Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Tonly Electronics Holdings / Event-Driven

Back on the 2 October 2019, via a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1002/ltn201910021175.pdf" target="_blank" rel="noopener">restructuring agreement</a>, T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI) acquired all of the issued capital in the "Divested Segment", a segment spun-off from  <a href="https://www.smartkarma.com/entities/tcl-corp-a" target="_blank" data-smartkarma-citation="entities:13497:1" rel="noopener">TCL Corp (A) (000100 CH)</a>. As this Segment held 48.68% of issued shares in <a href="https://www.smartkarma.com/entities/tonly-electronics-holdings-ltd" target="_blank" data-smartkarma-citation="entities:1320:1" rel="noopener">Tonly Electronics Holdings (1249 HK)</a> (TEH), TCLH was obligated to make a conditional MGO for all other shares not held. The Offer Price was HK$5.89/share, a 7.1% premium to last close. 
The Composite Document was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1122/2019112200005.pdf" target="_blank" rel="noopener">despatched</a> on the 22 November 2019. The IFA (Somerley)  concluded the Offer Price was fair and reasonable (which just goes to show that IFAs can be quite useless, given the Offer Price 12 months later). The Offer became unconditional on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1212/2019121201125.pdf" target="_blank" rel="noopener">12 December</a>.
The Offer <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1227/2019122701263.pdf" target="_blank" rel="noopener">closed</a> on the 27 December 2019 with the free float of 22.06%, breaching the public float requirement under Rule 8.08(1)(a) of the Listing Rules. The float was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0313/2020031300960.pdf" target="_blank" rel="noopener">restored</a> (25.1%) on the 13 March this year after TCLH placed out some shares.
<h3>The New News</h3>
After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1030/2020103000210.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading on the 30 October "in relation to the Code on Takeovers and Mergers", that evening TEH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1030/2020103002084.pdf" target="_blank" rel="noopener">announced</a> a proposed privatisation from TCLH by way of a Scheme.
The Scheme consideration is HK$12/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.531% of shares out. The headcount applies as TEH is Cayman incorporated.
Under a rollover agreement., shareholders (compromising senior management of TEH)  holding 11.81% of share out - and 30.5% of the total Scheme shares - have entered into an agreement affording these shareholders a subscription into an unlisted backend company. 
The rollover agreement requires independent shareholder approval, by way of a simple majority vote, and the IFA concluding the agreement is fair and reasonable.
The headline premium to last close appears okay. But TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.
There looks like enough here for the deal to get up.
More below the fold.

Back on the 2 October 2019, via a restructuring agreement, T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI) acquired all of the issued capital in the "Divested Segment", a segment spun-off from  TCL Corp (A) (000100 CH). As this Segment held 48.68% of issued shares in Tonly Electronics Holdings (1249 HK) (TEH), TCLH was obligated to make a conditional MGO for all other shares not held. The Offer Price was HK$5.89/share, a 7.1% premium to last close. 
The Composite Document was despatched on the 22 November 2019. The IFA (Somerley)  concluded the Offer Price was fair and reasonable (which just goes to show that IFAs can be quite useless, given the Offer Price 12 months later). The Offer became unconditional on the 12 December.
The Offer closed on the 27 December 2019 with the free float of 22.06%, breaching the public float requirement under Rule 8.08(1)(a) of the Listing Rules. The float was restored (25.1%) on the 13 March this year after TCLH placed out some shares.
The New News
After shares were suspended ahead of trading on the 30 October "in relation to the Code on Takeovers and Mergers", that evening TEH announced a proposed privatisation from TCLH by way of a Scheme.
The Scheme consideration is HK$12/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.531% of shares out. The headcount applies as TEH is Cayman incorporated.
Under a rollover agreement., shareholders (compromising senior management of TEH)  holding 11.81% of share out - and 30.5% of the total Scheme shares - have entered into an agreement affording these shareholders a subscription into an unlisted backend company. 
The rollover agreement requires independent shareholder approval, by way of a simple majority vote, and the IFA concluding the agreement is fair and reasonable.
The headline premium to last close appears okay. But TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.
There looks like enough here for the deal to get up.
More below the fold.

Tonly Electronics (1249 HK): Fair Scheme Offer

Alpha-Centric ESG Research

Kyle Rudden

"Social" has been a third-wheel ESG pillar for a long time. Not that it matters any less, and there is plenty of evidence that strong Social-pillar ESG performance can do a lot of  good for a stock price. Rather, it's that the Social pillar stuff is more ethereal, harder to wrap one's head around. And, let's face it, the Social ESG pillar is a little more rosewater than crude oil.It is amazing how a global pandemic changes things. Whether it is ESG's social or Corporate Social Responsibility's (CSR) "social," socially-responsibility – as well as social irresponsibility or inaction – by corporations are front-and-center. In prior reports I assessed corporate coronavirus responses from an ESG perspective. In doing so, I something became increasingly (and painfully) obvious:Company responses are very diverse (as they should be), making comparative analysis difficult.For society, comparisons aren't necessarily relevant. A patient receiving better medical care due to a generous contribution from Company A probably doesn't care that Company B – same sector but the other side of the world – gave a larger contribution to its local hospital. For investors, however, comparisons kind of matter. After all, what's the value of a stand-alone P/E multiple?Rather than go insane trying to standardise and normalise everything – e.g., the economic value of donated masks or cost of retrofitting manufacturing lines to produce ventilators – I decided to look at coronavirus-related corporate philanthropy as a comparative metric. It is universal, quantifiable, and decidedly much easier to measure and value than, say, vats of hand sanitiser.This takes a data-driven look at coronavirus-related corporate social responsibility and specifically  philanthropy by listed companies in Asia Pacific countries. APAC first because Asian companies are doing a lot of giving, and nearly all of that inspirational cross-border humanitarian aid – including to the U.S., despite a certain orange-haired xenophobe in a white house.

