Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/so-young-international-inc" target="_blank" data-smartkarma-citation="entities:28025:1" rel="noopener">So-Young (SY US)</a> has announced a preliminary non-binding proposal from its chairman, Xing Jin, of $5.30/ADS - a 22.7% premium to last close. </li>
<li>Xing Jin controls 83.9% of the voting power. If a firm Offer unfolds, which should involve a long-form merger, this is effectively done. </li>
<li>The pressure on Chinese stocks in the US to go private or change listing venue by 2024 is still on.</li>
</ul>



So-Young (SY US) has announced a preliminary non-binding proposal from its chairman, Xing Jin, of $5.30/ADS - a 22.7% premium to last close. 
Xing Jin controls 83.9% of the voting power. If a firm Offer unfolds, which should involve a long-form merger, this is effectively done. 
The pressure on Chinese stocks in the US to go private or change listing venue by 2024 is still on.


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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a> is the second-largest online music platform after <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> in China. It has launched its IPO to raise $400 million at the IPO mid-point.</li>
<li>In <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-ipo-not-yet-a-sound-investment" target="_blank" data-smartkarma-citation="insights:61441" rel="noopener">Cloud Village (NetEase Music) IPO: Not yet a Sound Investment</a>, we stated that the 9M21 update is underwhelming with slowing growth and a marginal decline in losses. </li>
<li>Our valuation analysis suggests that the IPO price is unattractive. We would give the IPO a pass. </li>
</ul>



Cloud Village (CLV HK) is the second-largest online music platform after Tencent Music (TME US) in China. It has launched its IPO to raise $400 million at the IPO mid-point.
In Cloud Village (NetEase Music) IPO: Not yet a Sound Investment, we stated that the 9M21 update is underwhelming with slowing growth and a marginal decline in losses. 
Our valuation analysis suggests that the IPO price is unattractive. We would give the IPO a pass. 


Cloud Village (NetEase Music) IPO: Valuation Insights

<div>
Just plain horrible.
Following an indicative pre-market sell-off of 35%, <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc (JOBS US)</a> closed down 19.2%, and is now 20% adrift of the undisturbed price. 
The news? As per 51job's <a href="https://ir.51job.com/ir/php/2021/PreRelease20211108.php?1108" target="_blank" rel="noopener">announcement</a>:
<blockquote>
that certain members of the buyer consortium that formed Garnet Faith Limited to acquire the Company ... have been in consultation with Chinese regulators on recent regulatory changes in China that may be applicable to the Company and the Proposed Transaction. The consultation process by these buyer consortium members is currently ongoing and a clear timeline to its completion cannot be provided at this time. 
</blockquote>
</div>
"Recent regulatory changes" emerged shortly after <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 listing in early July, and a broad regulatory crackdown followed, casting a net over sectors from education to technology. As quoted by Ministry of Industry and Information Technology spokesperson Zhao Zhiguo back in September: "we are guiding relevant companies to carry out self-examination and rectification".
Late last month State Administration for Market Regulation (SAMR) proposed a list of responsibilities it wanted internet platforms to uphold. This latest edict primarily targeted large platforms (such as <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>) and that they should (according to a Reuters <a href="https://www.reuters.com/world/china/china-proposes-guidelines-internet-platform-responsibilities-2021-10-29/" target="_blank" rel="noopener">article</a>) "abide by the principles of fairness when offering services and should open their services up to other platform operators. They should not obtain data without users' consent and should be transparent when using big data to recommend products."  The SAMR said these were draft guidelines that were open to public consultation until yesterday.
51job.com is the leading recruitment website/platform in China. Shares rolled over in July as the regulatory oversight on internet platforms ensnared more sectors/companies. 
Yet this latest announcement from 51job provides little new news to what was already known. Timing, admittedly, was not ideal, arriving shortly on the heels of last week's <a href="https://www.sec.gov/Archives/edgar/data/0001295484/000110465921132333/tm2131363d1_sc13da.htm" target="_blank" rel="noopener">announcement</a> that funding for the Offer had progressed.  
The significant price correction yesterday - which could all but be construed as a dealbreak - can ostensibly be put down to short-term investors piling into 51job on the financing news, then turning tail, exiting en-masse after the perceived financing head-fake.  
Yesterday's price movement appears overdone.  The gross spread to terms is now out to 45.8%.
<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/535/original/image_87521874221636431612863.png?1636431613" class="editor-image img-responsive" data-smartkarma-image-id="240535"></figure>
More below the fold.
</div>


