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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/akm-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:7206:1" rel="noopener">Akm Industrial (1639 HK)</a> announced a privatisation offer from Alpha Luck and AKM Meadville at HK$1.82 per scheme share, a 14.47% premium to last full trading day price of HK$1.59. </li>
<li>The key pre-condition is several regulatory approvals which be forthcoming as Alpha Luck is indirectly 100% owned by the SASAC. </li>
<li>The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). We think the offer price is reasonable and the scheme will pass. </li>
</ul>



Akm Industrial (1639 HK) announced a privatisation offer from Alpha Luck and AKM Meadville at HK$1.82 per scheme share, a 14.47% premium to last full trading day price of HK$1.59. 
The key pre-condition is several regulatory approvals which be forthcoming as Alpha Luck is indirectly 100% owned by the SASAC. 
The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). We think the offer price is reasonable and the scheme will pass. 


Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/biel-crystal" target="_blank" data-smartkarma-citation="entities:33919:1" rel="noopener">Biel Crystal (0924581D HK)</a> is looking to raise up to US$2bn in its upcoming Hong Kong IPO. Biel Crystal (BC) is the largest smart device enclosure and module solution provider in terms of shipment value in 2020 with a market share of 17.6%, according to Frost &amp; Sullivan (F&amp;S). BC’s products are used in end products such as smartphones, tablets, smart watches, AR, and VR glasses as well as automobiles.In this note, we will look at the industry landscape and compare BC to other Apple suppliers.We covered the IPO previously in:<ul><li dir="ltr" aria-level="1"><a href="https://www.smartkarma.com/insights/biel-crystal-pre-ipo-cash-flow-generative-business-but-underlying-trend-is-worrying" target="_blank" data-smartkarma-citation="insights:56198" rel="noopener">Biel Crystal (伯恩光学) Pre-IPO - Cash Flow Generative Business but Underlying Trend Is Worrying</a> </li></ul>

Biel Crystal (0924581D HK) is looking to raise up to US$2bn in its upcoming Hong Kong IPO. Biel Crystal (BC) is the largest smart device enclosure and module solution provider in terms of shipment value in 2020 with a market share of 17.6%, according to Frost &amp; Sullivan (F&amp;S). BC’s products are used in end products such as smartphones, tablets, smart watches, AR, and VR glasses as well as automobiles.In this note, we will look at the industry landscape and compare BC to other Apple suppliers.We covered the IPO previously in:Biel Crystal (伯恩光学) Pre-IPO - Cash Flow Generative Business but Underlying Trend Is Worrying 

Biel Crystal (伯恩光学) Pre-IPO - Industry Landscape & Peer Comparison -  Auto Is the Wildcard

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Q2 2020’s selection delivered an average return increase of 54% v’s the MSCI Asia Pacific Index 37.4% over the same period. The GARP-based screen uses a combination of growth and value metrics to identify shares where brokers are forecasting high earnings growth, but which are currently valued at a price that is low relative to their forecast outlook. Whilst Central Banks are providing additional liquidity favouring growth names, our value-based screen is key to delivering positive gains as tapering begins. Q2 2021's screen provides 16 key suggestions.  What makes the current selection interesting is the bias towards Taiwan and India on a country basis and Industrials and Healthcare on a sector basis. Also of particular note, Singapore presents one name on this screen.

Q2 2020’s selection delivered an average return increase of 54% v’s the MSCI Asia Pacific Index 37.4% over the same period. The GARP-based screen uses a combination of growth and value metrics to identify shares where brokers are forecasting high earnings growth, but which are currently valued at a price that is low relative to their forecast outlook. Whilst Central Banks are providing additional liquidity favouring growth names, our value-based screen is key to delivering positive gains as tapering begins. Q2 2021's screen provides 16 key suggestions.  What makes the current selection interesting is the bias towards Taiwan and India on a country basis and Industrials and Healthcare on a sector basis. Also of particular note, Singapore presents one name on this screen.

Screening the Silk Road: Q2-2021 All Cap GARP (Zulu Warrior Screening)

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

China Traditional Chinese Medicine / Event-Driven



For the month of January, 22 new deals were discussed on Smartkarma with an overall announced deal size of ~US$52bn.


Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow up discussions, or simply click on the insight link(s) below the name.