"Social" has been a third-wheel ESG pillar for a long time. Not that it matters any less, and there is plenty of evidence that strong Social-pillar ESG performance can do a lot of  good for a stock price. Rather, it's that the Social pillar stuff is more ethereal, harder to wrap one's head around. And, let's face it, the Social ESG pillar is a little more rosewater than crude oil.It is amazing how a global pandemic changes things. Whether it is ESG's social or Corporate Social Responsibility's (CSR) "social," socially-responsibility – as well as social irresponsibility or inaction – by corporations are front-and-center. In prior reports I assessed corporate coronavirus responses from an ESG perspective. In doing so, I something became increasingly (and painfully) obvious:Company responses are very diverse (as they should be), making comparative analysis difficult.For society, comparisons aren't necessarily relevant. A patient receiving better medical care due to a generous contribution from Company A probably doesn't care that Company B – same sector but the other side of the world – gave a larger contribution to its local hospital. For investors, however, comparisons kind of matter. After all, what's the value of a stand-alone P/E multiple?Rather than go insane trying to standardise and normalise everything – e.g., the economic value of donated masks or cost of retrofitting manufacturing lines to produce ventilators – I decided to look at coronavirus-related corporate philanthropy as a comparative metric. It is universal, quantifiable, and decidedly much easier to measure and value than, say, vats of hand sanitiser.This takes a data-driven look at coronavirus-related corporate social responsibility and specifically  philanthropy by listed companies in Asia Pacific countries. APAC first because Asian companies are doing a lot of giving, and nearly all of that inspirational cross-border humanitarian aid – including to the U.S., despite a certain orange-haired xenophobe in a white house.

COVID-19 and ESG: Tencent, Alibaba Lead in Coronavirus Aid for Asia Pacific Region

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.

Late Wednesday, <a href="https://www.smartkarma.com/entities/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia Technology (1070 HK)</a>/TCL said it had received an MGO. The MGO price was set at HK$3.23 per share, an 18% discount to the last close price of HK$3.95 per share. The MGO was triggered due to an astonishing oversight related to the divestiture of TCL Industries Holdings, a former wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/tcl-corp-a" target="_blank" data-smartkarma-citation="entities:13497:1" rel="noopener">TCL Corp (A) (000100 CH)</a>.<div class="content-highlight">The MGO price was based on a formula linked to an appraiser’s value of TCL. Setting aside that the MGO is purely a belated regulatory box-ticking exercise, we believe that the appraiser’s valuation methodology is questionable.</div>

Late Wednesday, Tcl Multimedia Technology (1070 HK)/TCL said it had received an MGO. The MGO price was set at HK$3.23 per share, an 18% discount to the last close price of HK$3.95 per share. The MGO was triggered due to an astonishing oversight related to the divestiture of TCL Industries Holdings, a former wholly-owned subsidiary of TCL Corp (A) (000100 CH).The MGO price was based on a formula linked to an appraiser’s value of TCL. Setting aside that the MGO is purely a belated regulatory box-ticking exercise, we believe that the appraiser’s valuation methodology is questionable.

This week in StubWorld ...
<ul>
<li>
<a href="https://www.smartkarma.com/entities/21096" target="_blank" data-smartkarma-citation="entities:21096:1">Asm International Nv (ASM NA) </a>is the more interesting play should TCL Corporation's rumoured acquisition in <a href="https://www.smartkarma.com/entities/15061" target="_blank" data-smartkarma-citation="entities:15061:1">Asm Pacific Technology (522 HK)</a> unfold.</li>
<li>The challenge of reconciling the implied market valuation for <a href="https://www.smartkarma.com/entities/5321" target="_blank" data-smartkarma-citation="entities:5321:1">IMAX Corp (IMAX US)</a><a href="https://www.smartkarma.com/entities/5321" target="_blank" data-smartkarma-citation="entities:5321:1"></a>'s deconsolidated operations.</li>
<li>At a 7.7% yield and a multi-year low ratio (<a href="https://www.smartkarma.com/entities/17638" target="_blank" data-smartkarma-citation="entities:17638:1">Intouch Holdings (INTUCH TB)</a> over <a href="https://www.smartkarma.com/entities/947" target="_blank" data-smartkarma-citation="entities:947:1">Advanced Info Service (ADVANC TB)</a>), Intouch looks attractive.</li>
</ul>
This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/Opco held must be at least 20% of the parent's market cap.
My comments on ASM, IMAX and Intouch follow my weekly setup/unwind tables.
<div class="content-caption">(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)</div>

This week in StubWorld ...


