Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Thematic (Sector/Industry)

<ul>
<li>Seeing as though it is Chinese New Year week, I thought it might be appropriate to conduct a brief analysis of US-listed China plays.</li>
<li>According to a recent US-China Economic and Security Review Commission report, 265 Chinese companies were listed on the NYSE, Nasdaq and NYSE American exchanges in January 2024 worth US$848bn. </li>
<li>That's down from 252 companies worth US$1.03tn a year ago, a 17.5% decline. 91% of the total market capitalization of Chinese firms listed on U.S. exchanges use VIEs.</li>
</ul>


Seeing as though it is Chinese New Year week, I thought it might be appropriate to conduct a brief analysis of US-listed China plays.
According to a recent US-China Economic and Security Review Commission report, 265 Chinese companies were listed on the NYSE, Nasdaq and NYSE American exchanges in January 2024 worth US$848bn. 
That's down from 252 companies worth US$1.03tn a year ago, a 17.5% decline. 91% of the total market capitalization of Chinese firms listed on U.S. exchanges use VIEs.


Event-Driven

<ul>
<li>Chinese Internet data center services provider <a href="https://www.smartkarma.com/entities/21-vianet-group-inc-adr" target="_blank" data-smartkarma-citation="entities:8489:1" rel="noopener">21Vianet Group (VNET US)</a> has recently received a non-binding proposal letter from the Hina Group and Shanghai's Industrial Bank Co. </li>
<li>The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.</li>
<li>The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.</li>
</ul>


Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai's Industrial Bank Co. 
The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.


<ul>
<li>The SEC has finalised the Holding Foreign Companies Accountable Act rules. Under the current timeframe, the SEC may force the delisting of foreign companies in three years if in contravention.</li>
<li>Amid <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>'s intention to delist from the US, the CSRC refutes it is pushing for VIEs to drop their listings in the United States.</li>
<li>Expect continued volatility as the ~248 US-listed China plays seek to avoid delisting if they don’t comply with auditing rules.</li>
</ul>


The SEC has finalised the Holding Foreign Companies Accountable Act rules. Under the current timeframe, the SEC may force the delisting of foreign companies in three years if in contravention.
Amid DiDi Global (DIDI US)'s intention to delist from the US, the CSRC refutes it is pushing for VIEs to drop their listings in the United States.
Expect continued volatility as the ~248 US-listed China plays seek to avoid delisting if they don’t comply with auditing rules.


Delisting Chinese ADRs: High Foreign-Holding, With No Fixed Abode, Most At Risk

<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

United States

Hollysys Automation Technologies Ltd. manufactures automation and control systems.  The Company produces process, industrial, rail and subway, and nuclear power plant automation equipment.

Hollysys Automation Technologies (HOLI US)

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Hollysys Automation Technologies (HOLI US)

Musings On US-Listed China Plays

Investors in Chinese companies may be willing to support activities that are contrary to US national interests, including technology used for...

David Blennerhassett

Hina/IBC's Non-Binding Proposal For VNET

Shandong Hi-Speed Holdings (412 HK) is investing US$299mn (@US$0.497/share) in VNET to take a 42.12% stake on a fully diluted basis, and 35.7% of...

David Blennerhassett

Delisting Chinese ADRs: High Foreign-Holding, With No Fixed Abode, Most At Risk

This does not strike me as the time to be bargain hunting. Not when there remains confusion as to how and when delistings will unfold. The focus...

David Blennerhassett

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

The average premium for the new transactions announced (or first discussed) in July was ~31%. The average premium YTD is ~44%.

David Blennerhassett

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

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

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