In today’s briefing:
- (Mostly) Asia M&A: May 2022 Roundup
- Dongfeng Auto (600006 CH): Dongfeng Motors’ Partial Offer
- Xinyi Glass Vs Flat Glass: Collapse and Long XYG
- Tencent: Is Tencent Trying to Cope with Revenue Slowdown?
- IQiyi – Generates Profits for the First Time; Can It Maintain Its Profitability?
- AKM’s Scheme Document, Court Meeting on 22 June, IFA Opinion
- Scivita (新光维医疗) Pre-IPO: Intense Competition Ahead
- Intco Medical Technology (300677.CH) – Declining Performance & Overcapacity Indicate Gloomy Outlook
(Mostly) Asia M&A: May 2022 Roundup
- For the month of May, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$26bn.
- The average premium for the new deals announced (or first discussed) in May was ~53%.
- This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.
Dongfeng Auto (600006 CH): Dongfeng Motors’ Partial Offer
- Dongfeng Motor (489 HK) (DFMG) has entered into an agreement to buy back the controlling stake in Dongfeng Automobile (600006 CH) (DFAC) from Nissan Motor (7201 JP).
- DFMG and Nissan’s JV (split 50:50) holds a 60.1% stake in DFAC. Under the agreement, 29.9% of the JV’s stake in DFAC will be transferred to DFMG.
- Subsequent to the completion of the transfer, DFMG will launch a partial offer for 25.1% of DFAC, with a view to holding 55% of shares out in DFAC.
Xinyi Glass Vs Flat Glass: Collapse and Long XYG
- The correlation between Xinyi Glass Holdings (868 HK) and Flat Glass (6865 HK) has narrowed thus it is time to lock the profit while it is still possible.
- Xinyi Glass formed a JV with Xinyi Solar Holdings (968 HK) to set up a polysilicon manufacturing facility.
- A 7% dividend with some potential growth juice from owning the shares at less than 7x PER is really quite a steal.
Tencent: Is Tencent Trying to Cope with Revenue Slowdown?
- Tencent reported lowest YoY increase in revenue in 1Q2022. Subsequent to this, Tencent mentioned during earnings call that it continues to scale back on loss-making activities across its business segments.
- Recent scale back of operation is in its cloud-services segment that includes loss-making activities such as projects with high proportion of sub-contractors and deeply discounted-contracts for CVM and CDN capacity.
- Layoffs have become prevalent as a cost cutting measure and Tencent is in the process of reducing headcount at gaming and fintech businesses.
IQiyi – Generates Profits for the First Time; Can It Maintain Its Profitability?
- IQiyi reported 1Q2022 results last week. Revenue fell 8.7% YoY to RMB 7.3bn (vs consensus RMB 7.22bn) and reported an OP of RMB 93.4m (vs consensus loss of RMB 297m).
- Growth in ARM helped offset decline in the number of subscribers for membership revenue. However, online advertising and content distribution both declined due to lack of content and macroeconomic weaknesses.
- IQiyi’s shares have gained 11.2% since its earnings announcement as the company reported an OPM for the first time.
AKM’s Scheme Document, Court Meeting on 22 June, IFA Opinion
- The AKM Industrial (1639 HK) scheme document is out with the court and EGM meeting on 22 June. The IFA considers the offer to be fair and reasonable.
- The key condition is the scheme approval by at least 75% and rejection by <10% of disinterested shareholders. Shareholders who hold blocking stakes have provided irrevocables.
- At last close and for a 4 August payment, the gross and annualised spread to the offer is 1.1% and 6.2%, respectively. This is a done deal.
Scivita (新光维医疗) Pre-IPO: Intense Competition Ahead
- Scivita is a China-based medical device company with a focus on single-use endoscope. The company is looking to raise up to USD100 m via a Hong Kong listing.
- In this note, we look at the company’s background, the industry dynamics and the company’s products.
- We think the company has a decent investor backing and management team but the intense competition is the main issue.
Intco Medical Technology (300677.CH) – Declining Performance & Overcapacity Indicate Gloomy Outlook
- Due to the reduction of glove selling price, lower demand, significant cost hike and inflation, it is expected that Intco would continue to face declining performance and margins.
- Under current circumstances, supply exceeds demand. The overcapacity could lead to substantial asset impairment. So, it would take some time before the industry clearing is finished or reach new balance.
- Intco’s weak performance would continue. Its share price is likely to remain depressed for some time.So, it may not be wise to bottom fishing that early even with low valuation.
Before it’s here, it’s on Smartkarma