Just plain horrible.
Following an indicative pre-market sell-off of 35%, 51 Job Inc (JOBS US) closed down 19.2%, and is now 20% adrift of the undisturbed price. 
The news? As per 51job's announcement:

that certain members of the buyer consortium that formed Garnet Faith Limited to acquire the Company ... have been in consultation with Chinese regulators on recent regulatory changes in China that may be applicable to the Company and the Proposed Transaction. The consultation process by these buyer consortium members is currently ongoing and a clear timeline to its completion cannot be provided at this time. 


"Recent regulatory changes" emerged shortly after DiDi Global (DIDI US)'s listing in early July, and a broad regulatory crackdown followed, casting a net over sectors from education to technology. As quoted by Ministry of Industry and Information Technology spokesperson Zhao Zhiguo back in September: "we are guiding relevant companies to carry out self-examination and rectification".
Late last month State Administration for Market Regulation (SAMR) proposed a list of responsibilities it wanted internet platforms to uphold. This latest edict primarily targeted large platforms (such as Alibaba Group (9988 HK), Tencent (700 HK), and Meituan (3690 HK)) and that they should (according to a Reuters article) "abide by the principles of fairness when offering services and should open their services up to other platform operators. They should not obtain data without users' consent and should be transparent when using big data to recommend products."  The SAMR said these were draft guidelines that were open to public consultation until yesterday.
51job.com is the leading recruitment website/platform in China. Shares rolled over in July as the regulatory oversight on internet platforms ensnared more sectors/companies. 
Yet this latest announcement from 51job provides little new news to what was already known. Timing, admittedly, was not ideal, arriving shortly on the heels of last week's announcement that funding for the Offer had progressed.  
The significant price correction yesterday - which could all but be construed as a dealbreak - can ostensibly be put down to short-term investors piling into 51job on the financing news, then turning tail, exiting en-masse after the perceived financing head-fake.  
Yesterday's price movement appears overdone.  The gross spread to terms is now out to 45.8%.


More below the fold.



For the month of October, 18 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.







New Deals


Industry


Size (US$bn)


Type


Premium




Australia




Apollo Consolidated (AOP AU) 
Gold
0.1
Off-market Takeover
27%


Ramelius (RMS AU) Adds Apollo To Its Portfolio



Aventus Group (AVN AU) 
Real estate
0.3
Scheme
N/A


HomeCo Daily Needs REIT (HDN AU) To Merge with Aventus (AVN AU) In Self-Takeunder