New Deals


Industry


Size (US$bn)


Type


Premium




Australia




Bingo Industries (BIN AU) 
Waste collection
1.8
Scheme
19.8%



Bingo Industries (ASX: BIN): Talking Trash
Bingo Industries (BIN AU): CPE/MIRA's Scavenger Hunt




Hong Kong




China Machinery Engineering (1829 HK) 
Construction
0.4
Merger by Absorption
45.1%



China Machinery Engineering (1829 HK): Possible Offer
China Machinery Engineering (1829 HK): Delisting Offer From Parent




Polytec Asset Holdings (208 HK) 
Real Estate
0.4
Scheme
61.3%


Polytec Asset (208 HK): Offer By Way Of A Scheme



HKC Holdings (190 HK) 
Holding Co.
0.2
Scheme
120.39%



China Renewable Energy (987 HK): Possible Privatisation Offer
HKC (190 HK): Take-Private Offer By Way Of A Scheme




New Century REIT (1275 HK) 
Hospitality
0.25
Scheme-like
14.3%


New Century (1275 HK): Closing Down Sale



Rivera Holdings (281 HK) 
Real estate
0.1
Scheme
62.5%


Rivera (281 HK): Scheme Or Face Delisting



China Traditional Chinese (570 HK) 
TCM
3.0
??
??


Trad Chi Med (570 HK): Sinopharm's Feverish Proposal



Zhejiang New Century Hotel (1158 HK) 
Hospitality
0.65
Merger by Absorption
24.7%


Zhejiang New Century (1158 HK): Pre-Conditional Offer



Zhuhai Holdings Investment (908 HK) 
Ports
0.2
Scheme
37.8%


Zhuhai Holdings (908 HK): Zhuhai SASAC Reloads With Scheme Offer



India




Engineers India (ENGR IN) 
Engineering
0.1
Buyback tender
10%


Hefty Engineers India Buyback Tender - Worth The Arb If You Own



Japan




Tokyo Rope Mfg (5981 JP) 
Wire rope
0.2
Partial
39%



Nippon Steel's HOSTILE Partial Tender Offer for Tokyo Rope: A Move to Mark Territory?
New Money for Old Rope? Gaming Out A Hostile Partial Offer on Tokyo Rope (5981)




Singapore




CEI Limited (CEI SP) 
Electronics
0.1
VGO
16.2%


CEI Limited (CEI SP): Privatization Deal by AEM Holdings (AEM SP) Trading with a View to Complete



GL Ltd (GLL SP) 
Hospitality
0.2
VGO
25.0%


GL Limited (GLL SP): Privatisation Offer Renews Interest In Guoco



Penguin International (PBS SP) 
Boat builder
0.1
VGO
30%


Penguin International (PBS SP): Friendly Privatization Deal Might Need A Bump



Europe




CA Immobilien Anlagen AG (CAI AV) 
Real estate
3.8
Offer
16.9%


CA Immo - Starwood: Mandatory Offer



Carrefour SA (CA FP) 
Convenience
20.0
Merger
29.3%


Carrefour - Alimentation Couche-Tard Non-Binding Offer



Enlabs AB (NLAB SS) 
Sports betting
0.3
Offer
1.1%


Enlabs - Entain Beefing Up



Entain (ENT LN) 
Entertainment
11.0
Offer
22%


MGM's Prospective Offer for Entain



Liberbank SA (LBK SM) 
Financing
0.9
Merger



Liberbank - Unicaja Agreed Merger



Naturgy Energy Group SA (NTGY SM) 
Energy
6.0
Partial offer
20%


IFM Investors to Launch a Partial Hostile Tender Offer for Naturgy



Handicare Group AB (HANDI SS) 
Medi aid
0.4
Offer
22.0%


Handicare - Savaria: Recommended Offer



Tikkurila Oyj (TIK1V FH) 
Paints
1.7
Offer
84.5%


Akzo Nobel Tops PPG's Offer for Tikkurila


Source: Smartkarma Insights




The average premium for the new deals announced (or first discussed) in January was ~35%. This compared to the average premium in 2020 and 2019 of 31% and 31.5% respectively. 




Summary of News in January of Arb Situations On Smartkarma's Radar


(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation. Where a new insight was written on these names in July, I've included a link, in bold, to that insight in italics.)






