Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>After watch accessory play <a href="https://www.smartkarma.com/entities/hengdeli-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15178:1" rel="noopener">Hengdeli Holdings (3389 HK)</a> was suspended on the 17th June pursuant to the Takeovers Code, I didn't hold out high hopes of a knock-out Offer.</li>
<li>And on cue, CEO Tony Cheung (16%), son of founder Zhang Yuping (holding 17%), has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0620/2024062001397.pdf" target="_blank" rel="noopener">made a Partial Offer</a> (for 15% of shares outstanding) at HK$0.16/share, towards gaining majority control.</li>
<li>That's a 18.5% premium to last close ... and a 80% discount to NAV, and a 47% discount to Hengdeli's net cash as at 31 December 2023.</li>
</ul>


After watch accessory play Hengdeli Holdings (3389 HK) was suspended on the 17th June pursuant to the Takeovers Code, I didn't hold out high hopes of a knock-out Offer.
And on cue, CEO Tony Cheung (16%), son of founder Zhang Yuping (holding 17%), has made a Partial Offer (for 15% of shares outstanding) at HK$0.16/share, towards gaining majority control.
That's a 18.5% premium to last close ... and a 80% discount to NAV, and a 47% discount to Hengdeli's net cash as at 31 December 2023.


Hengdeli Holdings (3389 HK)'s Pitiful Partial Offer

<ul>
<li>Watch accessory play <a href="https://www.smartkarma.com/entities/hengdeli-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15178:1" rel="noopener">Hengdeli Holdings (3389 HK)</a> is currently<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0617/2024061700059.pdf" target="_blank" rel="noopener"> suspended</a> pursuant to the Takeovers Code.</li>
<li>Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or <a href="https://www.smartkarma.com/entities/swatch-group-ag" target="_blank" data-smartkarma-citation="entities:22591:1" rel="noopener">Swatch Group (UHR SW)</a> (9.94%) may table an Offer. My money is on Zhang.</li>
<li>This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn - as at 31 December 2023 - against a market cap of HK$0.59bn.</li>
</ul>


Watch accessory play Hengdeli Holdings (3389 HK) is currently suspended pursuant to the Takeovers Code.
Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or Swatch Group (UHR SW) (9.94%) may table an Offer. My money is on Zhang.
This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn - as at 31 December 2023 - against a market cap of HK$0.59bn.


Hengdeli Holdings (3389 HK): Negative EV Play Halted

<ul>
<li>Back on the 19th July, online Q&amp;A play <a href="https://www.smartkarma.com/entities/zhihu-inc" target="_blank" data-smartkarma-citation="entities:36660:1" rel="noopener">Zhihu (2390 HK/</a><a href="https://www.smartkarma.com/entities/zhihu-technology-ltd" target="_blank" data-smartkarma-citation="entities:32185:1" rel="noopener">ZH US)</a> announced the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0719/2024071901181.pdf" target="_blank" rel="noopener">buyback</a> of 46.92mn ordinary A shares (15.9% of shares out) at HK$9.11/share (US$3.50/ADS). </li>
<li>Assuming the buyback is fully taken up, chairman Yuan Zhou's stake will increase to 44.4% from 42.9% currently (held via A shares and the weighted-voting B shares). </li>
<li>The key condition is a simple majority vote from independent shareholders. Zhihu is sitting on  net cash of US$764mn. A significantly larger buyback, or higher price, could have been initiated. </li>
</ul>


Back on the 19th July, online Q&amp;A play Zhihu (2390 HK/ZH US) announced the buyback of 46.92mn ordinary A shares (15.9% of shares out) at HK$9.11/share (US$3.50/ADS). 
Assuming the buyback is fully taken up, chairman Yuan Zhou's stake will increase to 44.4% from 42.9% currently (held via A shares and the weighted-voting B shares). 
The key condition is a simple majority vote from independent shareholders. Zhihu is sitting on  net cash of US$764mn. A significantly larger buyback, or higher price, could have been initiated. 


<ul>
<li>For the month of July 2024, 11 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.</li>
<li>The average premium for the new transactions announced (or first discussed) in July was ~31%. The average premium YTD is ~44%.</li>
<li>This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.</li>
</ul>


For the month of July 2024, 11 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
The average premium for the new transactions announced (or first discussed) in July was ~31%. The average premium YTD is ~44%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.


(Mostly) Asia M&A, July 2024: Canvest, Furukawa, Arvida, Advanced Info, Sermsuk, Thaicom

<ul>
<li>Expect True Wind to walk away rather than raising their price further for <a href="https://www.smartkarma.com/entities/sun-corp" target="_blank" data-smartkarma-citation="entities:10803:1" rel="noopener">Sun Corp (6736 JP)</a>. They'd need to pay ¥5,500-5,800 to dislodge a large chunk. And they won't.</li>
<li>
<a href="https://www.smartkarma.com/entities/amorepacific-group" target="_blank" data-smartkarma-citation="entities:12179:1" rel="noopener">Amorepacific Group (002790 KS)</a> plumbs new discount lows as <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS) </a> gets a boost from Amazon Prime Day.</li>
<li>
<a href="https://www.smartkarma.com/entities/canon-marketing-japan-inc" target="_blank" data-smartkarma-citation="entities:3866:1" rel="noopener">Canon Marketing Japan (8060 JP)</a> is still significantly under-levered. That means the stock price will generically not be that volatile. That generally means one should buy dips and sell pops.</li>
</ul>


Expect True Wind to walk away rather than raising their price further for Sun Corp (6736 JP). They'd need to pay ¥5,500-5,800 to dislodge a large chunk. And they won't.

Amorepacific Group (002790 KS) plumbs new discount lows as Amorepacific Corp (090430 KS)  gets a boost from Amazon Prime Day.

Canon Marketing Japan (8060 JP) is still significantly under-levered. That means the stock price will generically not be that volatile. That generally means one should buy dips and sell pops.


Last Week in Event SPACE: Sun Corp, Amorepacific, Canon Marketing, Jeisys Medical

Hong Kong

Hengdeli Holdings Limited, through its subsidiaries, retails and wholesales international brand watches in China.

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Hengdeli Holdings (3389 HK)