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.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/chinese-estates-holdings-limited" target="_blank" data-smartkarma-citation="entities:20954:1" rel="noopener">Chinese Estates Holdings (127 HK)</a> is principally engaged in property investment and development, building and property management, brokerage, securities investment, money lending and cosmetics distribution and trading. After market close on Wednesday, it announced a privatisation offer by way of a scheme of arrangement from an entity controlled by Ms HW Chan, the CEO. The offeror will offer HK$4.00 in cash for each scheme share. The bid represents a premium of 83.5% over the closing price of HK$2.18 per share on the last full trading date (28 September prior to the trading halt). </p><p>Chinese Estates’ shares are down 40% since 30 June largely due to the fallout from its substantial shareholding in <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a>. Chinese Estates built up a 6.48% shareholding in Evergrande in 2017 and 2018 at an eye-watering cost of HK$13,596.0 million ($1.7 billion) and an average cost of HK$15.8 per share. Due to the precipitous decline in Evergrande share price (HK$2.95 last close prior to a trading halt), since 30 August, Chinese Estates has reduced its shareholding in Evergrande to 4.39% of outstanding shares for total cash proceeds of HK$689.2 million ($89 million). If Chinese Estates disposes of its entire shareholding, it could result in a realised loss in other comprehensive income of -HK$10,408.3 million (-$1.3 billion) in 2021. Unabashedly, the CEO justifies the privatisation based on the “<em>material adverse change to the financial position of the Group</em>” due to this material loss. </p><p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 408.4 million shares or 21.41% of shares outstanding, the 10% blocking stake is 40.8 million shares or 2.14% of shares outstanding. No shareholder holds a blocking stake. </p><div class="content-highlight"><p>Chinese Estates predicament is self-inflicted and due to Joseph Lau’s (HW Chan’s husband), close relationship (said to be poker pals) with Hui Ka Yan, Evergrande’s Chairman. The Lau family which controls Chinese Estates is taking advantage of the fallout from their ill-advised investment in Evergrande to privatise Chinese Estates at the cost of minority investors. While we think the offer price is unattractive, the shareholding structure suggests that that privatisation bid will be likely successful. </p></div>

Chinese Estates Holdings (127 HK) is principally engaged in property investment and development, building and property management, brokerage, securities investment, money lending and cosmetics distribution and trading. After market close on Wednesday, it announced a privatisation offer by way of a scheme of arrangement from an entity controlled by Ms HW Chan, the CEO. The offeror will offer HK$4.00 in cash for each scheme share. The bid represents a premium of 83.5% over the closing price of HK$2.18 per share on the last full trading date (28 September prior to the trading halt). Chinese Estates’ shares are down 40% since 30 June largely due to the fallout from its substantial shareholding in Evergrande (3333 HK). Chinese Estates built up a 6.48% shareholding in Evergrande in 2017 and 2018 at an eye-watering cost of HK$13,596.0 million ($1.7 billion) and an average cost of HK$15.8 per share. Due to the precipitous decline in Evergrande share price (HK$2.95 last close prior to a trading halt), since 30 August, Chinese Estates has reduced its shareholding in Evergrande to 4.39% of outstanding shares for total cash proceeds of HK$689.2 million ($89 million). If Chinese Estates disposes of its entire shareholding, it could result in a realised loss in other comprehensive income of -HK$10,408.3 million (-$1.3 billion) in 2021. Unabashedly, the CEO justifies the privatisation based on the “material adverse change to the financial position of the Group” due to this material loss. The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 408.4 million shares or 21.41% of shares outstanding, the 10% blocking stake is 40.8 million shares or 2.14% of shares outstanding. No shareholder holds a blocking stake. Chinese Estates predicament is self-inflicted and due to Joseph Lau’s (HW Chan’s husband), close relationship (said to be poker pals) with Hui Ka Yan, Evergrande’s Chairman. The Lau family which controls Chinese Estates is taking advantage of the fallout from their ill-advised investment in Evergrande to privatise Chinese Estates at the cost of minority investors. While we think the offer price is unattractive, the shareholding structure suggests that that privatisation bid will be likely successful. 

