In today’s briefing:
- AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
- Beijing Enterprises Urban Resources (3718 HK): Potential Offer
- Cloud Chronicles: Chindata Attracting Bytes
- Chindata: Plenty of Upside Left
- Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?
- Galaxy Entertainment: Change in Sentiment Among Greater China Managers
- WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention
- China’s Steel Industry Is In for Slower Growth, Ministry Official Says
AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
- Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
- The despatch of the Scheme Document has been delayed until the 10 June.
- Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.
Beijing Enterprises Urban Resources (3718 HK): Potential Offer
- Beijing Enterprises Water Group (371 HK) (BEW) and Beijing Enterprises Urban Resources (3718 HK) (BEUR) were both suspended this morning, the latter pursuant to the Takeovers Code.
- BEW holds ~29% in BEUR, a stake largely unchanged since BEUR’s listing in January 2020.
- A possible privatisation of BEUR follows on the heels of the ongoing take-private transaction for Guodian Technology & Environment Group (1296 HK), another waste treatment and environmental play.
Cloud Chronicles: Chindata Attracting Bytes
- According to Bloomberg, Bain Capital-backed Chindata Group (CD US) is being scoped out by industry players.
- GDS Holdings (ADR) (GDS US) is rumoured to be interested in merging with Chindata. PE outfit PAG and EQT AB (EQT SS)-backed EdgeConneX are also, reportedly, in the mix.
- Chindata’s shares popped but are still 64% below its IPO price. This rumour follows data center provider 21Vianet (VNET US)‘s recent proposal from Hina Group and Shanghai’s Industrial Bank.
Chindata: Plenty of Upside Left
- Chindata Group (CD US) is a leading carrier-neutral hyperscale data center solution provider in Asia Pacific emerging markets with a focus on China, India and Southeast Asia.
- Bloomberg and several other news media outlets reported that the company has attracted takeover interest from other firms in the industry including rival GDS and PAG.
- CD’s shares are down more than 65% since its IPO primarily driven by the ongoing regulatory crackdown on tech firms in China alongside US-China trade tensions.
Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?
- Beijing Enterprises Urban Resources (3718 HK)/BEUR and Beijing Enterprises Water Group (371 HK)/BEWG entered trading halts relating to the Code on Takeovers and Mergers and “a proposed notifiable transaction”, respectively.
- BEWG, the largest BEUR shareholder, has steadily increased its stake from 26.25% at BEUR’s IPO on 15 January 2020 to 29.45% as of 31 March 2022.
- Our best guess is that the trading halts relate to a potential mandatory general offer associated with BEWG acquiring 30%+ of the voting rights.
Galaxy Entertainment: Change in Sentiment Among Greater China Managers
- Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
- Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
- Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.
WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention
- The weak performance of WuXi AppTec’s investment business dragged down the overall net profit growth, which could get worse considering the macro uncertainties, leading to the change of valuation logic.
- The gross profit margin showed a declining trend, and cost control in the context of inflation becomes urgent. Reduced cash balance, weaker short-term solvency and liquidity should also be noticed.
- With majority revenue from overseas markets, external uncertainties (e.g. geopolitical conflict, complex Sino-US relationship, etc.) may be greater than expected. Investors may need to be ready for this.
China’s Steel Industry Is In for Slower Growth, Ministry Official Says
- China’s steel market has entered a period of slower growth due to weakened supply and demand from domestic Covid-19 flare-ups and conflicts overseas, a ministry official said.
- As China confronts its worst Covid outbreak since April 2020, the steel inventories of major producers hit a two-year high of 18.5 million tons earlier this month, as pandemic controls curbed demand and disrupted transportation.
- On the supply side, China’s crude steel output fell 10.5% year-on-year in the first quarter of 2022, while the added value of China’s ferrous metal smelting and processing industry slid 2.4% year-on-year, according to figures from the National Bureau of Statistics (NBS).
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