HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>We once again heard privatization rumor of China TCM, but China TCM denied it at this stage. We still recommend investors to remain vigilant until receive definite official announcement.</li>
<li>One important background of privatization is the integration of SOE carried out in recent years. We do not rule out the possibility that Taiji Group would drive this privatization.</li>
<li>It may not be an optimal time for the proposal of privatization by major shareholders. Other shareholders may not want to give up high-quality stocks, which makes privatization challenging.</li>
</ul>


We once again heard privatization rumor of China TCM, but China TCM denied it at this stage. We still recommend investors to remain vigilant until receive definite official announcement.
One important background of privatization is the integration of SOE carried out in recent years. We do not rule out the possibility that Taiji Group would drive this privatization.
It may not be an optimal time for the proposal of privatization by major shareholders. Other shareholders may not want to give up high-quality stocks, which makes privatization challenging.


China Traditional Chinese Medicine (570.HK) - Will This Privatization Rumor Come True ?

Equity Bottom-Up

China Traditional Chinese Medicine / Equity Bottom-Up

<ul>
<li>The sharp performance decline of China TCM in 2024 is actually in line with our expectation. The current valuation has not yet reached its lowest point. </li>
<li>China TCM can still achieve an average annual profit of RMB1 billion in the future. Together with the new management, we expect the Company to come out of the trough.</li>
<li>Instead of betting on privatization again, it's better to focus more on whether China TCM's fundamentals would improve, which is the key factor that can support a sustainable valuation rebound.</li>
</ul>


The sharp performance decline of China TCM in 2024 is actually in line with our expectation. The current valuation has not yet reached its lowest point. 
China TCM can still achieve an average annual profit of RMB1 billion in the future. Together with the new management, we expect the Company to come out of the trough.
Instead of betting on privatization again, it's better to focus more on whether China TCM's fundamentals would improve, which is the key factor that can support a sustainable valuation rebound.


China TCM (570.HK) - About the Profit Warning and the Valuation Outlook

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>On the 26th March, <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> announced a cash/scrip Offer from <a href="https://www.smartkarma.com/entities/enn-natural-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:16456:1" rel="noopener">ENN Natural Gas (600803 CH)</a> (ENN-NG), its largest shareholder.</li>
<li>The pushback is that the scrip portion pivots off the value of newly-listed ENN-NG H-shares. And the IFA's theoretical assessment on such leaves a lot to be desired.</li>
<li>A redacted version of ENN-NG's application proof is now out. Curiously, the share ratio - new ENN-NG H Shares for each ENN shares - is noticeably absent</li>
</ul>


On the 26th March, ENN Energy (2688 HK) announced a cash/scrip Offer from ENN Natural Gas (600803 CH) (ENN-NG), its largest shareholder.
The pushback is that the scrip portion pivots off the value of newly-listed ENN-NG H-shares. And the IFA's theoretical assessment on such leaves a lot to be desired.
A redacted version of ENN-NG's application proof is now out. Curiously, the share ratio - new ENN-NG H Shares for each ENN shares - is noticeably absent


ENN Energy (2688 HK): ENN Natural Gas' Application Proof Is Out. Interesting For What Is Not Present

<ul>
<li>You might have to go all the back to <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>'s 2012/2013 unconditional cash offer, which was ostensibly blocked by First Eagle AND Elliott Advisors.</li>
<li>Otherwise, it's slim pickings. Past Schemes or Tender Offers arguably failed as minorities were simply not supportive. There are exceptions, like <a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">Soho China (410 HK)</a> and <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">TCM (570 HK)</a>
</li>
<li>IF LVC wish to remain active in this space/region, they appear to be going about it in a counterproductive way. I still don't understand why they would want to block.</li>
</ul>


You might have to go all the back to Guoco Group Ltd (53 HK)'s 2012/2013 unconditional cash offer, which was ostensibly blocked by First Eagle AND Elliott Advisors.
Otherwise, it's slim pickings. Past Schemes or Tender Offers arguably failed as minorities were simply not supportive. There are exceptions, like Soho China (410 HK) and TCM (570 HK)

IF LVC wish to remain active in this space/region, they appear to be going about it in a counterproductive way. I still don't understand why they would want to block.


Henlius (2696 HK): So, When Was The Last Time A PE/VC Outfit Blocked A Deal?

Haitong Securities Co Ltd (H) / Event-Driven

<ul>
<li>Back in March, the CSRC said it aimed to "form two to three investment banks and institutions with international competitiveness and market leadership by 2035".
</li>
<li>Last week's announced merger between China's leading state-backed brokerages, <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> and <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong (6837 HK)</a>, is a move in that direction. Expect more scrip mergers to follow. </li>
<li>There have also been some media reports that the GJS/Haitong terms disadvantage holders of other Hong Kong broker stocks if potentially acquired in a merger. It's not quite that simple. </li>
</ul>


Back in March, the CSRC said it aimed to "form two to three investment banks and institutions with international competitiveness and market leadership by 2035".

Last week's announced merger between China's leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong (6837 HK), is a move in that direction. Expect more scrip mergers to follow. 
There have also been some media reports that the GJS/Haitong terms disadvantage holders of other Hong Kong broker stocks if potentially acquired in a merger. It's not quite that simple. 


Hong Kong

China Traditional Chinese Medicine Co. Limited, through its subsidiaries, manufactures and sells medicine and pharmaceutical products in China.

China Traditional Chinese Medicine (570 HK)

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China Traditional Chinese Medicine (570 HK)