Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/12901" target="_blank" data-smartkarma-citation="entities:12901:1">Cityneon Holdings (CITN SP)</a> <a href="http://infopub.sgx.com/FileOpen/West%20Knighton%20Offer%20Announcement.ashx?App=Announcement&amp;FileID=531380" target="_blank">announced</a> West Knighton Limited has purchased 168,692,268 shares of Cityneon from Lucrum 1 Investment Limited (Lucrum), representing approximately 68.95% of shares out, at S$1.30/share or a total consideration of S$219.3mn.
As a result of this acquisition, the West Knighton is required to make a mandatory unconditional cash Offer for all the Shares, other than those already owned.  The mandatory Offer price is also S$1.30 (a 3.2% premium to last close) and is unconditional in all respects. 
West Knighton has stated it does not intend to increase the Offer price. Dividends declared or paid after this announcement will be netted off the Offer price.  West Knighton also intends to delist the company and will exercise its right to compulsory acquisition if afforded.
This is by no means not a knock-out price and is ~10% below the consensus target price of S$1.40+. The mandatory Offer is triggered via the major shareholder existing (having entered a year ago), and is largely an opportunistic Offer to secure a larger stake in the company.
I would not tender into the Offer and recommend buying at or just below the $1.30 Offer Price, which provides a temporary floor. Cityneon is likely to surprise to the upside in earnings after securing its 4th intellectual property (IP) right in May (an exclusive worldwide touring exhibition license agreement with Lions Gate Exhibition for The Hunger Games: The Exhibition), together with an agreement with Universal Pictures to build the second set for Jurassic World – The Exhibition.

Cityneon Holdings (CITN SP) announced West Knighton Limited has purchased 168,692,268 shares of Cityneon from Lucrum 1 Investment Limited (Lucrum), representing approximately 68.95% of shares out, at S$1.30/share or a total consideration of S$219.3mn.
As a result of this acquisition, the West Knighton is required to make a mandatory unconditional cash Offer for all the Shares, other than those already owned.  The mandatory Offer price is also S$1.30 (a 3.2% premium to last close) and is unconditional in all respects. 
West Knighton has stated it does not intend to increase the Offer price. Dividends declared or paid after this announcement will be netted off the Offer price.  West Knighton also intends to delist the company and will exercise its right to compulsory acquisition if afforded.
This is by no means not a knock-out price and is ~10% below the consensus target price of S$1.40+. The mandatory Offer is triggered via the major shareholder existing (having entered a year ago), and is largely an opportunistic Offer to secure a larger stake in the company.
I would not tender into the Offer and recommend buying at or just below the $1.30 Offer Price, which provides a temporary floor. Cityneon is likely to surprise to the upside in earnings after securing its 4th intellectual property (IP) right in May (an exclusive worldwide touring exhibition license agreement with Lions Gate Exhibition for The Hunger Games: The Exhibition), together with an agreement with Universal Pictures to build the second set for Jurassic World – The Exhibition. 

The accounting research firm, GMT Research

Lisa Mangkornkarn

The accounting research firm

GMT Research

GMT Research provides independent insight into markets, sectors and companies throughout Asia. Our unique method of mining a comprehensive collection of corporate financial statements for key data allows us to evaluate the financial health of a company, sectors and the market at large. We also investigate the application of accounting standards by companies and sectors, shedding light on the quality of reported profits. Armed with this information, we help investment professionals navigate the financial landscape.

Given that related party transactions are somewhat of a national sport in Asia and a key component of most accounting frauds, it is somewhat surprising that no-one’s gone through and detailed each company’s involvement in them. Well, that is until now. Yes, we locked two analysts in a room and told them to download the annual reports of every company with a market capitalisation over US$1bn in Hong Kong and Singapore, around 360 of them. They were then instructed to trawl through each annual report and calculate related party transactions as a percentage of sales and expenses. Three weeks later our analysts emerged somewhat paler and thinner. Their results are cause for concern.

Given that related party transactions are somewhat of a national sport in Asia and a key component of most accounting frauds, it is somewhat surprising that no-one’s gone through and detailed each company’s involvement in them. Well, that is until now. Yes, we locked two analysts in a room and told them to download the annual reports of every company with a market capitalisation over US$1bn in Hong Kong and Singapore, around 360 of them. They were then instructed to trawl through each annual report and calculate related party transactions as a percentage of sales and expenses. Three weeks later our analysts emerged somewhat paler and thinner. Their results are cause for concern.

RELATED PARTIES: Family Games in HK and SG

Hong Kong

KuangChi Science Limited is an innovation company that is principally engaged in the novel space services and other innovative technology business. The Company provides a series of disruptive space services and is working towards building a global disruptive space technology alliance.

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Cityneon - Buy For The Back-End

Cityneon Holdings (CITN SP) announced West Knighton Limited has purchased 168,692,268 shares of Cityneon from Lucrum 1 Investment Limited (Lucrum),...

David Blennerhassett

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Cityneon - Buy For The Back-End

Cityneon Holdings (CITN SP) announced West Knighton Limited has purchased 168,692,268 shares of Cityneon from Lucrum 1 Investment Limited (Lucrum),...

David Blennerhassett

RELATED PARTIES: Family Games in HK and SG

Given that related party transactions are somewhat of a national sport in Asia and a key component of most accounting frauds, it is somewhat...

GMT Research