IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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.

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<a href="https://www.smartkarma.com/entities/chinese-estates-holdings-limited" target="_blank" data-smartkarma-citation="entities:20954:1" rel="noopener">Chinese Estates Holdings (127 HK)</a> is principally engaged in property investment and development, building and property management, brokerage, securities investment, money lending and cosmetics distribution and trading. After market close on Wednesday, it announced a privatisation offer by way of a scheme of arrangement from an entity controlled by Ms HW Chan, the CEO. The offeror will offer HK$4.00 in cash for each scheme share. The bid represents a premium of 83.5% over the closing price of HK$2.18 per share on the last full trading date (28 September prior to the trading halt). Chinese Estates’ shares are down 40% since 30 June largely due to the fallout from its substantial shareholding in <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a>. Chinese Estates built up a 6.48% shareholding in Evergrande in 2017 and 2018 at an eye-watering cost of HK$13,596.0 million ($1.7 billion) and an average cost of HK$15.8 per share. Due to the precipitous decline in Evergrande share price (HK$2.95 last close prior to a trading halt), since 30 August, Chinese Estates has reduced its shareholding in Evergrande to 4.39% of outstanding shares for total cash proceeds of HK$689.2 million ($89 million). If Chinese Estates disposes of its entire shareholding, it could result in a realised loss in other comprehensive income of -HK$10,408.3 million (-$1.3 billion) in 2021. Unabashedly, the CEO justifies the privatisation based on the “material adverse change to the financial position of the Group” due to this material loss. The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 408.4 million shares or 21.41% of shares outstanding, the 10% blocking stake is 40.8 million shares or 2.14% of shares outstanding. No shareholder holds a blocking stake. <div class="content-highlight">Chinese Estates predicament is self-inflicted and due to Joseph Lau’s (HW Chan’s husband), close relationship (said to be poker pals) with Hui Ka Yan, Evergrande’s Chairman. The Lau family which controls Chinese Estates is taking advantage of the fallout from their ill-advised investment in Evergrande to privatise Chinese Estates at the cost of minority investors. While we think the offer price is unattractive, the shareholding structure suggests that that privatisation bid will be likely successful. </div>

Chinese Estates Holdings (127 HK) is principally engaged in property investment and development, building and property management, brokerage, securities investment, money lending and cosmetics distribution and trading. After market close on Wednesday, it announced a privatisation offer by way of a scheme of arrangement from an entity controlled by Ms HW Chan, the CEO. The offeror will offer HK$4.00 in cash for each scheme share. The bid represents a premium of 83.5% over the closing price of HK$2.18 per share on the last full trading date (28 September prior to the trading halt). Chinese Estates’ shares are down 40% since 30 June largely due to the fallout from its substantial shareholding in Evergrande (3333 HK). Chinese Estates built up a 6.48% shareholding in Evergrande in 2017 and 2018 at an eye-watering cost of HK$13,596.0 million ($1.7 billion) and an average cost of HK$15.8 per share. Due to the precipitous decline in Evergrande share price (HK$2.95 last close prior to a trading halt), since 30 August, Chinese Estates has reduced its shareholding in Evergrande to 4.39% of outstanding shares for total cash proceeds of HK$689.2 million ($89 million). If Chinese Estates disposes of its entire shareholding, it could result in a realised loss in other comprehensive income of -HK$10,408.3 million (-$1.3 billion) in 2021. Unabashedly, the CEO justifies the privatisation based on the “material adverse change to the financial position of the Group” due to this material loss. The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 408.4 million shares or 21.41% of shares outstanding, the 10% blocking stake is 40.8 million shares or 2.14% of shares outstanding. No shareholder holds a blocking stake. Chinese Estates predicament is self-inflicted and due to Joseph Lau’s (HW Chan’s husband), close relationship (said to be poker pals) with Hui Ka Yan, Evergrande’s Chairman. The Lau family which controls Chinese Estates is taking advantage of the fallout from their ill-advised investment in Evergrande to privatise Chinese Estates at the cost of minority investors. While we think the offer price is unattractive, the shareholding structure suggests that that privatisation bid will be likely successful. 

Chinese Estates’ Privatisation Bid from the Lau Family

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

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Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

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In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

The Asia HY Trade Book for the month of September includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of September includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - September 2021 - Lucror Analytics

In this month’s "In-Focus" section, we discuss variable interest entities (VIEs) in China, including recent developments in China and the US that may complicate the future use of VIEs. We also give an overview of recent bond defaults. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s "In-Focus" section, we discuss variable interest entities (VIEs) in China, including recent developments in China and the US that may complicate the future use of VIEs. We also give an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Chinese Variable Interest Entities - Lucror Analytics

China

Kaisa Group Holdings Limited is an integrated real estate company. The Group focuses on urban development and operation. Kaisa Group's real estate business covers the planning, development and operation of large-scale residential properties and integrated commercial properties.

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Kaisa Group Holdings (1638 HK)

Chinese Estates’ Privatisation Bid from the Lau Family

The Lau family is taking advantage of the Evergrande stake fallout to privatise Chinese Estates at the cost of minorities. The offer is...

Arun George

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related...

Lucror Analytics

Asia HY Trade Book - September 2021 - Lucror Analytics

The Asia HY Trade Book for the month of September includes a summary of our recommendations, as well as our high-conviction ideas. The report...

Lucror Analytics

Asia HY Trade Book - September 2021 - Lucror Analytics

The Asia HY Trade Book for the month of September includes a summary of our recommendations, as well as our high-conviction ideas. The report...

Lucror Analytics

Asia HY Monthly - Chinese Variable Interest Entities - Lucror Analytics

In this month’s "In-Focus" section, we discuss variable interest entities (VIEs) in China, including recent developments in China and the US that...

Lucror Analytics

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