Chinese Estates’ Privatisation Bid from the Lau Family

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<div class="content-highlight">
<p><em><strong>Corrigenda: There is an error in this Insight. Please note the correction.</strong></em></p>
<p><em><strong>Correction: [Under the section “On the Evergrande holding”], that (unrealised &amp; realised) loss on the investment in Evergrande (3333 HK) of HK$10.4bn almost certainly includes the HK$3.99bn loss on investment included in the 2021 interims.</strong></em></p>
<p><em><strong>Therefore the additional (unrealised &amp; realised) loss on investment, using the $2.95/share price for Evergrande as provided in the announcement, is ~HK$6.4bn, or HK$3.37/share, giving an adjusted NAV of HK$9.61/share (ignoring forward earnings), implying a P/B under the Offer of ~0.42x compared to a three-year average of 0.31x.</strong></em></p>
</div>
<p>After being <a href="chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/viewer.html?pdfurl=https%3A%2F%2Fwww1.hkexnews.hk%2Flistedco%2Flistconews%2Fsehk%2F2021%2F0929%2F2021092900219.pdf&amp;clen=26125&amp;chunk=true" target="_blank" rel="noopener">suspended</a> on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, <a href="https://www.smartkarma.com/entities/chinese-estates-holdings-limited" target="_blank" data-smartkarma-citation="entities:20954:1" rel="noopener">Chinese Estates Holdings (127 HK)</a>, a leading property developer in Hong Kong, has now <a href="chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/viewer.html?pdfurl=https%3A%2F%2Fwww1.hkexnews.hk%2Flistedco%2Flistconews%2Fsehk%2F2021%2F1006%2F2021100601285.pdf&amp;clen=203491&amp;chunk=true" target="_blank" rel="noopener">announced</a> an Offer, by way of a Scheme, from its founder, Joseph Lau, and his wife Chan Hoi Wan.</p>
</div>
<div>
<p>The consideration is $4.00/share, a 37.9% premium to last close, but an impressive 83.5% premium to the close on the last full trading day. The Offer price will NOT be increased.</p>
</div>
<div>
<p>Lau and Chan control <a href="https://di.hkex.com.hk/di/NSAllSSList.aspx?sa2=as&amp;sid=206&amp;corpn=Chinese+Estates+Holdings+Ltd.&amp;sd=29/09/2013&amp;ed=29/09/2021&amp;cid=0&amp;sa1=cl&amp;scsd=29%2f09%2f2013&amp;sced=29%2f09%2f2021&amp;sc=127&amp;src=MAIN&amp;lang=EN&amp;g_lang=en&amp;" target="_blank" rel="noopener">74.99%</a> of the company. Disinterested shareholders comprise 21.41% of shares out, therefore the blocking stake at the forthcoming Court Meeting is 2.141% of shares out. </p>
<p>The headcount test applies.</p>
</div>
<div>
<p>In <em><a href="https://skr.ma/1HQM2" target="_blank" rel="noopener">Chinese Estates (127 HK): Potential Privatisation?</a></em>, I expected a punchy premium (to the "undisturbed price") upwards of up 75%, or $3.82/share, to get this over the line. This has been exceeded. </p>
<p>Optically, Lau and Chan appear to be getting Chinese Estates at a bargain. But the current realised plus unrealised losses on the <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a> holding is HK$10.4bn, which dramatically alters what is deemed to be book value, and therefore the implied valuation metric under the Offer.</p>
<p>This looks like a done deal and should trade tight to terms.</p>
</div>
<div>
<div>
<p></p>
</div>
</div>



Corrigenda: There is an error in this Insight. Please note the correction.
Correction: [Under the section “On the Evergrande holding”], that (unrealised &amp; realised) loss on the investment in Evergrande (3333 HK) of HK$10.4bn almost certainly includes the HK$3.99bn loss on investment included in the 2021 interims.
Therefore the additional (unrealised &amp; realised) loss on investment, using the $2.95/share price for Evergrande as provided in the announcement, is ~HK$6.4bn, or HK$3.37/share, giving an adjusted NAV of HK$9.61/share (ignoring forward earnings), implying a P/B under the Offer of ~0.42x compared to a three-year average of 0.31x.

After being suspended on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, Chinese Estates Holdings (127 HK), a leading property developer in Hong Kong, has now announced an Offer, by way of a Scheme, from its founder, Joseph Lau, and his wife Chan Hoi Wan.


The consideration is $4.00/share, a 37.9% premium to last close, but an impressive 83.5% premium to the close on the last full trading day. The Offer price will NOT be increased.


Lau and Chan control 74.99% of the company. Disinterested shareholders comprise 21.41% of shares out, therefore the blocking stake at the forthcoming Court Meeting is 2.141% of shares out. 
The headcount test applies.


In Chinese Estates (127 HK): Potential Privatisation?, I expected a punchy premium (to the "undisturbed price") upwards of up 75%, or $3.82/share, to get this over the line. This has been exceeded. 
Optically, Lau and Chan appear to be getting Chinese Estates at a bargain. But the current realised plus unrealised losses on the Evergrande (3333 HK) holding is HK$10.4bn, which dramatically alters what is deemed to be book value, and therefore the implied valuation metric under the Offer.
This looks like a done deal and should trade tight to terms.







