Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud

WH Group Post-Tender Outlook - Index Selldown and Back-End Trading/Valuations

WH Group Offer Doc Out - This Little Piggy Went To Market

WH Group - Long-Only Fundamental Investors Can Take Advantage Too

WH Group Vs Peers - Too Many Piggies Going to Market?

Quiddity Advisors

Event-Driven

The <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> Partial Offer to buy back 13% of shares outstanding at HK$7.80/share (a 15.9% premium to yesterday's close) went Unconditional yesterday as yesterday's EGM <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0816/2021081601150.pdf" target="_blank" rel="noopener">passed</a> the proposal and the Whitewash Waiver. This deal is live, and closes on 30 August. Unlike other partial offers where one looks at spot price, potential participation/pro-ration, and prices a breakeven against peers, this deal also creates 15% EPS accretion compared to pre-deal. I'd note that despite the premium to the buyback, and the IFA saying fair value is lower, the Controlling Shareholders are not tendering anything.The unaudited <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0812/2021081201179.pdf" target="_blank" rel="noopener">results</a> of 70.3%-owned Chinese unit Henan Shuanghui were out 12 August.  OP was down in H1 to 30 June vs 2020 as live hog prices plummeted and the relative ratio of feed to pork was up, and other costs were down but not as much, and EPS was down 20.0% year-on-year in H1 2021. Unaudited <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0812/2021081200442.pdf" target="_blank" rel="noopener">results</a> of WH Group as a whole were out the same day. Sales volume of packaged meats and pork increased by 2.5% and 10.1% respectively; revenue was up by 6.8%. Operating Profit decreased by 0.5%. Profit attributable to owners of the Company, before biological fair value adjustments, decreased by 2.0%. After adjustments it was up, despite live hog prices falling. US cash prices continue to outpace futures (strong spot demand against weaker forward exports to China and increased supply on seasonal weight gain).We now come down to the wire. Investors should have a long, hard look at where they sit, and why. In the very big picture, WH Group does not look out of place given the 15% EPS accretion and diversified sources and sales markets. But near-term, one could be forgiven for thinking it is nearly priced in. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/264/original/Screenshot+2021-08-17+at+3.08.58+PM.png?1629184157" class="editor-image img-responsive" data-smartkarma-image-id="224264"></figure></section><section class="figure"><div class="content-highlight">With about ten days to make a decision, and onshore pork and hog prices perhaps reaching something of an inflection point, the relative merits are less easy than they were as the ratio of the WH Group Back End to its Asia Peer Basket is now at its highest in more than a year and it is only a little bit off its high vs its non-HK/CH Global Peer Basket.</div></section>Much more below the fold.<hr>The series of insights on this event are:<table class="table table-striped">
<colgroup>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="text-align: center; width: 95pt;">Date</td>
<td style="width: 94pt;">Relative Direction</td>
<td style="width: 400pt;">Title</td>
</tr>
<tr>
<td style="text-align: center;">2-Jun-21</td>
<td>Bullish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-288-hk-today-s-pig-is-tomorrow-s-bacon" target="_blank" rel="noopener">WH Group (288 HK): Today’s Pig Is Tomorrow’s Bacon?</a></td>
</tr>
<tr>
<td style="text-align: center;">6-Jun-21</td>
<td>Bullish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-buyback-offer-announced-strong-accretion-creates-accretion-risk" target="_blank" rel="noopener">WH Group Buyback Offer Announced - Strong Accretion Creates Accretion Risk</a></td>
</tr>
<tr>
<td style="text-align: center;">20-Jun-21</td>
<td>Bullish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-vs-peers-too-many-piggies-going-to-market" target="_blank" rel="noopener">WH Group Vs Peers - Too Many Piggies Going to Market?</a></td>
</tr>
<tr>
<td style="text-align: center;">5-Jul-21</td>
<td>Bearish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-trading-opportunities-abound" target="_blank" rel="noopener">WH Group - Trading Opportunities Abound</a></td>
</tr>
<tr>
<td style="text-align: center;">10-Jul-21</td>
<td>Bullish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-long-only-fundamental-investors-can-take-advantage-too" target="_blank" rel="noopener">WH Group - Long-Only Fundamental Investors Can Take Advantage Too</a></td>
</tr>
<tr>
<td style="text-align: center;">30-Jul-21</td>
<td>Bullish</td>
<td><a href="https://www.smartkarma.com/insights/wh-group-offer-doc-out-this-little-piggy-went-to-market" target="_blank" rel="noopener">WH Group Offer Doc Out - This Little Piggy Went To Market</a></td>
</tr>
</tbody>
</table>

The WH Group (288 HK) Partial Offer to buy back 13% of shares outstanding at HK$7.80/share (a 15.9% premium to yesterday's close) went Unconditional yesterday as yesterday's EGM passed the proposal and the Whitewash Waiver. This deal is live, and closes on 30 August. Unlike other partial offers where one looks at spot price, potential participation/pro-ration, and prices a breakeven against peers, this deal also creates 15% EPS accretion compared to pre-deal. I'd note that despite the premium to the buyback, and the IFA saying fair value is lower, the Controlling Shareholders are not tendering anything.The unaudited results of 70.3%-owned Chinese unit Henan Shuanghui were out 12 August.  OP was down in H1 to 30 June vs 2020 as live hog prices plummeted and the relative ratio of feed to pork was up, and other costs were down but not as much, and EPS was down 20.0% year-on-year in H1 2021. Unaudited results of WH Group as a whole were out the same day. Sales volume of packaged meats and pork increased by 2.5% and 10.1% respectively; revenue was up by 6.8%. Operating Profit decreased by 0.5%. Profit attributable to owners of the Company, before biological fair value adjustments, decreased by 2.0%. After adjustments it was up, despite live hog prices falling. US cash prices continue to outpace futures (strong spot demand against weaker forward exports to China and increased supply on seasonal weight gain).We now come down to the wire. Investors should have a long, hard look at where they sit, and why. In the very big picture, WH Group does not look out of place given the 15% EPS accretion and diversified sources and sales markets. But near-term, one could be forgiven for thinking it is nearly priced in. With about ten days to make a decision, and onshore pork and hog prices perhaps reaching something of an inflection point, the relative merits are less easy than they were as the ratio of the WH Group Back End to its Asia Peer Basket is now at its highest in more than a year and it is only a little bit off its high vs its non-HK/CH Global Peer Basket.Much more below the fold.The series of insights on this event are:







Date
Relative Direction
Title


2-Jun-21
Bullish
WH Group (288 HK): Today’s Pig Is Tomorrow’s Bacon?


6-Jun-21
Bullish
WH Group Buyback Offer Announced - Strong Accretion Creates Accretion Risk


20-Jun-21
Bullish
WH Group Vs Peers - Too Many Piggies Going to Market?


5-Jul-21
Bearish
WH Group - Trading Opportunities Abound


10-Jul-21
Bullish
WH Group - Long-Only Fundamental Investors Can Take Advantage Too


30-Jul-21
Bullish
WH Group Offer Doc Out - This Little Piggy Went To Market




WH Group Partial Buyback Offer Now Unconditional