Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>In what I viewed as one of the cleaner deals, <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener"><strong>CPMC Holdings (906 HK)</strong></a> announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.</li>
<li>A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable - this looked done. </li>
<li>Now ORG Development Limited/<strong><a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a></strong>, holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.</li>
</ul>


In what I viewed as one of the cleaner deals, CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable - this looked done. 
Now ORG Development Limited/ORG Technology Co., Ltd. A (002701 CH), holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.


HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.</li>
<li>There are benefits to be realised as Baowu also owns a packaging A-share <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. CPMC's 1H23 result is very solid with good margin expansion.  </li>
<li>Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.</li>
</ul>



CPMC Holdings (906 HK) is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.
There are benefits to be realised as Baowu also owns a packaging A-share Shanghai Baosteel Packaging-A (601968 CH). CPMC's 1H23 result is very solid with good margin expansion.  
Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.</li>
<li>There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.</li>
<li>The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.</li>
</ul>


Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.


CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

<p>We believe <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> is an attractive alternative consumption play given its exposure to the rise in demand for food, beverages and household chemical product packaging in China. It is among the top player in China's packaging manufacturing (1-piece cans, 2-piece cans, tinplate packaging and plastic containers) with prominent customer profile including Coca-Cola, Tsingtao, Carlsberg, Blue Moon, Feihe, Yili and Jiaduobao etc. </p><p>The combination of margin expansion, capacity growth and surging consumption demand, we expect CPMC to post a steady rising ROE. We expect special DPS payout on the receipt of Rmb1.5bn repurchase consideration from JDB settlement, and this will place its dividend yield at least at 7.8%. Its 8.9x PER and 0.69x P/B represent deep discounts to its customers (40x PER) and packaging peers (23.4x) which are unjustified in our view.</p>

We believe CPMC Holdings (906 HK) is an attractive alternative consumption play given its exposure to the rise in demand for food, beverages and household chemical product packaging in China. It is among the top player in China's packaging manufacturing (1-piece cans, 2-piece cans, tinplate packaging and plastic containers) with prominent customer profile including Coca-Cola, Tsingtao, Carlsberg, Blue Moon, Feihe, Yili and Jiaduobao etc. The combination of margin expansion, capacity growth and surging consumption demand, we expect CPMC to post a steady rising ROE. We expect special DPS payout on the receipt of Rmb1.5bn repurchase consideration from JDB settlement, and this will place its dividend yield at least at 7.8%. Its 8.9x PER and 0.69x P/B represent deep discounts to its customers (40x PER) and packaging peers (23.4x) which are unjustified in our view.

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

CHINA - Healthcare, Steel, Autos, Education, Research From Beijing

Scott Laprise/ 乐天虎

CHINA - Healthcare, Steel, Autos, Education

Thematic (Sector/Industry)

<p>This is a big topic that I find myself addressing to investors each quarter for the past 10 years as a steel analyst from where I live in Beijing, China. No steel production cuts have been made by the government and none are expected in the near term. </p><p>The evidence for this view is clear looking at crude steel production data, we see record high levels of production out of China in September.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/016/382/original/crude%20steel.png?1479190556" class="editor-image img-responsive" data-smartkarma-image-id="16382"></figure><div class="content-caption">Figure 1: World Crude Steel Production - 139m tonnes in September up 2% YoY</div><div class="content-remarks"><p>Source: <a href="http://www.worldsteel.org/media-centre/press-releases/2016/September-2016-crude-steel-production.html" target="_blank">http://www.worldsteel.o</a>…</p></div>

This is a big topic that I find myself addressing to investors each quarter for the past 10 years as a steel analyst from where I live in Beijing, China. No steel production cuts have been made by the government and none are expected in the near term. The evidence for this view is clear looking at crude steel production data, we see record high levels of production out of China in September.Figure 1: World Crude Steel Production - 139m tonnes in September up 2% YoYSource: http://www.worldsteel.o…

Steel in China- No Government Capacity Shutdown

China

ORG Technology Co., Ltd. develops, designs, manufactures and sells food and beverages metal packaging products. The Company's main products include food and beverage cans.

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ORG Technology Co., Ltd. A (002701 CH)

CPMC (906 HK): SASAC Usurper?

One of these transaction will turn unconditional. Either the current Offer stands, and Zhang Wei tips in his 21.91% stake. OR, ORG comes in with a...

David Blennerhassett

CPMC Holdings (906 HK): What's Brewing?

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

We see 50 changes a side for the CSI500 in Dec. The Industrials sector could take a lot of index spots from Materials as one-way turnover exceeds...

Brian Freitas

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

CPMC is well positioned to capture the strong packaging demand from food, beverage and chemical products driven by China's consumption growth. Yet,...

Osbert Tang, CFA

Steel in China- No Government Capacity Shutdown

This is a big topic that I find myself addressing to investors each quarter for the past 10 years as a steel analyst from where I live in Beijing,...

Scott Laprise/ 乐天虎

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CPMC (906 HK): SASAC Usurper?

One of these transaction will turn unconditional. Either the current Offer stands, and Zhang Wei tips in his 21.91% stake. OR, ORG comes in with a...

David Blennerhassett

CPMC Holdings (906 HK): What's Brewing?

​CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

We see 50 changes a side for the CSI500 in Dec. The Industrials sector could take a lot of index spots from Materials as one-way turnover exceeds...

Brian Freitas

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

CPMC is well positioned to capture the strong packaging demand from food, beverage and chemical products driven by China's consumption growth. Yet,...

Osbert Tang, CFA

Steel in China- No Government Capacity Shutdown

This is a big topic that I find myself addressing to investors each quarter for the past 10 years as a steel analyst from where I live in Beijing,...

Scott Laprise/ 乐天虎

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...