Cashrewards (CRW AU) 
Online shopping
0.1
Scheme
19.5%


Cashrewards (CRW AU)'s Offer Is 34% Below Last December's IPO



Class Ltd (CL1 AU) 
Cloud accounting
0.3
Scheme
71.6%


Class - Hub24: Scheme Trading Wide



Irongate Group (IAP AU) 
Real estate
0.7
Scheme
10%


Irongate (IAP AU): 360 Capital's Tilt Reminiscent Of ARA/Cromwell Stoush



Intega Group Ltd (ITG AU) 
Construction
0.3
Scheme
95%


Intega (ITG AU) Enters Scheme With Kiwa



Over the Wire Holdings Ltd (OTW AU) 
Telco/It provider
0.3
Scheme
15%


 Over The Wire (OTW AU): The Latest Aussie IT Play



Senex Energy (SXY AU) 
Gas producer
0.6
Off-market Takeover
40%


 Senex (SXY AU): Posco's Looming Offer



Hong Kong




Ausnutria Dairy Corp (1717 HK) 
Infant formula
0.7
MGO
13.67%


Yili's Pre-Conditional Offer &amp; Ausnutria (1717 HK)'s Crowded Register



Chinese Estates Holdings (127 HK) 
Real estate
0.3
Scheme
37.9%


Chinese Estates (127 HK): $4.00/Share Offer



Cp Pokphand (43 HK) 
Agri play
0.9
Scheme
19.79%


C.P. Pokphand (43 HK): Privatisation Offer From CP Foods



Dragon Crown Group (935 HK) 
Chemical storage
0.2
Pre-con Offer
8.475


Dragon Crown (935 HK)'s VGO Is A Done Deal



Yorkey Optical International Cayman (2788 HK) 
Optics
0.1
Scheme
54.4%



Yorkey Optical (2788 HK)'s Scheme: What Will Webb Do? Yorkey Optical (2788 HK): Webb Bumps... Will Asia Optical? Yorkey Optical (2788 HK): Time To Buy




Japan




Ebook Initiative Japan Co Ltd (3658 JP) 
Digital books
0.2
Tender Offer
4.6%


E-Book Initiative (3658 JP) Tender Offer Takeout - This One Needs Cowbell Too



Pipedo HD Inc (3919 JP) 
Info platform
0.1
Tender Offer
N/A


 Pipedo HD (3919 JP): Advantage Partners MBO




Singapore




ESR-REIT (EREIT SP) /ARA LOGOS (ALLT SP)

Property
1.0
Scheme
N/A


ARA Logos (ALLT SP) To Merge with ESR-REIT (EREIT SP)



Singapore Press Holdings (SPH SP) 
Conglomerate
2.5
Scheme
10%


SPH Lobang - Holders So Shiok, Bidders So Kiasu. This May Not Be The End



Taiwan




IBF Financial (2889 TT) / Entie Commercial Bank (2849 TT) 
Finance
1.2
Share swap
N/A


20-Oct: EnTie (2849 TT) - IBF (2889 TT): US$1.2bn Cash &amp; Scrip Deal Far From Done



Source: Smartkarma Insights






The average premium for the new deals announced (or first discussed) in October was ~30%, with a year-to-date average of ~32% (139 deals &amp; total deal size of US$259bn).
This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively.




Offer Premium Summary





     




2019


2020


2021 YTD



Australia
33.0%
32.4%
36.0%


Hong Kong
25.2%
34.7%
32.2%


Japan
44.0%
35.2%
27.4%


ROW
29.1%
24.2%
32.5%


Average
31.5%
31.1%
32.2%



Source: Smartkarma Insights









Summary of News in October of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)






Australia


Comments (with links to announcements &amp; insights)




1300 Smiles Ltd (ONT AU) 

13-Oct Scheme Booklet registered with ASIC. Scheme meeting to be held on the 12 November.




5G Networks Ltd/Australia (5GN AU) / Webcentral (WCG AU) 

1-Oct: The Federal Court of Australia has approved the convening of Scheme Meeting and distribution of Scheme Booklet. The Scheme Meeting will be held virtually at 10:00am (Melbourne time) on Monday, 8 November 2021. Indicative Timeline is shown in the image below.




Afterpay Touch (APT AU) 

No October update




Ale Property (LEP AU) 

20-Oct: Ale Property (LEP AU) is suspended "pending release of a judgement of the Supreme Court of Victoria in relation to the 2018 Rent Determinations as advised by ASX announcement on 19 October 2021". Some background on this can be found on page 12 of the 2021 annual report. According to Philip Cheetham, Head Of Listed Investor Relations at Charter Hall Long Wale Reit (CLW AU):"The outcome of this litigation does not form a defeating condition or alter our bid for LEP."