Chinese Estates (127 HK): $4.00/Share Offer

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>In this insight, we provide a trading strategy on the upcoming KOSPI 200 rebalance announcement in November amid heightened market volatility. The classic "bread and butter" trading strategy is to go long on the companies that could get included in the KOSPI 200 rebalance and go short on the companies that could get excluded. However, this is typical on relatively normal market conditions. In this high vol market environment, we would argue that this strategy should be tweaked a bit. </p>
<p>In the tables below, we provided a list of 7 stocks that could get included and 10 stocks that could get excluded in the next round of KOSPI 200 rebalance. In normal conditions, the regular strategy would be to go long on the 7 stocks which could get included and go short on the 10 stocks that could get excluded. </p>
<p>Because of heightened market volatility, we would argue that a BETTER strategy is to go long on the top 3 high market cap companies (which tend to be more resistant to high volatility environment) which would be SK Telecom/SK Square, Hyundai Heavy Industries, and Meritz Financial and go short on the 10 stocks that could get excluded in the KOSPI 200 rebalance. </p>
</div>


In this insight, we provide a trading strategy on the upcoming KOSPI 200 rebalance announcement in November amid heightened market volatility. The classic "bread and butter" trading strategy is to go long on the companies that could get included in the KOSPI 200 rebalance and go short on the companies that could get excluded. However, this is typical on relatively normal market conditions. In this high vol market environment, we would argue that this strategy should be tweaked a bit. 
In the tables below, we provided a list of 7 stocks that could get included and 10 stocks that could get excluded in the next round of KOSPI 200 rebalance. In normal conditions, the regular strategy would be to go long on the 7 stocks which could get included and go short on the 10 stocks that could get excluded. 
Because of heightened market volatility, we would argue that a BETTER strategy is to go long on the top 3 high market cap companies (which tend to be more resistant to high volatility environment) which would be SK Telecom/SK Square, Hyundai Heavy Industries, and Meritz Financial and go short on the 10 stocks that could get excluded in the KOSPI 200 rebalance. 


A Trading Strategy on the Upcoming KOSPI 200 Index Rebalance Amid Heightened Market Volatility

Evergrande Property Services / Event-Driven

<p>The plight of <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a>, the "<em>world's most indebted property developer</em>" has been exhaustively covered and picked apart both here at Smartkarma and in the media. (<em>Although I highly recommend <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a>'s Bloomberg <a href="https://www.bloomberg.com/news/articles/2021-09-20/understanding-evergrande-the-chinese-real-estate-conglomerate-that-s-nearing-collapse?sref=frV97TwV" target="_blank" rel="noopener">podcast</a> for his bird's eye synopsis</em>).</p>
<p>Concerns for the embattled real estate play are leading to formerly friendly and close shareholders exiting at massive losses, such as recently suspended <a href="https://www.smartkarma.com/entities/chinese-estates-holdings-limited" target="_blank" data-smartkarma-citation="entities:20954:1" rel="noopener">Chinese Estates Holdings (127 HK)</a> (as discussed in <em><a href="https://skr.ma/1HQM2" target="_blank" rel="noopener">Chinese Estates (127 HK): Potential Privatisation?</a>); </em>and spreading to smaller investors such as <a href="https://www.smartkarma.com/entities/blue-river-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20130:1" rel="noopener">Blue River Holdings (498 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1004/2021100403346.pdf" target="_blank" rel="noopener">dumping</a> <a href="https://www.smartkarma.com/entities/china-evergrande-new-energy-vehicle-group-ltd" target="_blank" data-smartkarma-citation="entities:713:1" rel="noopener">Evergrande Vehicle (708 HK)</a> (reportedly missed its last payroll payment) at a material loss - Blue River also sold stakes in Evergrande and <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> (EPS). <a href="https://www.smartkarma.com/entities/china-strategic-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:20588:1" rel="noopener">China Strategic Hldgs (235 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0921/2021092101057.pdf" target="_blank" rel="noopener">announced</a> on the 21 September it proposes to sell its 1.37% stake in Evergrande Vehicle. </p>
<p>Evergrande has also been selling off assets, most recently a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0929/2021092900039.pdf" target="_blank" rel="noopener">19.93% stake</a> in <a href="https://www.smartkarma.com/entities/shengjing-bank-co-ltd-h" target="_blank" data-smartkarma-citation="entities:96:1" rel="noopener">Shengjing Bank Co Ltd H (2066 HK)</a> for ~RMB10bn. </p>
<p>Now we have Evergrande <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1004/2021100400771.pdf" target="_blank" rel="noopener">suspended</a> due to a material transaction; EPS due to a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1004/2021100400799.pdf" target="_blank" rel="noopener">possible general Offer</a>; and the intriguing part, <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1004/2021100400101.pdf" target="_blank" rel="noopener">suspended</a> due the acquisition of a company "<em>and the relevant possible mandatory offer to acquire the shares of the</em>" company.</p>
<p>China's state-backed Global Times <a href="https://www.globaltimes.cn/page/202110/1235627.shtml" target="_blank" rel="noopener">said</a> Hopson will buy a 51% stake in EPS "and the deal could be valued at more than 40 billion HKD" ($5.1bn). One of those media sources appears to be <a href="https://www.cls.cn/detail/846513" target="_blank" rel="noopener">Cailian Press</a>, which also has SOE affiliation. Jiemian.com, Cailian's sister publication - the two merged in <a href="https://www.chinamoneynetwork.com/2018/02/28/chinese-media-firms-jiemian-cailian-press-merge-creating-financial-information-giant" target="_blank" rel="noopener">February 2018</a> - <a href="https://www.jiemian.com/article/6667341.html" target="_blank" rel="noopener">reckons</a> the fine print on a deal won't be known for a few days.<a href="https://www.jiemian.com/article/6667341.html" target="_blank" rel="noopener"></a></p>
<p>All three companies remain suspended at the time of writing. Given this transaction could come out any old way, this insight touches on some of the permutations Hopson may take to gain majority control in EPS, if that is the end-game.</p>

