Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Yichang HEC Changjiang Pharma / Event-Driven

<ul>
<li>A "Privatisation via a Merger by Absorption" is nothing new in Hong Kong. But the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0510/2024051001146.pdf" target="_blank" rel="noopener">Offer consideration</a> for <a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC (1558 HK)</a>'s minorities is in unlisted scrip - that's new. </li>
<li>The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 "Offeror H shares".</li>
<li>These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I'd vote this down. </li>
</ul>


A "Privatisation via a Merger by Absorption" is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)'s minorities is in unlisted scrip - that's new. 
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 "Offeror H shares".
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I'd vote this down. 


Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.</li>
<li>Sunshine Lake Pharma's pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.</li>
<li>Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.</li>
</ul>


Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.
Sunshine Lake Pharma's pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.
Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.


HEC CJ Pharma (1558.HK)'s Merger Deal with Sunshine Lake Pharma - Almost No Investment Value

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a>'s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).</li>
<li>The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). </li>
<li>There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   </li>
</ul>



Yichang HEC Changjiang Pharma (1558 HK)'s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). 
There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   


HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

<ul>
<li>We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.</li>
<li>Highest spreads: <a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a>, <a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a>, <a href="https://www.smartkarma.com/entities/qv-equities-ltd" target="_blank" data-smartkarma-citation="entities:24284:1" rel="noopener">QV Equities Ltd (QVE AU)</a>, <a href="https://www.smartkarma.com/entities/ansarada-group-ltd" target="_blank" data-smartkarma-citation="entities:30718:1" rel="noopener">Ansarada Group Ltd (AND AU)</a>, <a href="https://www.smartkarma.com/entities/malaysia-airports-holdings-bhd" target="_blank" data-smartkarma-citation="entities:117:1" rel="noopener">Malaysia Airports Holdings (MAHB MK)</a>. </li>
<li>Lowest spreads: <a href="https://www.smartkarma.com/entities/chilled-frozen-logistics-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:40987:1" rel="noopener">Chilled &amp; Frozen Logistics Holdings (9099 JP)</a>, <a href="https://www.smartkarma.com/entities/mma-offshore-ltd" target="_blank" data-smartkarma-citation="entities:594:1" rel="noopener">Mma Offshore (MRM AU)</a>, <a href="https://www.smartkarma.com/entities/great-eastern-holdings-ltd" target="_blank" data-smartkarma-citation="entities:13993:1" rel="noopener">Great Eastern Holdings (GE SP)</a>, <a href="https://www.smartkarma.com/entities/mimasu-semiconductor-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:5531:1" rel="noopener">Mimasu Semiconductor Industry (8155 JP)</a>, <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a>. </li>
</ul>


We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK). 
Lowest spreads: Chilled &amp; Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU). 


Merger Arb Mondays (20 May) - L'Occitane, China TCM, SciClone, Malaysia Airports, I'rom, Hollysys

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

Yichang HEC Changjiang Pharma / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a> is set to benefit from the recent upsurge in respiratory illness in China. The company commands ~90% share of anti-flu drug market in China.</li>
<li>In 1H23, HEC Pharma’s revenue jumped 148% YoY to RMB3.2B, mainly due to spiking flu cases in China. A strong flu season in 4Q23, should boost H2 performance.</li>
<li>Despite a 43% rally in HEC Pharma share price over the last six months, the shares are trading at forward P/E of just 4.8x.</li>
</ul>



Yichang HEC Changjiang Pharma (1558 HK) is set to benefit from the recent upsurge in respiratory illness in China. The company commands ~90% share of anti-flu drug market in China.
In 1H23, HEC Pharma’s revenue jumped 148% YoY to RMB3.2B, mainly due to spiking flu cases in China. A strong flu season in 4Q23, should boost H2 performance.
Despite a 43% rally in HEC Pharma share price over the last six months, the shares are trading at forward P/E of just 4.8x.


HEC Pharma (1558 HK): Strong Performance to Continue as Flu Activity Is On Rise In China

Hong Kong

YiChang HEC ChangJiang Pharmaceutical Co Ltd develops a variety of drugs.  The Company develops and sells drugs for anti-virus, metabolic diseases, cardiovascular, and more.

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Yichang HEC Changjiang Pharma (1558 HK)

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

Maybe this gets up. Maybe this is worth HK$19.30/share. Too many maybes. If in, I'd vote this transaction down. If not in, I'd be looking elsewhere.

David Blennerhassett

HEC CJ Pharma (1558.HK)'s Merger Deal with Sunshine Lake Pharma - Almost No Investment Value

Sunshine Lake Pharma plans to privatize and merge with CJ Pharma.However, with an outdated pipeline, the new entity's valuation performance will...

Xinyao (Criss) Wang

Merger Arb Mondays (20 May) - L'Occitane, China TCM, SciClone, Malaysia Airports, I'rom, Hollysys

This week, the highest gross spreads are HEC Pharma (84.7%), Hollysys (16.5%), QV Equities (9.1%), Ansarada (8.7%), Malaysia Airports (8.3%), China...

Arun George

HEC Pharma (1558 HK): Strong Performance to Continue as Flu Activity Is On Rise In China

HEC Pharma should benefit from the upsurge in respiratory illness in China. With a forward P/E of 4.8x and 14% YoY EPS growth expectation for 2024,...

Tina Banerjee

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52-week Range

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Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

Maybe this gets up. Maybe this is worth HK$19.30/share. Too many maybes. If in, I'd vote this transaction down. If not in, I'd be looking elsewhere.

David Blennerhassett

HEC CJ Pharma (1558.HK)'s Merger Deal with Sunshine Lake Pharma - Almost No Investment Value

​Sunshine Lake Pharma plans to privatize and merge with CJ Pharma.However, with an outdated pipeline, the new entity's valuation performance will...

Xinyao (Criss) Wang

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

There is scrip valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, the deal should get...

Arun George

Merger Arb Mondays (20 May) - L'Occitane, China TCM, SciClone, Malaysia Airports, I'rom, Hollysys

This week, the highest gross spreads are HEC Pharma (84.7%), Hollysys (16.5%), QV Equities (9.1%), Ansarada (8.7%), Malaysia Airports (8.3%), China...

Arun George

HEC Pharma (1558 HK): Strong Performance to Continue as Flu Activity Is On Rise In China

HEC Pharma should benefit from the upsurge in respiratory illness in China. With a forward P/E of 4.8x and 14% YoY EPS growth expectation for 2024,...

Tina Banerjee

Sunshine Lake Pharma plans to privatize and merge with CJ Pharma.However, with an outdated pipeline, the new entity's valuation performance will...