Daily Brief China: CPMC Holdings, Meituan and more

In today’s briefing:

CPMC Holdings (906 HK): ORG’s Competing Offer Kicks off an Auction
Game On As ORG Lobs Competing Offer For CPMC (906 HK)
[Meituan (3690 HK, BUY, TP HK$156) TP Change]: Counting on Execution to Navigate the Uncertainties

CPMC Holdings (906 HK): ORG’s Competing Offer Kicks off an Auction

CPMC Holdings (906 HK) disclosed a competing pre-conditional voluntary offer from ORG Technology Co., Ltd. A (002701 CH) at HK$7.21, a 4.9% premium to Changping Industrial’s HK$6.87 offer.
Like the Changping Industrial offer, ORG’s offer is pre-conditional on regulatory approvals and has a 50% minimum acceptance condition. Changping Industrial has secured all regulatory approvals except SAMR.
ORG’s skinny premium and precarious irrevocable from Mr Zhang Wei suggests Changping Industrial’s next move is to secure Mr Wei’s irrevocable with a revised higher offer.

After six months had elapsed, and CPMC Holdings (906 HK)‘s Offeror just needing SAMR/SAFE clearance before launching a firm bid, a competing Offer from ORG Technology (002701 CH) appeared unlikely.
Yet in a surprise move, ORG has made a pre-conditional (NDRC, SAFE, MoC, SAMR, and shareholder approval) Offer at HK$7.21/share, a 4.9% premium to the ongoing SASAC/NCSSF Offer.
ORG’s pre-con Offer also has a 50% acceptance condition. ORG and concert parties have 24.43%. And Zhang Wei (22.01%) has given has an irrevocable. Directors have 0.87%. Intriguing situation.

Meituan reported C1Q24 revenue 6.0%/6.2% higher our estimate/consensus, and adjusted net income 19%/29% higher than our estimate/consensus. The stock fell on lower takeout order and in-store revenue guidance for C2Q24;
The stock has two uncertainties:(1)Strategic moves by Douyin and Eleme,(2)success of overseas expansion. There are no easy answers to these two questions but we believe the corner has been turned
We maintain the stock as BUY rating and raise TP to HK$156/share to factor in the improvement in profitability.

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