Ausnet Services (AST AU) 

15-Oct: Ausnet Services (AST AU) announces that it proposes to engage with APA Group (APA AU) on its indicative, non-binding and conditional proposal. This follows the decision and final orders announced by the Takeovers Panel in response to the application previously submitted by APA.  25-Oct: Ausnet Services (AST AU) has announced that they have granted due diligence access to APA Group (APA AU) and have been granted reverse due diligence access.  29-Oct: AusNet (AST AU): ACCC Commences Informal Review




Australian Pharmaceutical Industries (API AU) 

7-Oct: Pursuant to an undertaking agreement with Washington H. Soul Pattinson and Co. Ltd (SOL AU), Wesfarmers Ltd (WES AU) has now taken a 19.3% stake in Australian Pharmaceutical Industries (API AU).




Empired Ltd (EPD AU) 

25-Oct: Empired Ltd (EPD AU) shareholders approved the Scheme. Implementation is the 16 November.




iCar Asia Ltd (ICQ AU) 

19-Oct: ICar (ICQ AU) &amp; Carsome Enter Into Scheme




Huon Aquaculture (HUO AU) 

29-Oct: Huon Aquaculture (HUO AU) shareholders overwhelmingly supported the Scheme. The implementation date is expected to be the 17 November. 




Japara Healthcare (JHC AU) 

21-Oct: Japara Healthcare (JHC AU) shareholders approve the Scheme. The implementation date is the 5 November. 




Oil Search Ltd (OSH AU) 

29-Oct: Oil Search Ltd (OSH AU)'s first court hearing is expected to take place on the 10 November in place of 27 October as previously announced. 




Rhipe Ltd (RHP AU) 

11-Oct: Rhipe Ltd (RHP AU)'s shareholders approve the Scheme. Shares to be suspended at the close of trading on the 14 October. 




Smartgroup Corp (SIQ AU) 

25-Oct: Smartgroup Corp (SIQ AU) have announced that the TPG and Potentia consortium have decided not to proceed with the acquisition at A$10.35/share and have revised their proposal to A$9.25/share.




Spark Infrastructure (SKI AU) 

21-Oct: Spark (SKI AU): Scheme Booklet Out. Meeting On The 22 November




Sydney Airport (SYD AU) 

7-Oct: Australia's ACCC is now seeking views on the proposed acquisition of Sydney Airport (SYD AU) by the Sydney Aviation Alliance. Responses are required to be submitted by the 28 October. 










Hong Kong


Comments (with links to announcements &amp; insights)




China Youzan Limited (8083 HK) 

1-Oct: The Offeror and China Youzan (8083 HK) announced they are preparing the Scheme doc.  20 Oct: Well, not quite yet. The despatch date has been pushed o the 31 December from 19 October previously. 




Golden Throat Holdings (6896 HK) 

29-Oct: Golden Throat (6896 HK): Scheme Doc Out. Court Meeting On 30 November




Nature Home Holding Company (2083 HK) 

14-Sep: Nature Home (2083 HK): Scheme Doc Out. Court Meeting On 6 Oct. Evergrande Overhang
28-Sep: Nature Home (2083 HK): Risk Aversity Sees Spread Blow Out




Suchuang Gas Corp (1430 HK) 

29-Oct: Suchuang Gas Corp (1430 HK)'s Scheme Doc has been delayed until the 29 December. 










India


Comments 




Adani Power (ADANI IN) 

No October update




Mphasis Ltd (MPHL IN) 

No October update










Japan


Comments (with links to announcements &amp; insights)




Ebook Initiative Japan Co Ltd (3658 JP) 

No October update




Hitachi Metals (5486 JP) 

No October update




Kansai Super Market (9919 JP) 

No October update




Maxvalu Nishinihon (8287 JP) / Fuji Co Ltd (8278 JP) 

No October update




Nippo Corp (1881 JP) 

7-Oct: The Nikkei (English and Japanese) is out with an article saying that ENEOS Holdings (5020 JP) has agreed to buy JRE from GS and GIC. 




Pipedo HD Inc (3919 JP) 

No October update




Shinsei Bank (8303 JP) 

21-Oct: Shinsei Objects to SBI Tender - Offers "Requirements" To Approve 27-Oct: Shinsei TOB: A Complicated Game of 🐓 Nobody Has Thought About?