The plight of Evergrande (3333 HK), the "world's most indebted property developer" has been exhaustively covered and picked apart both here at Smartkarma and in the media. (Although I highly recommend Travis Lundy's Bloomberg podcast for his bird's eye synopsis).
Concerns for the embattled real estate play are leading to formerly friendly and close shareholders exiting at massive losses, such as recently suspended Chinese Estates Holdings (127 HK) (as discussed in Chinese Estates (127 HK): Potential Privatisation?); and spreading to smaller investors such as Blue River Holdings (498 HK) dumping Evergrande Vehicle (708 HK) (reportedly missed its last payroll payment) at a material loss - Blue River also sold stakes in Evergrande and Evergrande Property Services (6666 HK) (EPS). China Strategic Hldgs (235 HK) announced on the 21 September it proposes to sell its 1.37% stake in Evergrande Vehicle. 
Evergrande has also been selling off assets, most recently a 19.93% stake in Shengjing Bank Co Ltd H (2066 HK) for ~RMB10bn. 
Now we have Evergrande suspended due to a material transaction; EPS due to a possible general Offer; and the intriguing part, Hopson Development (754 HK) suspended due the acquisition of a company "and the relevant possible mandatory offer to acquire the shares of the" company.
China's state-backed Global Times said Hopson will buy a 51% stake in EPS "and the deal could be valued at more than 40 billion HKD" ($5.1bn). One of those media sources appears to be Cailian Press, which also has SOE affiliation. Jiemian.com, Cailian's sister publication - the two merged in February 2018 - reckons the fine print on a deal won't be known for a few days.
All three companies remain suspended at the time of writing. Given this transaction could come out any old way, this insight touches on some of the permutations Hopson may take to gain majority control in EPS, if that is the end-game.

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br/> In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.<br/></p>

  In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

China

China Evergrande Group is an integrated residential property developer. The Company, through its subsidiaries, operates in property development, investment, management, finance, internet, health, culture, and tourism markets.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Evergrande (3333 HK)

Chinese Estates’ Privatisation Bid from the Lau Family

The Lau family is taking advantage of the Evergrande stake fallout to privatise Chinese Estates at the cost of minorities. The offer is...

Arun George

A Trading Strategy on the Upcoming KOSPI 200 Index Rebalance Amid Heightened Market Volatility

In this insight, we provide a trading strategy on the upcoming KOSPI 200 rebalance announcement in November amid heightened market volatility.

Douglas Kim

Hopson Navigates Evergrande's Fire Sale

Indebted Evergrande and Hopson in trading halt over the possible sale of property management unit, the completion of which may trigger a general...

David Blennerhassett

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Chinese Estates’ Privatisation Bid from the Lau Family

The Lau family is taking advantage of the Evergrande stake fallout to privatise Chinese Estates at the cost of minorities. The offer is...

Arun George

Chinese Estates (127 HK): $4.00/Share Offer

There may be some pushback on pricing, but factoring in the Evergrande loss (real & unrealised), the Offer Price appears fair.

David Blennerhassett

A Trading Strategy on the Upcoming KOSPI 200 Index Rebalance Amid Heightened Market Volatility

In this insight, we provide a trading strategy on the upcoming KOSPI 200 rebalance announcement in November amid heightened market volatility.

Douglas Kim

Hopson Navigates Evergrande's Fire Sale

Indebted Evergrande and Hopson in trading halt over the possible sale of property management unit, the completion of which may trigger a general...

David Blennerhassett

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related...

Lucror Analytics