Australia


Comments (with links to announcements &amp; insights)




3P Learning (3PL AU) 

21-Jan: Non-binding term sheet entered into




amaysim Australia (AYS AU) 

18-Jan:
WAM Capital Ltd (WAM AU) has bumped its Offer for amaysim Australia (AYS AU) to 1 new WAM share for every 2.675 AYS share; or A$0.70/share cash per share, from 1 new WAM share for every 2.7 AYS share; or A$0.695/share cash per share. AYS' largest shareholder, Longfrist with 19.19%, supports WAM's Offer.




Asaleo Care Ltd (AHY AU) 

27-Jan: Independent board rejects non-binding proposal




Cardinal Resources (CDV AU) 

27-Jan: Shandong to compulsory acquire shares. Shares to be cease trading on the 3 Feb




Coca Cola Amatil (CCL AU) 

6-Jan: Coca-Cola Amatil Takeover Offer: A Bump Forthcoming?




Link Administration Holdings (LNK AU) 

3-Jan: SS&amp;C withdraws proposal for Link Administration Holdings (LNK AU).




Regis Healthcare (REG AU) 

20-Jan Washington H. Soul Pattinson and Co. (SOL AU)withdraws




Think Childcare (TNK AU) 

20-Jan: Think Childcare (TNK AU): Bigger Bid by Busy Bees




Vitalharvest Freehold Trust (VTH AU) 

No January update




WPP PLC (WPP LN) 

No January update










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Jingneng Clean Energy (579 HK) 

31-Dec: Beijing Jingneng (579 HK): Doc Out. IFA Says Fair &amp; Reasonable
11-Jan: As expected, SAIF (6.13% of total issued H  shares, and 11.53% of independent H shares; and Goldwind (2.83% &amp; 5.32% respectively) have given letters of intent to support the Offer. 
25-Jan:Quiddity M&amp;A : A Guide To Mergers By Absorption




Car Inc (699 HK) 

7-Jan: Car Inc (699 HK):  Are We Missing Anything?
26-Jan: Car Inc (699 HK):  No, We Are Not Missing Anything




China Logistics Property Holdings (1589 HK) 

18-Jan: Bloomberg is reporting that Blackstone Group Inc., ESR Cayman Ltd., and JD Logistics Inc. are among bidders for control of China Logistics Property Holdings (1589 HK). Meituan (3690 HK) is also reportedly in the mix.




Cowell E Holdings (1415 HK) 

1-Jan: Cowell E Holdings (1415 HK) delays the dispatch of the Composite Doc to the 22 January. 
15-Jan: Doc issued. Fist close is the 5 Feb




Huifu Payment Limited (1806 HK) 

27-Jan: Huifu Payment (1806 HK): Scheme Doc Out. IFA Says Fair




I.T Ltd (999 HK) 

20-Jan: Pre-cons satisfied. 




Shanghai Prime Machinery H (2345 HK) 

11-Jan: Shanghai Prime Machinery H (2345 HK) shareholders approved the merger. 12 Jan was the last day of trading. 




SHK Hong Kong Industries (666 HK) 

No January update




Tonly Electronics Holdings (1249 HK) 

29-Jan: Tonly Electronics (1249 HK): Scheme Doc Out. IFA Says Fair




China Zhongdi Dairy (1492 HK) 

18-Jan:  Zhongdi Dairy (1492 HK): Doc Out. Compulsory Acquisition Afforded










India


Comments (with links to insights)




Allcargo Logistics (AGLL IN) 

No January update




INEOS Styrolution India Limited (INEOS IN) 

No January update




Vedanta Ltd (VEDL IN) 

11-Jan: Vedanta (VEDL IN) Promoter To Launch an Open Offer To Buy More










Japan


Comments (with links to insights)




Cocokara Fine (3098 JP) 
No January update



Honshu Chemical Industry (4115 JP) 

No January update




Japan Asia (3751 JP) 

11-Dec: City Index Eleventh is now 14.91% of the register at Japan Asia (3751 JP).
18-Jan: Murakami Fund's Tender for JAG (3751):  May Be Rangebound Near-Term
26-Jan: Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100% 




Joban Kaihatsu (1782 JP) 

4-Jan: Black Clover today reported they owned 12.29% of Joban Kaihatsu (1782 JP) 
23-Jan: Joban Kaihatsu MBO Price Bumped, Tender Extended: Still Not Rolling In Clover




Keihanshin Building (8818 JP) 

13-Jan Tender offer fails. Funny that. 




