Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Machinery Engineering / Event-Driven

<p><a href="https://www.smartkarma.com/entities/china-machinery-engineering-corp" target="_blank" data-smartkarma-citation="entities:10998:1" rel="noopener">China Machinery Engineering (1829 HK)</a>'s (CMEC) shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0108/2021010701436.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading this morning  "<em>pursuant to The Codes on Takeovers and Mergers which constitute inside information of the Company</em>".</p>
<p>CMEC is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against) for the H shares. Such an Offer may or may not require an additional tendering acceptance condition.</p>
<p>CMEC's ultimate controlling shareholder is state-owned Chinese National Machinery Industry Corporation, also known as SINOMACH, which holds 77.99% of shares out, via CMEC's domestic shares. SINOMACH holds no H shares. </p>
<p>CMEC is up 56.4% since the 29 December, on larger-than-average volume.</p>
<p>Funny that.</p>
<p>The most interesting facet attached to CMEC is that it has (adjusted) net cash of HK$8.8bn as at 30 June 2020, compared to market cap of HK$10.5bn.  Should a firm offer unfold, it is doubtful it will fully reflect the underlying business in addition to that cash pile.</p>
<p>More below the fold.</p>

China Machinery Engineering (1829 HK)'s (CMEC) shares were suspended ahead of trading this morning  "pursuant to The Codes on Takeovers and Mergers which constitute inside information of the Company".
CMEC is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against) for the H shares. Such an Offer may or may not require an additional tendering acceptance condition.
CMEC's ultimate controlling shareholder is state-owned Chinese National Machinery Industry Corporation, also known as SINOMACH, which holds 77.99% of shares out, via CMEC's domestic shares. SINOMACH holds no H shares. 
CMEC is up 56.4% since the 29 December, on larger-than-average volume.
Funny that.
The most interesting facet attached to CMEC is that it has (adjusted) net cash of HK$8.8bn as at 30 June 2020, compared to market cap of HK$10.5bn.  Should a firm offer unfold, it is doubtful it will fully reflect the underlying business in addition to that cash pile.
More below the fold.

China Machinery Engineering (1829 HK): Possible Offer

Beijing Jingneng Clean Energy / Event-Driven

<div>
<p>On the 17 November, <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/2020111701054.pdf" target="_blank" rel="noopener">announced</a> a voluntary conditional offer at HK$2.70/share, a 70.89% premium to the undisturbed price. The Offer price is final. No dividends are expected during the Offer period.</p>
</div>
<div>
<p>Jingneng is PRC-incorporated therefore there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via a Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against). Additionally, as this is a "<em>voluntary conditional offer</em>", a tendering condition of 90% is also present.</p>
</div>
<div>
<p>At the time, I thought the Offer looked done. I still think that. And in today's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1231/2020123100105.pdf" target="_blank" rel="noopener">Composite Document</a>, the IFA reckons the Offer is fair and reasonable.</p>
<p>The H-share class meeting is scheduled for the 19 February with an expected payment under the Offer on the 10 March. </p>
</div>
<div>
<p>More below the fold.</p>
</div>


On the 17 November, Beijing Jingneng Clean Energy (579 HK) announced a voluntary conditional offer at HK$2.70/share, a 70.89% premium to the undisturbed price. The Offer price is final. No dividends are expected during the Offer period.


Jingneng is PRC-incorporated therefore there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via a Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against). Additionally, as this is a "voluntary conditional offer", a tendering condition of 90% is also present.


At the time, I thought the Offer looked done. I still think that. And in today's Composite Document, the IFA reckons the Offer is fair and reasonable.
The H-share class meeting is scheduled for the 19 February with an expected payment under the Offer on the 10 March. 


More below the fold.


Beijing Jingneng (579 HK): Doc Out. IFA Says Fair & Reasonable

<div>
<p>Following a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0703/2020070300108.pdf" target="_blank" rel="noopener">suspension</a> on the 3 July this year pursuant to the Code on Takeovers and Mergers, <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a>, an SOE utility, subsequently <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0706/2020070602025.pdf" target="_blank" rel="noopener">announced</a> it had received a letter from Beijing Energy Holdings (BEH), its controlling shareholder, of an intention to make a Conditional General Offer.</p>
<p>Late last night, a voluntary conditional offer was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/2020111701054.pdf" target="_blank" rel="noopener">announced</a> at HK$2.70/share, a 70.89% premium to the undisturbed price. The Offer price is final. No dividends are expected during the Offer period.</p>
<p>Jingneng is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via a <em>Merger by Absorption</em>, incorporating a Scheme-like vote (≥ 75% for, ≤10% against). Additionally, as this is a "voluntary conditional offer", a tendering condition of 90% is also present.</p>
<p>This looks done. There is just a question mark over timing.</p>
<p>More below the fold.</p>
</div>


Following a suspension on the 3 July this year pursuant to the Code on Takeovers and Mergers, Beijing Jingneng Clean Energy (579 HK), an SOE utility, subsequently announced it had received a letter from Beijing Energy Holdings (BEH), its controlling shareholder, of an intention to make a Conditional General Offer.
Late last night, a voluntary conditional offer was announced at HK$2.70/share, a 70.89% premium to the undisturbed price. The Offer price is final. No dividends are expected during the Offer period.
Jingneng is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via a Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against). Additionally, as this is a "voluntary conditional offer", a tendering condition of 90% is also present.
This looks done. There is just a question mark over timing.
More below the fold.


