share, which is a 10.1% discount to its NAV.


This privatisation renews interest in Hong Kong's remaining  "family"-owned banks, such as Dah Sing Banking (2356 HK) and Bank of East Asia (23 HK).
Of the two, DSB is the most obvious candidate. It is 74.4% held by Dah Sing Financial (440 HK), which in turn is controlled by the Wong family with 42.96%.
More below the fold.


Dah Sing (2356 HK): Trading Cheap As Chong Hing Gets Bid

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<p>This week in StubWorld ...</p>
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<p>Following Yue Xiu's privatization Offer for <a href="https://www.smartkarma.com/entities/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a>, Hong Kong's remaining  "family"-owned banks, such as <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a> (BEA), are back in focus. <a href="https://www.smartkarma.com/entities/guoco-group-ltd" target="_blank" data-smartkarma-citation="entities:5290:1" rel="noopener">Guoco Group Ltd (53 HK)</a> is trading cheap to its historical NAV discount range, and the 14.94% holding in BEA accounts for 15% of its NAV.</p>
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<p>Preceding my comments on Guoco are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Following Yue Xiu's privatization Offer for Chong Hing Bank (1111 HK), Hong Kong's remaining  "family"-owned banks, such as Bank of East Asia (23 HK) (BEA), are back in focus. Guoco Group Ltd (53 HK) is trading cheap to its historical NAV discount range, and the 14.94% holding in BEA accounts for 15% of its NAV.



Preceding my comments on Guoco are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: Guoco/BEA Into Focus Post Chong Hing Bank Bid

<p>0.9x P/B. That's the only number that matters here.</p>
<p>Yue Xiu (the investment arm of the Guangzhou municipal government) has made an Offer, by way of a Scheme, for <a href="https://www.smartkarma.com/entities/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a> shares not owned, at HK$20.80/share, a 51.2% premium to last close, and a 97% premium to the day preceding the last trading day.</p>
<p>The Cancellation Price, which is a 10.1% <em>discount</em> to the NAV, will NOT be increased.</p>
<p>Standard Scheme conditions apply. Chong Hing is Hong Kong-incorporated, therefore there is no headcount test.</p>
<p>Despite the impressive premium, the P/B multiple is less than half the average P/B multiple for Hong Kong banks over the past twenty years, and less than half the most recent takeover multiple of Wing Hang Bank, which was taken out by <a href="https://www.smartkarma.com/entities/oversea-chinese-banking-corp" target="_blank" data-smartkarma-citation="entities:114:1" rel="noopener">OCBC (OCBC SP)</a> in 2014 at 1.81x P/B in a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2014/0629/ltn20140629025.pdf" target="_blank" rel="noopener">US$4.9bn deal</a>.</p>
<p>More below the fold.</p>

0.9x P/B. That's the only number that matters here.
Yue Xiu (the investment arm of the Guangzhou municipal government) has made an Offer, by way of a Scheme, for Chong Hing Bank (1111 HK) shares not owned, at HK$20.80/share, a 51.2% premium to last close, and a 97% premium to the day preceding the last trading day.
The Cancellation Price, which is a 10.1% discount to the NAV, will NOT be increased.
Standard Scheme conditions apply. Chong Hing is Hong Kong-incorporated, therefore there is no headcount test.
Despite the impressive premium, the P/B multiple is less than half the average P/B multiple for Hong Kong banks over the past twenty years, and less than half the most recent takeover multiple of Wing Hang Bank, which was taken out by OCBC (OCBC SP) in 2014 at 1.81x P/B in a US$4.9bn deal.
More below the fold.

Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a>/CHB provides banking and related financial services in Hong Kong and the Mainland. It has 34 branches in Hong Kong, 10 branches and sub-branches in Mainland China and one branch in Macau.</p><p>On Wednesday, CHB announced a privatisation offer from Yuexiu Holdings, the largest shareholder which holds 74.97% of outstanding shares. The offeror will offer HK$20.80 per scheme share less a possible dividend adjustment. The offer price is a juicy premium of 97.0% to the last full trading day price of HK$10.56 per share (5 May prior to the trading halt). </p><div class="content-highlight"><p>The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). Yuexiu Holdings acquired 326.3 million CHB shares (75.0% of outstanding shares at that time) through a partial offer at HK$35.69 per share in 2014. While the current offer price is materially below the previous partial offer price, we think that the substantial premium of the current offer price to long-term average share prices and P/B multiples makes it likely to be a done deal. </p></div>

Chong Hing Bank (1111 HK)/CHB provides banking and related financial services in Hong Kong and the Mainland. It has 34 branches in Hong Kong, 10 branches and sub-branches in Mainland China and one branch in Macau.On Wednesday, CHB announced a privatisation offer from Yuexiu Holdings, the largest shareholder which holds 74.97% of outstanding shares. The offeror will offer HK$20.80 per scheme share less a possible dividend adjustment. The offer price is a juicy premium of 97.0% to the last full trading day price of HK$10.56 per share (5 May prior to the trading halt). The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). Yuexiu Holdings acquired 326.3 million CHB shares (75.0% of outstanding shares at that time) through a partial offer at HK$35.69 per share in 2014. While the current offer price is materially below the previous partial offer price, we think that the substantial premium of the current offer price to long-term average share prices and P/B multiples makes it likely to be a done deal. 

Hong Kong

The Bank of East Asia, Limited and its subsidiaries provide general banking, related financial, business corporate, and investor services.

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Bank of East Asia (23 HK)

Last Week in Event SPACE: Japan Post Ins, Straits Trad., Invesco Office, Chong Hing, Toshiba, JD.com

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Dah Sing (2356 HK): Trading Cheap As Chong Hing Gets Bid

I think one could be long both DSF and DSB. DSF is cheaper, and because of the securities holdings, the discount is more egregious.

David Blennerhassett

StubWorld: Guoco/BEA Into Focus Post Chong Hing Bank Bid

Following the privatization Offer for Chong Hing, Bank of East Asia is back in focus. Guoco is trading cheap to its historical NAV discount range,...

David Blennerhassett

Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light

I think this is being done too cheaply. Yet, no other suitor will emerge. Ultimately, this is where long-suffering shareholders cash out. Assuming...

David Blennerhassett

Chong Hing’s Privatisation Bid

CHB announced a privatisation offer at HK$20.80 per scheme share less a possible dividend adjustment. We think that the substantial premium of the...

Arun George

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