Kenedix Inc (4321 JP) 

9-Jan: Kenedix Inc (4321 JP) reported  that SMFL MIrai Partners had completed the Tender Offer for Kenedix shares and ended up with 62.35%
12-Jan: FTSE announced today that it would reduce the weight of Kenedix Inc (4321 JP) in its index from 97.7309% to 34.90958490918% while keeping the share count unchanged at 218,917,200 shares. The change takes place at the close of business on the 14th of January




Medical &amp; Biological Laboratories (4557 JP) 

Delisted 13 January




Pressance Corp (3254 JP) 

17-Jan: Pressance Partial Tender - Almost EVERYONE Tendered




Softbrain (4779 JP) 

Delisted on Jan 19




Tokyo Dome Corp (9681 JP) 

19-Jan: Mitsui Fudosan (8801 JP) announced the results of its Tender Offer for Tokyo Dome Corp (9681 JP). That will trigger an EGM and a resulting squeezeout.  It will also trigger a FTSE and MSCI downweight.




Toa Oil Co Ltd (5008 JP) 

13-Jan: Toa Oil (5008) Tender Offer Update - Looks Bumpity
14-Jan: Cornwall Capital announced it had increased its position in Toa Oil Co Ltd (5008 JP) from 20.86% (as of the last report) to 21.89% (as of the 6th of January). 
28-Jan: Cornwall Capital announced it had increased its position to 22.98%










Malaysia


Comments (with links to insights)




Batu Kawan Bhd (BAK MK) 

No January update




FGV Holdings Bhd (FGV MK) 

26-Jan: FGV (FGB MK): IFA Says Offer Not Fair








New Zealand


Comments (with links to insights and announcements)




Infratil Ltd (IFT NZ) 

28-Jan: Announced a strategic review of 51%-held Trustpower Ltd (TPW NZ) 








Philippines


Comments (with links to insights and announcements)




Lopez Holdings (LPZ PM) 

21-Jan: Tender Offer report despatched. Closing date is the 19 Feb,










Singapore


Comments 




Hi P International (HIP SP) 

No January update




Soilbuild Business Space REIT (SBREIT SP) 

24-Jan: First court hearing to be held on the 8 Feb.








Taiwan


Comments (with links to insights)




Jih Sun Financial (5820 TT) 

6-Jan: Fubon Financial Offer for Jih Sun Gets Even Weirder
7-Jan: Taiwanese news agency CNA has said that the FSC is investigating whether or not Capital Target Limited and its Responsible Officer Derek MD Chen (who I had believed to be the Responsible Person) is indeed the controller of Capital Target Limited.




Thinflex Corp (3144 TT) 

Tender Offer was completed, 100% pro-ration. (Japanese)













Europe/UK


Comments (with links to announcements and insights)




Altice NV A (ATC NA) 


22-Jan: Offer declared unconditional




Calisen PLC (1779730D LN) 


18-Jan: Sche doc issued




Entra ASA (ENTRA NO) 

No January update




KAZ Minerals (KAZ LN) 

25-Jan:  KAZ Minerals




Siltronic AG (WAF GR) 

25-Jan: GlobalWafers Ups Offer for Siltronic




Recipharm AB (RECIB SS) 
28-Jan: Roar bumps Offer



RSA Insurance (RSA LN) 
No January update



Tele Columbus AG (TC1 GR) 
No January update



Veolia Environnement SA (VIE FP) 
11-Jan: Veolia Steps up Pressure on Suez







Last Week in Event SPACE ...



The list of China Military Cos in which US persons are banned from investing continues to be a VERY big deal. It would be best to operate on a "better safe than sorry" basis. If you were not already out of these names, get out as soon as possible. 

Haier Smart Home (600690 CH)'s H/A discount has only been narrower on three trading days in the past year, all of which occurred in the second half of July, ahead of the pre-conditional proposal. to privatise Haier Electronics Group Co (1169 HK).

Avex Inc (7860 JP)'s ToSTNeT-3 stock repurchase would indicate activist Dalton exiting.

Beijing Jingneng Clean Energy (579 HK) is trading wide to terms following the despatch of the Composite Doc.
We still have a very large look-through discount on Naspers (NPN SJ).  As March approaches, the likelihood that investors realise there could be another large offering increases, which could put pressure on Tencent Holdings (700 HK) shares.
Plus, other events, CCASS movements, and Mood Spins.



