IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Languang Justbon’s Mandatory Offer and Voluntary Delisting Proposal from Country Garden Services

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Languang Justbon Possible General Offer from Country Garden Services

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Sichuan Languang Justbon Service Group / Event-Driven

Sichuan Languang Justbon Service Group (2606 HK)

<a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> provided an update pursuant to Rule 3.7 of the Hong Kong Code on Takeovers and Mergers. As a reminder on 25 February 2021, Languang Justbon announced that Languang Hejun, the controlling shareholder, entered a memorandum of understanding (MOU) with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> to sell 115.1 million H shares (64.62% of the outstanding shares) at a price of RMB42.1105 per H share. The MOU has been updated such that Languang Hejun will sell Country Garden Services also 0.75 million domestic shares (0.42% of the outstanding shares) in addition to the previously agreed 115.1 million H shares (64.62% of the outstanding shares). The total represents Languang Hejun entire shareholding of 115.8 million shares, which represents 65.04% of the outstanding shares. Also, the acquisition price has been modestly bumped 1.8% from RMB42.1105 per H share to RMB42.8546 per H share or per domestic share. Country Garden Services will also pay a deposit of RMB1,985.67 million to Languang Hejun and Languang Hejun shall execute a share charge over 106.9 million H shares (60.00% of the outstanding shares) in favour of Country Garden Services.If the potential transaction materialises it may lead to a general offer at the higher of (i) the price paid to Languang Hejun, and (ii) the HK$ equivalent of RMB42.8546 (HK$51.30 per share at an FX rate of 0.8353). <div class="content-highlight">We think that this latest development takes the transaction one step closer to completion. At the last close price of HK$47.55, the gross spread to the possible general offer price of HK$51.30 per share is 7.9%. The downside risk to a failed agreement remains low as Languang Justbon is trading close to its break price, in our view. The forward P/E of 9.7x implied by the last close price is 11% above the 6-month forward P/E multiple of 8.7x but 9% below the 1-year average forward P/E of 10.7x (calculated up to 22 February prior to the trading halt). </div>

Sichuan Languang Justbon Service Group (2606 HK) provided an update pursuant to Rule 3.7 of the Hong Kong Code on Takeovers and Mergers. As a reminder on 25 February 2021, Languang Justbon announced that Languang Hejun, the controlling shareholder, entered a memorandum of understanding (MOU) with Country Garden Services Holdings (6098 HK) to sell 115.1 million H shares (64.62% of the outstanding shares) at a price of RMB42.1105 per H share. The MOU has been updated such that Languang Hejun will sell Country Garden Services also 0.75 million domestic shares (0.42% of the outstanding shares) in addition to the previously agreed 115.1 million H shares (64.62% of the outstanding shares). The total represents Languang Hejun entire shareholding of 115.8 million shares, which represents 65.04% of the outstanding shares. Also, the acquisition price has been modestly bumped 1.8% from RMB42.1105 per H share to RMB42.8546 per H share or per domestic share. Country Garden Services will also pay a deposit of RMB1,985.67 million to Languang Hejun and Languang Hejun shall execute a share charge over 106.9 million H shares (60.00% of the outstanding shares) in favour of Country Garden Services.If the potential transaction materialises it may lead to a general offer at the higher of (i) the price paid to Languang Hejun, and (ii) the HK$ equivalent of RMB42.8546 (HK$51.30 per share at an FX rate of 0.8353). We think that this latest development takes the transaction one step closer to completion. At the last close price of HK$47.55, the gross spread to the possible general offer price of HK$51.30 per share is 7.9%. The downside risk to a failed agreement remains low as Languang Justbon is trading close to its break price, in our view. The forward P/E of 9.7x implied by the last close price is 11% above the 6-month forward P/E multiple of 8.7x but 9% below the 1-year average forward P/E of 10.7x (calculated up to 22 February prior to the trading halt). 

Languang Justbon’s General Offer from Country Garden Services - A Step Closer