Daily Brief Financials: Aquila Acquisition Corporation, Mason Group Holdings , Godrej Properties, China Zheshang Bank , Yanlord Land, Manulife Financial , Arrow Financial, Georgia Capital PLC and more

• SPACs – remember them? US offerings in 2021 topped ~US$150bn, falling to US$13bn in 2022. Singapore joined the bandwagon in January 2022  and Hong Kong two months later.
• That Hong Kong stock is Aquila Acquisition Corporation (7836 HK), and it recently announced a merger with ZG Group, a Chinese steel trading website.
• That’s positive. Less positive is how de-SPACed shares tend to trade in the US. 

• Mason Group Holdings (273 HK)‘s scheme document is out, with the vote scheduled for 3 October. The IFA considers Red Emerald Capital’s HK$0.0338 per share offer fair and reasonable. 
• The key conditions are SFC approval and the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). Peer de-rating has helped the attractiveness of the offer.
• Shareholders with blocking stakes have provided irrevocables or will accept due to the attractive ROI. At the last close and for the 21 November payment, the gross/annualised spread is 9.0%/52.1%.

• Aquila Acquisition Corporation (7836 HK) agreed to a De-SPAC transaction with ZG Group (formerly Zhaogang.com), the world’s largest digital platform for third-party steel transactions.
• ZG has a questionable business model, struggling to generate profits or underlying FCF. This dynamic suggests that ZG has not established a sustainable competitive advantage. 
• The negotiated value of ZG in the De-SPAC transaction is HK$10,004 million (US$1,277 million). Our valuation analysis suggests that this negotiated value is unrealistic.

• Godrej Properties (GPL IN) is one of the large real estate developers in India. The company has diversified presence across four of the largest markets in India. 
• Even though Godrej has strong booking pipeline, the company however faces trouble in generating cash historically.
• Its low ROCE, fragile earnings quality remains a concern. Other concerns include JV exposure, CWIP ageing along with few disclosure woes.

• Credit metrics appear worse than headlines, with what may be inflated substandard loans now at 66% of total NPLs in 1H23 compared with 21% in 1H21, requiring low provisions
• High net charge-offs can partly explain this, but high growth from RMB1.6bn during 2H18/1H19 compared with RMB7.5bn during 2H22/1H23, shows major deterioration
• 2Q23 saw CZB take credit costs of RMB10.3bn or 2.48% of loans, far higher than most other periods, but there remains high volatility, where very high figures rarely repeat QoQ

• On the 11 June, broker Mason Group (273 HK) announced a Scheme at HK$0.0338/share, a 20.7% premium to last close. Terms had not been declared final.
• The Offeror is Red Emerald. which holds no shares in Mason. Shareholders with 47.55% of shares out have given irrevocables in support of the Scheme. 
• The Scheme Doc is now out. The EGM/Court Meeting will be held on the 3 Oct with expected payment around the 21 November. Trading wide to terms.

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.

• Country Garden Holdings Co
• Greentown China
• Hopson Development
• Innergex Renewable Energy
• Yanlord Land

• Manulife Financial Corporation produced a fair result with decent momentum in its top-line KPIs, with APE sales, new business value, and new business CSM all up by double digits.
• Besides, they achieved APE sales of $1.6 billion, a new business value of $585 million, and a new business CSM of $592 million, an increase of 15% from the preceding year and in line with their medium-term plan.
• They have now added Manulife Vitality to new Manulife Par individual insurance policies in Canada, considerably broadening their behavioral insurance program.

• The CN-3 well encountered 67 feet of oil pay in two Ubaque zones plus 23 feet of oil pay in the C7 and 59 feet in the Lower Gacheta formations.
• The oil pay encountered in the Ubaque at CN-3 is thicker than at CN-2 (~60 feet). The characteristics of the reservoir are very good and similar to those encountered in the CN-1 and CN-2 wells.
• The Lower Ubaque zone was initially tested at 593 bbl/d of oil with a 30% water cut. The water cut subsequently increased and the test was terminated. 

Georgia Capital (GCAP) delivered positive newsflow during August, including the successful pricing of its new sustainability-linked bond (with proceeds used to redeem the 2024 Eurobond), as well as its Q223 results release, with a robust 8.2% NAV total return (TR) in GEL terms posted during the quarter. We believe that the successful bond refinancing, coupled with continued deleveraging at holding level (net capital commitment ratio of 17.4% at end-June 2023) further reduces GCAP’s risk profile. Despite the above, GCAP’s shares are still trading at a relatively wide c 58% discount to its ‘live’ NAV estimate.