(This insight covers specific insights &amp; comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)




EVENTS




OFAC Makes a Longer List of Trump Names of China Military Cos
On the 12th of November, newly lame-duck US president Donald Trump signed an Executive Order (Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies) banning investment and capital provision by "US persons" to companies in lists established by the US Department of Defense. New guidance from OFAC has been released. Based on these updates, Travis expects that MSCI, FTSE, and S&amp;P will likely have to delete the major telcos, including China Unicom Hong Kong (762 HK), China Mobile (941 HK), and China Telecom Corp Ltd (H) (728 HK) as well as CNOOC Ltd (883 HK). I expect that they would have to delete China Tower (788 HK) as well because it is more than 50% owned by the three major telcos. Cgn Power Co Ltd H (1816 HK) appears not to be addressed in previous iterations of the index providers lists but I expect it gets the boot. 

Travis estimates roughly 20-25% of the float of major names appears to be held by US persons. And it isn't just index holders who have to sell. Other major fundamental holders ALSO have to sell. This event creates a multitude of problems which need to be addressed. The index holders "have to" sell at the time the names are deleted from the indices.
Hedge funds which would normally buy the dip are stuck too. They have US investors. If they do not, they might be OK, but normally hedge funds which buy the dip also have to sell to someone later, and all US persons may be out of commission for a while. Hedge funds who own long positions or short positions would have to unwind them if they have US persons as fund investors, or as SMA clients. Hedge funds, pensions, and other investors who have long or short positions in futures and options which are linked to these indices will also have to liquidate their positions.


Overall, it is a BIG list of names targeted (Travis has a list of 133 names, most of which appear to be 50+% controlled, which could be affected in portfolios). Investors would do well to understand how much of the float is for sale.



(link to Travis' insight: OFAC Makes a Longer List of Trump Names of China Military Cos)




SHARE CLASS





Haier Smart Home (600690 CH) (HSH) / Haier Smart Home Co Ltd (6690 HK) 

On the 31 July this year, Haier Electronics Group Co (1169 HK) (HEG) announced a pre-conditional Scheme such that HEG shareholders would receive 1.6 new HSH H shares plus HK$1.95 in cash.  HEG's shares were suspended on the 11 December subsequent to its privatisation, with an implied look-through discount for HSH's H shares to the As of  30.4%. The Hs received by HEG shareholders commenced trading under the code Haier Smart Home Co Ltd (6690 HK) on the 23 December with a closing discount to the As of 22.1%. It was 21.6% at the time of my insight. This is not sustainable. 




What is a "fair" discount for the Hs? The mid-point price from the independent valuer of $38.03 - see page 75 - implied a 32% discount - H to the As. The average A/H premium for the Hang Seng Stock Connect China AH Premium Index is currently ~43%, or a ~31% discount. 
Key peer Hisense Home Appliances Group Co., Ltd. H (921 HK) is trading at a ~37% discount to  Hisense Kelon Electrical-A (000921 CH) versus a one-year average of 32%. 


A  basket of liquid A/Hs trade at a 44% discount and one of HSH's closest peers is at 37%. The implied discount via the independent advisor was 32%.


The trade here is to short the Hs and go long the As, with a target discount of at least 30%. 



(link to my insight: Haier Smart Homes (6690 HK): H-Shares Trading Tight To A-Shares)




M&amp;A - ASIA





China Logistics Property Holdings (1589 HK) (CLPH) (Mkt Cap: $1.7bn; Liquidity: $1mn)




CLPH has announced its two largest shareholders - Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~22.8%) - are "conducting a preliminary strategic review of their stakes in the Company, which involves up to approximately 51.5% shareholding of the Company." The media is reporting these two shareholders are seeking a 20% premium to the unaffected price or around ~$4.70/share, roughly a four-year high. A sale could potentially trigger an unconditional mandatory general offer; or it may be structured by way of a Scheme in which Li/RRJ provide irrevocables to vote in favour of the delisting resolutions.


 CLPH is trading at a FY20E/FY21E EV/EBITDA of 35x/31x vs. 20x/18x for peers.  CLPH has consistently traded at a premium to peers on an EV/EBITDA metric. Daniel Hellberg analyses CLPH's EV/portfolio (the book value of property, equity investments, PP&amp;E). A further 20-25% upside from here places CLPH EV/portfolio at ~1x versus 1.2x for GLP at the time of its privatisation.
This is, as yet, a pre-event. There is no guarantee an Offer is forthcoming. Yet the company is very much in play, one that is likely to garner considerable interest from prospective suitors given the scarcity of logistic asset disposals. I would be buying the dips here, with a possible fair value range of $4.75-HK$5.00.





links to: Daniel Hellberg's insight: Major Shareholders of CLPH (1589:HK) Selling! Revisiting Narrative &amp; Valuations my insight: China Logistics (1589 HK): Possible Offer As Major Shareholders Seek Exit


Avex Inc (7860 JP) (Mkt Cap: $0.5bn; Liquidity: $3mn)

On 28 December, Avex announced that it would buy back up to 2.7mm shares at a price of ¥1,078/share in a ToSTNeT-3 stock repurchase transaction. This appears to be activist Dalton exiting.