Beijing Jingneng (579 HK): Privatisation Offer From Parent

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.

<p><a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a>/BJCE is the largest gas-fired heat and power supplier in Beijing and the leading wind power operator in China. After market close, BJCE announced a conditional voluntary cash general offer from Beijing Energy Holding, the controlling shareholder. Beijing Energy Holding will offer HK$2.70 in cash for each H-share, a premium of 11.57% to the last close price of HK$2.42 per H-share and a premium of 70.89% to the unaffected price of HK$1.58 per H-share (6 July prior to the announcement of a possible privatisation bid). This potential privatisation joins a list of recent SOE privatisations of clean energy companies - <a href="https://www.smartkarma.com/entities/huadian-fuxin-energy-corp-ltd" target="_blank" data-smartkarma-citation="entities:59:1" rel="noopener">Huadian Fuxin Energy Corp (816 HK)</a>,  <a href="https://www.smartkarma.com/entities/huaneng-renewables-corp-h" target="_blank" data-smartkarma-citation="entities:7542:1" rel="noopener">Huaneng Renewables Corp H (958 HK)</a> and CP Clean Energy.</p><div class="content-highlight"><p>The key condition precedent will be approval by at least 75% disinterested H-shareholders (&lt;10% of all disinterested H-shareholders rejection) and minimum acceptance of at least 90% of H-shares held by disinterested H-shareholders. Due to an attractive offer price, we think that offer will garner enough acceptances to become unconditional.  </p></div>

Beijing Jingneng Clean Energy (579 HK)/BJCE is the largest gas-fired heat and power supplier in Beijing and the leading wind power operator in China. After market close, BJCE announced a conditional voluntary cash general offer from Beijing Energy Holding, the controlling shareholder. Beijing Energy Holding will offer HK$2.70 in cash for each H-share, a premium of 11.57% to the last close price of HK$2.42 per H-share and a premium of 70.89% to the unaffected price of HK$1.58 per H-share (6 July prior to the announcement of a possible privatisation bid). This potential privatisation joins a list of recent SOE privatisations of clean energy companies - Huadian Fuxin Energy Corp (816 HK),  Huaneng Renewables Corp H (958 HK) and CP Clean Energy.The key condition precedent will be approval by at least 75% disinterested H-shareholders (&lt;10% of all disinterested H-shareholders rejection) and minimum acceptance of at least 90% of H-shares held by disinterested H-shareholders. Due to an attractive offer price, we think that offer will garner enough acceptances to become unconditional.  

Beijing Jingneng Clean Energy’s Voluntary Conditional Offer

AviChina Industry & Technology H / Event-Driven

<p>Civil-aviation and defense play <a href="https://www.smartkarma.com/entities/avichina-industry-tech-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">Avichina Industry &amp; Tech H (2357 HK)</a> is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.</p>
<p>In the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0918/2020091800348.pdf" target="_blank" rel="noopener">2020 interim report</a>, AviChina stated:</p>
<blockquote>
<p>During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.</p>
</blockquote>
<div data-v-e1aeccf8="">
<h3>The Fifth Plenum</h3>
<p data-v-d6b361f8="" data-v-e1aeccf8="">China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.</p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. </p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">Concurrent with China's "dual circularity" development - discussed in <em><a href="https://skr.ma/ANkER" target="_blank" rel="noopener">China's Dual Circulation: Hedged Integration</a></em> - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.</p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. </p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">More below the fold.</p>
</div>

Civil-aviation and defense play Avichina Industry &amp; Tech H (2357 HK) is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.
In the 2020 interim report, AviChina stated:

During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.


The Fifth Plenum
China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.
One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. 
Concurrent with China's "dual circularity" development - discussed in China's Dual Circulation: Hedged Integration - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.
Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. 
More below the fold.


AviChina (2357 HK): Buy The Modern Army Narrative

China

Huaneng Renewables Corp Ltd. is an alternative energy company. The Company acquires and develops wind power projects in China and overseas.

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Huaneng Renewables Corp H (958 HK)

China Machinery Engineering (1829 HK): Possible Offer

Shares are suspended so there is nothing to do here. I think the Offer needs to be pitched closer to $4/share to dislodge Cape Ann. It will still...

David Blennerhassett

Beijing Jingneng (579 HK): Doc Out. IFA Says Fair & Reasonable

Currently trading at a gross/annualised spread of 6.3%/38.1%, assuming payment on the 10 March. The tendering condition is the key risk. However,...

David Blennerhassett

Beijing Jingneng (579 HK): Privatisation Offer From Parent

Currently trading at a gross/annualised spread of 7.6%/18.9%, assuming the transaction takes five and a half months to complete. This appears a...

David Blennerhassett

Beijing Jingneng Clean Energy’s Voluntary Conditional Offer

BJCE announced a conditional voluntary cash general offer from Beijing Energy Holding at HK$2.70. Due to an attractive offer price, we think that...

Arun George

AviChina (2357 HK): Buy The Modern Army Narrative

One would think the "modern army" maxim will catalyse companies such as AviChina (2357 HK). That is positive. But why subject capex to outside...

David Blennerhassett

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