Daily Brief China: EVOC Intelligent Technology Company Limited H, Tencent, Magic Empire Global, Chongqing Hongjiu Fruit, Guangzhou R&F Properties and more

• EVOC Intelligent Technology Company Limited H (2308 HK) announced a privatisation offer from Mr Chen Zhi Lie, the ultimate controlling shareholder, at HK$1.75 per H share. 
• The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.  
• The offer price is final. The offer is attractive in comparison to long-term historical share prices and multiples. We think that Mr Chen’s third privatisation attempt will likely succeed. 

• Tencent aims to raise shareholdings in an overseas game company and reduce shareholdings in a domestic movie producer.
• Tencent and NetEase have not got new game licenses and a license black market has emerged in China.
• Autohome revenue decreased in 4Q22 due to the lockdown in Shanghai.

• Magic Empire Global (MEGL US) is the second biggest bubble in 2022, after AMTD Digital (HKD US). 
• We believe there are two major reasons for MEGL’s surging share price including US retail investors’ buying frenzy post AMTD Digital and the “scarcity effect” of new Chinese IPOs.
• Sell MEGL as it makes little sense to put any of your valuable amounts of capital into this stock. The bubble has already started to burst on MEGL. 

• Magic Empire Global (MEGL US) shares are currently up 45x since its listing at US$4.00 per share on 5 August. Its market cap currently stands at US$3.6 billion.
• Just like AMTD Digital (HKD US), it is hard to pinpoint the real reason for MEGL’s share price surge. MEGL’s financials are uninspiring and cannot justify the share price ramp.
• MEGL has no unique competitive advantage which could justify it’s current large premium multiple compared to larger and better-established peers.    

• Chongqing Hongjiu Fruit (CHF HK)  focuses on managing the entire supply chain for quality fruits grown in China, Thailand and Vietnam.
• The company has a portfolio of 49 fruit categories and has filed for an IPO on HKEx and plans to raise proceeds of US$300m.
• CHF’s earnings growth is slowing down while margins are trending downwards and the company’s cashflow burn is increasing

• After shares were suspended on the 1 August, electronics play and property developer EVOC Intelligent Technology Company Limited H (2308 HK) has announced a privatisation at HK$1.75 per H-share.
• This Offer is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
• The premium to last close is just 15.13%; however, it is a 42.28% premium to the five-day closing average. This is EVOC’s third privatisation attempt in the past five years. 

• Magic Empire Global (MEGL US)  priced its IPO at $4.00 per share in August. Unknown financial services company sold 5M ordinary shares to investors and raised ~$18M.
• Return since IPO totaled a whopping ~2,825%. IPO investors are sitting on ~$570M in paper profits and own 25% of Magic Empire’s shares outstanding. 
• Network 1 Financial Securities, an independent full-service broker-dealer based in New Jersey, led the offering. The firm specializes in investment banking services for small to mid-sized companies. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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