Given the pro-forma financials for March-end, you could not pay Travis Lundy to be short this company. There was a sharp pop on shares on the 25th after the news and the stock traded significant volume, but it opened high and then fell. There were sellers. 
Travis expects the company will have significant enough cash to pay off all debt and buy back a lot more shares should it want to do so.  While numerous commentators have mourned the slow-moving death of Japanese pop, Avex is so ubiquitous that he would expect the company to have considerable staying power on the music scene. Travis would buy here. 




(link to Travis' insight: Avex (7860) ToSTNeT-3 Buyback After HUGE News)

Beijing Jingneng Clean Energy (579 HK)  (Mkt Cap: $2.7bn; Liquidity: $2mn)
The Composite Doc is now out. Beginning on page 29, Gram Capital (IFA) traversed familiar ground in concluding the Offer was fair and reasonable. Gram analysed 10 peers (with an average PER and P/B of 6.87x and 0.48x vs. 9.05x and 0.81x for Jingneng under the Offer) and past privatization (for all industries, not energy specifically). Gram also flagged Jingneng's issue obtaining equity financing. This was also used as one of the reasons for the H-share Offer and delisting.

The EGM/H-share class meeting will be held on the 19 February, following which the Offer will remain open to acceptance up until the 1 March.  Payment under the Offer is expected on or before the 10 March. 96.43% of shares out are in CCASS, which should assist the bankers in rustling up shareholders to tender once the delisting is (or should be) approved at the H-class meeting. 
Trading (at the time of the insight) at a gross/annualised spread of 6.3%/38.1%, assuming payment on the 10 March. The tendering condition is the key risk, as seen in the Harbin Electric Co Ltd H (1133 HK)  fiasco. However, this appears a solid entry point.
This is the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control since last year - and seventh in which interested parties have been circling. This Offer continues a clear directive to privatise clean energy plays. Some other possible names which could be targeted next include China Datang Corp Renewable Power (1798 HK).

(link to my insight: Beijing Jingneng (579 HK): Doc Out. IFA Says Fair &amp; Reasonable)







STUBS






Naspers (NPN SJ) / Prosus (PRX NA) / Tencent Holdings (700 HK) 


Back on the 30 October, Prosus announced it would conduct a US$5bn buyback of Prosus shares and Naspers shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). This was discussed at length by Travis Lundy in Naspers &amp; Prosus - A $5bn Catalyst Arrives. The buyback of Prosus shares and Naspers shares wasn't a lot in the grand scheme of things, but $5bn is $5bn, and the Naspers discount was quite wide. Prosus' discount to NAV has subsequently narrowed to ~23% (at the time of the insight), from a pre-buyback discount of 38%. 

The three-year anniversary of the sale of shares of Tencent is coming up in March, just before the fiscal year-end. That means Prosus/Naspers comes off lockup and could sell more shares of Tencent. There is nothing keeping Prosus from selling another US$10-15bn of Tencent (the position is currently worth US$211bn) and locking themselves up for another year, then continuing to buy Naspers and Prosus shares at a wide-ish discount. 
Stay long Naspers vs Tencent at the current look-through value. I would expect Tencent's operations to come under greater scrutiny, under a wider regulatory mandate.
If Naspers+Prosus decide to sell some more Tencent in late March 2021 while the Naspers discount is still 50%, I would expect that Naspers+Prosus might decide to buy more Naspers shares back rather than pay too much for something. 




(link to my insight: StubWorld: Tencent Under Pressure From Antitrust Push) 





TOPIX INCLUSIONS!






Odk Solutions (3839 JP) (Mkt Cap: $0.1bn; Liquidity: &lt;$1mn)  


after the close on 22nd December 2020, ODK announced they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 29th December 2020.  TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. 


