In today’s briefing:
- Fengxiang’s Judical Auction Successful, MGO Upcoming
- Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
- In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors
- China Internet Weekly (17Oct2022): Alibaba, JD, Tencent, 37, S.F., YTO
- Fengxiang (9977 HK): Unconditional MGO Imminent
- Xinhua Winshare (811 HK): Revisiting a Solid Yield Play Fully Backed by Net Cash
Fengxiang’s Judical Auction Successful, MGO Upcoming
- A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
- As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).
- The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%.
Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Giant Biogene Holding (GBH HK) pre-marketing a US$500 million HKEx IPO. Betagro (BTG TB) closes its books early for its THB17.4 billion (US$462 million) IPO.
- Event-Driven developments – Kingston Financial (1031 HK), Yashili International Holdings (1230 HK), China Vast Industrial Urban Development (6166 HK), Elmo Software (ELO AU), Pushpay Holdings (PPH NZ), DTAC/True.
In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors
- TSE published “English Disclosure Practice Guide” for companies with the aim of promoting disclosure in English for communicating with foreign investors, who have significant presence in TSE and Japanese companies.
- The purpose of English-language disclosure is to attract investment from overseas investors and improve valuations, but there is mismatch between information needs of overseas investors and English-language disclosure of companies.
- While this handbook is helpful for companies attempting to disclose in English for the first time, in-depth approach may be necessary for companies that need further communications with overseas investors.
China Internet Weekly (17Oct2022): Alibaba, JD, Tencent, 37, S.F., YTO
- Two logistics companies expected that their net profits to rise significantly in 3Q22.
- Alibaba’s Freshippo closed its community group purchase business after many small companies did.
- Tencent gave up on acquiring Black Shark, a mobile game handset producer.
Fengxiang (9977 HK): Unconditional MGO Imminent
- Shandong Fengxiang (9977 HK) is a company engaged in chicken breeding, slaughtering, and processing.
- Its controlling shareholder with 70.9% of shares out, via domestic shares, was unable to meet its debts, and had been forced into a judicial auction to sell its holding.
- The auction has completed. This forced stake sale should trigger an MGO, one that is likely to be unconditional. Expect an official announcement shortly.
Xinhua Winshare (811 HK): Revisiting a Solid Yield Play Fully Backed by Net Cash
- Including dividends, Xinhua Winshare (811 HK) has returned 26.8% since end-2019, significantly outperformed the market. We expect it to maintain a secured 7% dividend yield in next two years.
- Without any outstanding borrowings, it has net cash of HK$5.23 at end-1H22. This equals to 103.5% of share price. Such a strong financial position means dividend stream can be sustained.
- Its businesses of textbook and supplementary materials publication and distribution are well insulated from economic slowdown. It does not face the same regulatory risks given its ownership by local SASAC.
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