Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<p>This insight re-introduces a weekly monitor for H-Share/A-Share spreads.</p>
<p>The monitor will be published every weekend for the data ending the previous week. It includes all stocks where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...</p>
<ul>
<li>H/A Discount,</li>
<li>movement in H/A Discount over 5 and 20 days,</li>
<li>a 52-week Z-score for the spread,</li>
<li>A chart showing evolution of the H/A spread over the last 20 days,</li>
<li>Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, </li>
<li>There is also a chart showing the narrowest and widest spread and the average spread over the last three years. </li>
</ul>
<p>In the example for the H/A spreads in the <strong>Materials</strong> sector below, spreads were generally flat over the past five days and were wider by 1.5% over the past 20 days. Southbound were net buyers on average on the H side of each pair over both 5 days and 20 days. <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> and <a href="https://www.smartkarma.com/entities/ganfeng-lithium-co-ltd" target="_blank" data-smartkarma-citation="entities:26795:1" rel="noopener">Ganfeng Lithium (1772 HK)</a> are spreads at the relatively narrow end of their 52-week ranges, while <a href="https://www.smartkarma.com/entities/maanshan-iron-steel-h" target="_blank" data-smartkarma-citation="entities:204:1" rel="noopener">Maanshan Iron &amp; Steel H (323 HK)</a>, <a href="https://www.smartkarma.com/entities/bbmg-corp-h" target="_blank" data-smartkarma-citation="entities:2821:1" rel="noopener">BBMG Corp H (2009 HK)</a>, <a href="https://www.smartkarma.com/entities/sinopec-shanghai-petrochemical-co-ltd" target="_blank" data-smartkarma-citation="entities:17576:1" rel="noopener">Sinopec Shanghai Petrochemical (338 HK)</a>, and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement Co Ltd H (914 HK)</a> are at the wider end of their 52-week ranges. The average spread in the sector widened somewhat dramatically in the month of August as seen on the chart, but stabilized at the beginning of September.</p>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/165/714/original/Screenshot%202020-10-18%20at%202.00.22%20AM.png?1602957633" class="editor-image img-responsive" data-smartkarma-image-id="165714"></figure>
<p></p>
</section>
</section>
<p>Commentary is offered for the major movers and influences along with market observations on the sector rotation movement and particularly significant changes.</p>
<div class="content-highlight">
<p>Recommendations are in highlights like this.</p>
</div>
<section class="figure">
<p>More below the fold.  </p>
<hr>
<p><em>By the way, there are two versions of the Spread Evolution mini charts. Input is welcomed in the Discussion section as to which one is preferred (bars or lines).</em></p>
</section>

This insight re-introduces a weekly monitor for H-Share/A-Share spreads.
The monitor will be published every weekend for the data ending the previous week. It includes all stocks where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...

H/A Discount,
movement in H/A Discount over 5 and 20 days,
a 52-week Z-score for the spread,
A chart showing evolution of the H/A spread over the last 20 days,
Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, 
There is also a chart showing the narrowest and widest spread and the average spread over the last three years. 

In the example for the H/A spreads in the Materials sector below, spreads were generally flat over the past five days and were wider by 1.5% over the past 20 days. Southbound were net buyers on average on the H side of each pair over both 5 days and 20 days. Shandong Gold Mining Co., Ltd. (1787 HK) and Ganfeng Lithium (1772 HK) are spreads at the relatively narrow end of their 52-week ranges, while Maanshan Iron &amp; Steel H (323 HK), BBMG Corp H (2009 HK), Sinopec Shanghai Petrochemical (338 HK), and Anhui Conch Cement Co Ltd H (914 HK) are at the wider end of their 52-week ranges. The average spread in the sector widened somewhat dramatically in the month of August as seen on the chart, but stabilized at the beginning of September.






Commentary is offered for the major movers and influences along with market observations on the sector rotation movement and particularly significant changes.

Recommendations are in highlights like this.


More below the fold.  

By the way, there are two versions of the Spread Evolution mini charts. Input is welcomed in the Discussion section as to which one is preferred (bars or lines).


Quiddity Weekly H/A: Share Spread Monitor 16 Oct 2020

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.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/hengxing-gold-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:8874:1" rel="noopener">Hengxing Gold Holding (2303 HK)</a>/HXG is a gold miner and producer which owns the Gold Mountain Mine, the largest individual mine in Xinjiang, as measured by annual ore processing capacity and gold production. HXG has total gold resources of 77.28 tonnes and total gold reserves of 39.76 tonnes.</p><p>HXG has received an all-stock privatisation offer from <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a>/SDGM. SDGM is offering 5/29 SDGM H share for every scheme share. The share exchange ratio will not be adjusted for the HXG special dividend (RMB0.3157/HK$0.3585 per ordinary share) which will be paid on 30 October 2020. The privatisation price of HK$3.29 based on the last close prices implies a discount of 2.43% to the HXG last close price of HK$3.73 less the HXG special dividend resulting in a net price of HK$3.37 per HXG share.</p><div class="content-highlight"><p>The key conditions precedents are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). SDGM and concert parties do not hold any HKG shares. SDGM has received irrecovables representing 75.00% of shares outstanding. Overall, we believe that the privatisation proposal will complete. </p></div>

