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

<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.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). <div class="content-highlight">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. </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. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, JD.com

Equity Bottom-Up

On the 25 October 2013, <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") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2013/1025/ltn20131025786.pdf" target="_blank" rel="noopener">announced</a> an agreement with Yue Xiu (the investment arm of the Guangzhou municipal government) to acquire a maximum of 75% of the bank for a consideration of HK$11.5bn (HK$35.7/share, a 2.1x P/B).  The deal was subject to approval from the HKMA. It was Yue Xiu's intention to maintain the bank's listing.
That Offer was widely seen as supportive for the remaining family-owned banks in Hong Kong 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>, <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 Wing Hang Bank, the latter of 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>.
The partial Offer for CHB closed on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2014/0205/ltn201402051310.pdf" target="_blank" rel="noopener">5 February 2014</a>. Shares closed yesterday at HK$10.56/share (and 0.4x P/B), down ~70% from the Partial Offer Price. BEA and DSB have similarly languished, down 33% and 42% respectively in the last five years.
<h3>The New News</h3>
CHB was suspended at <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0506/2021050600453.pdf" target="_blank" rel="noopener">10.45am</a> this morning, but not before gaining 30% to close at HK$13.76/share. That's worth a second look.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/204/617/original/image_68039818121620283783177.png?1620283785" class="editor-image img-responsive" data-smartkarma-image-id="204617"></figure>

On the 25 October 2013, Chong Hing Bank (1111 HK) ("CHB") announced an agreement with Yue Xiu (the investment arm of the Guangzhou municipal government) to acquire a maximum of 75% of the bank for a consideration of HK$11.5bn (HK$35.7/share, a 2.1x P/B).  The deal was subject to approval from the HKMA. It was Yue Xiu's intention to maintain the bank's listing.
That Offer was widely seen as supportive for the remaining family-owned banks in Hong Kong such as Bank of East Asia (23 HK), Dah Sing Banking (2356 HK), and Wing Hang Bank, the latter of which was taken out by OCBC (OCBC SP) in 2014 at 1.81x P/B in a US$4.9bn deal.
The partial Offer for CHB closed on the 5 February 2014. Shares closed yesterday at HK$10.56/share (and 0.4x P/B), down ~70% from the Partial Offer Price. BEA and DSB have similarly languished, down 33% and 42% respectively in the last five years.
The New News
CHB was suspended at 10.45am this morning, but not before gaining 30% to close at HK$13.76/share. That's worth a second look.


Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Executive Summary:  Rapidly rising interest rates present a challenge for credit to generate positive total returns. Unfortunately, the upward sloping sawtooth pattern of rising US interest rates ended the month on an upswing. Credit spreads needed to compress by as much to generate positive total returns. Only a small handful of Asia’s US$-denominated bank bonds (x-Japan) managed to generate positive total returns during the month of March. This was concentrated in a select sweet spot.Long duration, low investment grade rated, and high BB rated bonds led tightening over the month. Lower risk tolerance, as evidenced by the rating preferences, combined with duration desires to drive performance in March, as in February. One differentiating factor between March and February is the concentration amongst Thai- and South Korean-headquartered banks during March; however, these institutions are also the largest issuers of longer duration bank paper in Asia. As such, we see this as more of a duration, than a country story.From a pure credit spread perspective, ignoring movements in the risk-free rate, Asia’s bank bonds had an outstanding month with each of the +100 bonds that we track tightening during the month. Global monetary accommodation is in large part responsible for this spread compression. Credit fundamentals have yet to catch-up. Continued tightening, however, cannot be ruled out as credit tourists crowd-in and markets melt-up. Unfortunately for most, the recent tightening did not exceed the speed with which interest rates rose.Q1 2021 was a tough quarter for real money asset managers. We anticipate that US interest rates will continue to climb higher and may even accelerate their upward trajectory. If the trend is your friend and longer duration bonds continue to outperform, the risk is that of buying a bond which either has a higher level of volatility or is fully priced. With South Korean long-dated Senior Unsecured notes trading just north of 100 basis points (bps), it is hard to imagine these notes continuing to compress faster than interest rates. Asset managers may need to consider more subordinated, higher yielding notes to generate positive total returns over the near term. Investors will likely be pushed towards lower rated Additional Tier 1 (AT1) bonds in April / May to achieve positive total returns. Security selection may become more important.

Executive Summary:  Rapidly rising interest rates present a challenge for credit to generate positive total returns. Unfortunately, the upward sloping sawtooth pattern of rising US interest rates ended the month on an upswing. Credit spreads needed to compress by as much to generate positive total returns. Only a small handful of Asia’s US$-denominated bank bonds (x-Japan) managed to generate positive total returns during the month of March. This was concentrated in a select sweet spot.Long duration, low investment grade rated, and high BB rated bonds led tightening over the month. Lower risk tolerance, as evidenced by the rating preferences, combined with duration desires to drive performance in March, as in February. One differentiating factor between March and February is the concentration amongst Thai- and South Korean-headquartered banks during March; however, these institutions are also the largest issuers of longer duration bank paper in Asia. As such, we see this as more of a duration, than a country story.From a pure credit spread perspective, ignoring movements in the risk-free rate, Asia’s bank bonds had an outstanding month with each of the +100 bonds that we track tightening during the month. Global monetary accommodation is in large part responsible for this spread compression. Credit fundamentals have yet to catch-up. Continued tightening, however, cannot be ruled out as credit tourists crowd-in and markets melt-up. Unfortunately for most, the recent tightening did not exceed the speed with which interest rates rose.Q1 2021 was a tough quarter for real money asset managers. We anticipate that US interest rates will continue to climb higher and may even accelerate their upward trajectory. If the trend is your friend and longer duration bonds continue to outperform, the risk is that of buying a bond which either has a higher level of volatility or is fully priced. With South Korean long-dated Senior Unsecured notes trading just north of 100 basis points (bps), it is hard to imagine these notes continuing to compress faster than interest rates. Asset managers may need to consider more subordinated, higher yielding notes to generate positive total returns over the near term. Investors will likely be pushed towards lower rated Additional Tier 1 (AT1) bonds in April / May to achieve positive total returns. Security selection may become more important.

Bank Credit Compass: Positive Total Return Sweet Spot

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see <a href="https://www.smartkarma.com/insights/credit-suisse-greensill-sows-reputation-risks-underweight-cs-bonds" target="_blank" data-smartkarma-citation="insights:48839" rel="noopener">Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds</a> for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" data-smartkarma-citation="insights:48133" rel="noopener">Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position</a> for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Bank Credit Weekly: One Size Does Not Fit All

Hong Kong

Chong Hing Bank Limited provides banking and related services.  It operates branches in Hong Kong, China, and the United States.

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

Chong Hing Bank (1111 HK)

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

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, 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