Malaysia


Comments 




Daibochi Plastic &amp; Packaging Industry (DPP MK) 
15-Oct: The independent advisor recommends the unconditional offer for Daibochi Plastic &amp; Packaging Industry (DPP MK). 25-Oct: Daibochi (DPP MK)'s Offer has been extended to the 8 November. 



Ijm Plantations (IJMP MK) 
1 Oct: Ijm Plantations (IJMP MK)'s IFA recommends Offer to shareholders.  7-Oct: Ijm Plantations (IJMP MK)'s Offer has been extended to the 25 October.   25-Oct: Ijm Plantations (IJMP MK) extends the closing date of its Offer to the 18 November.



MMC Corp Bhd (MMC MK) 
No October update











Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> has had an exceptionally volatile 12 months of trading. Following a &gt;200% share price surge between October 2020 and March 2021, the share price has corrected 77%, wiping out nearly $24bn in market value. The significant sell-off, coupled with less severe earnings expectation downgrades (-18%) from the sell-side, has resulted in Vipshop de-rating from a peak forward PE ratio of 25.3x to only 6.9x, which is the cheapest the stock has ever been. 
In this insight, we take a closer look at the meaningful market events which have driven the sell-off in Vipshop as well as the short- and longer-term earnings outlook for the company. 
Going into their 3Q21 reporting period, Vipshop is facing an exceptionally high growth base set in the comparative period as well as macro-economic headwinds due to a slowing Chinese economy and retail spending, which could result in the continuation of the earnings downgrade cycle over the short- to medium-term. However, trading on an estimated 5.3x ex-cash forward PE ratio likely implies that the buy-side has factored most of this in and we are nearing the point of peak pessimism.

Vipshop Holdings (VIPS US) has had an exceptionally volatile 12 months of trading. Following a &gt;200% share price surge between October 2020 and March 2021, the share price has corrected 77%, wiping out nearly $24bn in market value. The significant sell-off, coupled with less severe earnings expectation downgrades (-18%) from the sell-side, has resulted in Vipshop de-rating from a peak forward PE ratio of 25.3x to only 6.9x, which is the cheapest the stock has ever been. 
In this insight, we take a closer look at the meaningful market events which have driven the sell-off in Vipshop as well as the short- and longer-term earnings outlook for the company. 
Going into their 3Q21 reporting period, Vipshop is facing an exceptionally high growth base set in the comparative period as well as macro-economic headwinds due to a slowing Chinese economy and retail spending, which could result in the continuation of the earnings downgrade cycle over the short- to medium-term. However, trading on an estimated 5.3x ex-cash forward PE ratio likely implies that the buy-side has factored most of this in and we are nearing the point of peak pessimism.

China

JOYY Inc. operates a global social media platform. The Company offers platform which enables users to interact with each other in real time through online live media by creating, sharing, and enjoying a vast range of entertainment content and activities. JOYY serves customers in China.

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JOYY (YY US)

So-Young's Low-Balled Proposal

How the regulator assesses such a deal, and the timing thereon, is indeterminate. But So-Young is very beaten up. Buying around here is probably...

David Blennerhassett

Cloud Village (NetEase Music) IPO: Valuation Insights

Cloud Village has launched its IPO to raise $400 million at the IPO mid-point. Our valuation analysis suggests that the IPO price is unattractive....

Arun George

51job (JOB US): That Was An Overreaction

Trading at a gross spread of 45.8%. I expect this spread to stay wide given the opaqueness of the regulatory overlay, the (likely) vacuum of...

David Blennerhassett

(Mostly) Asia M&A: October 2021 Roundup

The average premium for the new deals announced (or first discussed) in October was ~30%, with a year-to-date average of ~32% (138 deals & total...

David Blennerhassett

Vipshop: Cheapest It Has Ever Been

In this insight, we take a closer look at the meaningful market events which have driven the sell-off in Vipshop as well as the short- and longer...

Wium Malan, CFA

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