Asm International Nv (ASM NA) is the more interesting play should TCL Corporation's rumoured acquisition in Asm Pacific Technology (522 HK) unfold.
The challenge of reconciling the implied market valuation for IMAX Corp (IMAX US)'s deconsolidated operations.
At a 7.7% yield and a multi-year low ratio (Intouch Holdings (INTUCH TB) over Advanced Info Service (ADVANC TB)), Intouch looks attractive.

This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/Opco held must be at least 20% of the parent's market cap.
My comments on ASM, IMAX and Intouch follow my weekly setup/unwind tables.
(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)

StubWorld: TCL's Possible Stake in ASM, Imax Is Not The Ticket, Out of Touch Intouch

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

<ul class=""><li>Consensus EPS estimates for <a href="https://www.smartkarma.com/entities/11557" target="_blank" data-smartkarma-citation="entities:11557:1">CJ Korea Express Corp (000120 KS)</a> in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin compared to the current 3.8%.</li><li>A portion of this improvement may come from CJL's two Korea-centric segments, Contract Logistics and Parcel, which accounted for 37% and 30% of Sales in Q1 2017, respectively. But the opportunities for these two segments to scale up significantly are limited by Korea's relatively small domestic market size.</li><li>A much larger proportion of the expected earnings improvement will likely come from CJL's Global segment, which focuses on 'asset light' transportation services outside of Korea (primarily in China and elsewhere in developing Asia). CJL over the last two years has grown this segment organically and through M&amp;A.</li><li>In our view, the most likely path to significantly higher earnings in 2018 and 2019 would be a sharp increase in both the scale and profitability of CJL's Global (ie, non-Korean) logistics business. We believe improvements in domestic segments (such as raising automation in Parcel) will probably have a smaller impact on medium-term earnings, if any.</li><li>In this note we evaluate CJL's chances of successfully following one of these paths to EPS of 6,400+ Won by 2018. Given the company's recent track record, we believe consensus earnings estimates for 2018 (over 6,400 Won EPS) and 2019 (over 8,400 Won EPS) are simply too high, and that analysts will pull them down later in 2017 when it becomes apparent that progress towards those milestones is negligible.</li></ul>

Consensus EPS estimates for CJ Korea Express Corp (000120 KS) in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin compared to the current 3.8%.A portion of this improvement may come from CJL's two Korea-centric segments, Contract Logistics and Parcel, which accounted for 37% and 30% of Sales in Q1 2017, respectively. But the opportunities for these two segments to scale up significantly are limited by Korea's relatively small domestic market size.A much larger proportion of the expected earnings improvement will likely come from CJL's Global segment, which focuses on 'asset light' transportation services outside of Korea (primarily in China and elsewhere in developing Asia). CJL over the last two years has grown this segment organically and through M&amp;A.In our view, the most likely path to significantly higher earnings in 2018 and 2019 would be a sharp increase in both the scale and profitability of CJL's Global (ie, non-Korean) logistics business. We believe improvements in domestic segments (such as raising automation in Parcel) will probably have a smaller impact on medium-term earnings, if any.In this note we evaluate CJL's chances of successfully following one of these paths to EPS of 6,400+ Won by 2018. Given the company's recent track record, we believe consensus earnings estimates for 2018 (over 6,400 Won EPS) and 2019 (over 8,400 Won EPS) are simply too high, and that analysts will pull them down later in 2017 when it becomes apparent that progress towards those milestones is negligible.

Why CJ Logistics Won't Likely Reach Annual EPS of 6,400+ Won Any Time Soon

China

TCL Corporation manufactures electronic products, telecommunication products, home appliances, and electrical products.  The Company's products include televisions, mobile phones, personal computers, air-conditioners, washing machines, refrigerators, and other related products.

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TCL Corp (A) (000100 CH)

Tonly Electronics (1249 HK): Fair Scheme Offer

This time the TCL Group means business with what appears to be a fair offer for Tonly (1249 HK) by way of a Scheme at HK$12/share.

David Blennerhassett

COVID-19 and ESG: Tencent, Alibaba Lead in Coronavirus Aid for Asia Pacific Region

"Social" has been a third-wheel ESG pillar for a long time. Not that it matters any less, and there is plenty of evidence that strong Social-pillar...

Kyle Rudden

TCL Electronics’ Accidental MGO

Late Wednesday, Tcl Multimedia Technology (1070 HK)/TCL said it had received an MGO. The MGO price was set at HK$3.23 per share, an 18% discount to...

Arun George

StubWorld: TCL's Possible Stake in ASM, Imax Is Not The Ticket, Out of Touch Intouch

This week in StubWorld ... Asm International Nv (ASM NA) is the more interesting play should TCL Corporation's rumoured acquisition in Asm...

David Blennerhassett

Why CJ Logistics Won't Likely Reach Annual EPS of 6,400+ Won Any Time Soon

Consensus EPS estimates for CJ Korea Express Corp (000120 KS) in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin...

Daniel Hellberg

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