Janaghan Jeyakumar, CFA estimates the Inclusion quantity to be 615,000-738,000 shares. This translates to an Inclusion Size of ¥0.45-0.54bn and an Impact of 24-28 days of volume based on 3-month ADV.
According to the company's most recent "Long-term Management Plan" the company's revenue target for FY22E is ¥7bn which is 36% higher than their FY20A revenue. This translates to a revenue CAGR of ~16.6% from FY20A to FY22E. Going by FY20A numbers, the current price translates to EV/Revenue and EV/EBITDA multiples of 0.8x and 4.6x, respectively, which are significantly lower than the estimated average for peers. 
Janaghan would be Bullish until the Inclusion Date (28th January 2021).




(link to Janaghan's insight: TOPIX Inclusion: ODK Solutions (3839 JP): High Impact BLUE Name) 


In  TOPIX Inclusion Trade Summary: Dec 2020, Janaghan provided performance updates for 11 "Live" event stocks which are expected to have Inclusion Events at the end of January 2021 and 6 "Post" event stocks that completed their Inclusion Events at the end of November 2020 and December 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 





M&amp;A - EUROPE




On 18 December, Castellum AB (CAST SS) increased its bid for Entra ASA (ENTRA NO) by 13.9% to NOK 185/share in cash and shares. On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share. SBB's bid also offers a larger cash component. In Entra - SBB - Castellum: Bidding War Heats Up, Jesus Rodriguez Aguilar recommends a long in Entra. 




H/A MONITOR





The previous week saw a gentle rebound in Quiddity H/A Share Recommendations (mixed long/short the spreads). Spread momentum continues to rule the day in most sectors, but finally not all. There were 54 delta-neutral spread recommendations which gained 0.97% on average. We have ~50 spread recommendations for this past week.



(link to Travis' insight: Quiddity H/A: National Team Buys Continue in Industrials; Recos Gain 97bp, 50 Recos This Week)





M&amp;A - 2020 ROUND-UP





The average premium for the new deals announced (or first discussed) in December was ~27% and the YTD average premium for all deals discussed on Smartkarma (158 all-in) is ~31%.  The average for all deals discussed on Smartkarma in 2019 (145 deals all-in) was, coincidentally, 31.5%.
(link to my insight: (Mostly) Asia M&amp;A: 2020 Roundup)





OTHER M&amp;A &amp; EVENT UPDATES







WPP AUNZ (WPP AU) has entered into a Scheme Implementation Deed with WPP PLC (WPP LN).
Shandong now holds 61.54% in Cardinal Resources (CDV AU).

Nitori Holdings (9843 JP) announced that it had successfully completed the Tender Offer for Shimachu Co Ltd (8184 JP), gaining 77.04% of the shares outstanding. This is lower than I expected, but it will allow them to squeeze out minorities. 


Noted activist (or noisy engagement investor) Asset Value Investors announced today that it had gone from 6.03% holding in Kanaden Corp (8081 JP) to 0.74%  by selling 1.4mm shares (4.91%) of the company at JPY 1260/share.  


The bidder for Joban Kaihatsu (1782 JP) announced a change in the end date for the Tender Offer, changing the end date from 28 December 2020 to 25 January 2021.


Eco World Development (ECW MK) and Uem Sunrise Bhd (UEMS MK) are exploring the feasibility of a merger. 

Cowell E Holdings (1415 HK) delays the dispatch of the Composite Doc to the 22 January. 



CCASS


My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 


Often these moves can easily be explained - the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.   






Name


% chg


Into


Out of




Coolpad (2369 HK) 
13.74%
Chiyu
Kingkey



360 Ludashi (3601 HK) 
30.76%
China Int'l
Outside CCASS



China Tontine Wines (389 HK) 
14.90%
CNI
Yuet Sheung



China Regenerative Medicine (8158 HK) 
10.25%
Prime
Outside CCASS


K Group (8475 HK)
34.37%
Sun Int'l
Quasar


Source: HKEx 




The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.





Name


% chg


Into


Out of



Wenling (1379 HK)
29.15%
Realord
Outside of CCASS


Source: HKEx 








Last Week in Event SPACE: OFAC's Longer List, Haier, Avex, Beijing Jingneng, Naspers/Tencent

Hong Kong

Cowell e Holdings Inc, is a holding company, which operates electronics and optical components manufacturing entities. The products include camera modules, optical lens and prisms.

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Cowell E Holdings (1415 HK)

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