Hengxing Gold Holding (2303 HK)/HXG is a gold miner and producer which owns the Gold Mountain Mine, the largest individual mine in Xinjiang, as measured by annual ore processing capacity and gold production. HXG has total gold resources of 77.28 tonnes and total gold reserves of 39.76 tonnes.HXG has received an all-stock privatisation offer from Shandong Gold Mining Co., Ltd. (1787 HK)/SDGM. SDGM is offering 5/29 SDGM H share for every scheme share. The share exchange ratio will not be adjusted for the HXG special dividend (RMB0.3157/HK$0.3585 per ordinary share) which will be paid on 30 October 2020. The privatisation price of HK$3.29 based on the last close prices implies a discount of 2.43% to the HXG last close price of HK$3.73 less the HXG special dividend resulting in a net price of HK$3.37 per HXG share.The key conditions precedents are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). SDGM and concert parties do not hold any HKG shares. SDGM has received irrecovables representing 75.00% of shares outstanding. Overall, we believe that the privatisation proposal will complete. 

Shandong Gold’s Privatisation Bid for Hengxing Gold

David Blennerhassett

<div>
<p>After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900255.pdf" target="_blank" rel="noopener">halted</a> after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, <a href="https://www.smartkarma.com/entities/hengxing-gold-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:8874:1" rel="noopener">Hengxing Gold Holding (2303 HK)</a> (HGH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0930/2020093001586.pdf" target="_blank" rel="noopener">announced</a> on the 30 September a pre-conditional Scheme from <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> ("SGM").</p>
<p>Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900669.pdf" target="_blank" rel="noopener">29 September</a>, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. </p>
<p>The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.</p>
<p>Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.</p>
<p>SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.</p>
<p>This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.</p>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


After shares were halted after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, Hengxing Gold Holding (2303 HK) (HGH) announced on the 30 September a pre-conditional Scheme from Shandong Gold Mining Co., Ltd. (1787 HK) ("SGM").
Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the 29 September, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. 
The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.
SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.
This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.


As always, more below the fold.


Hengxing (2303 HK): Offer From Shandong Gold

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

<div>
<p>Last Wednesday, Nordgold <a href="https://www.asx.com.au/asxpdf/20200902/pdf/44m7p0lx0p11z0.pdf" target="_blank" rel="noopener">bumped</a> its Offer for <a href="https://www.smartkarma.com/entities/cardinal-resources-ltd" target="_blank" data-smartkarma-citation="entities:12256:1" rel="noopener">Cardinal Resources (CDV AU)</a> by 36.4% to A$0.90/share from A$0.66/share. This was an unconditional on-market takeover Offer; and will remain open to acceptance until the close of trading on the 10 September - unless extended. Nordgold increased its stake to <a href="https://www.asx.com.au/asxpdf/20200903/pdf/44m8y5qsvdhhlf.pdf" target="_blank" rel="noopener">28.39%</a> (from 18.71% previously) as at 2 September. </p>
<p>Under the Bid Implementation Agreement, <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> had the <a href="https://www.asx.com.au/asxpdf/20200903/pdf/44m8xnxdz73rfh.pdf" target="_blank" rel="noopener">opportunity</a> (but not the obligation) to match or provide a superior proposal to Nordgold by today. </p>
<p>This morning CDV <a href="https://www.asx.com.au/asxpdf/20200907/pdf/44md5nxqtpr7sz.pdf" target="_blank" rel="noopener">announced</a> that Shandong intends to increase its Offer Price to A$1.00/share. This Offer remains subject to a minimum acceptance condition of 50.1%. </p>
<p>Shandong's offer is a 118% premium to Nordgold's initial proposal back in March, and 300% above the one-day undisturbed price. The price of gold is up ~30% since Nordgold's March Offer.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/514/original/image_51673227451599469081750.png?1599469083" class="editor-image img-responsive" data-smartkarma-image-id="157514"></figure>
</div>
<div style="text-align: left;" class="content-caption">Source: CapIQ, ASX</div>
<div>
<p>What now?  Shandong immediately responded to Nordgold's punchy proposal, but Shandong also had the benefit of two and a half months since its last offer to crunch numbers.</p>
<p>Currently trading through terms. My back-of-the-napkin calculation suggests there <em>is</em> upside, based on the current gold price and estimated IRR. Neither Shandong nor Nordgold declared their offers "final". And the price of gold remains high. </p>
<div>
<p>As always, more below the fold.</p>
<hr>
</div>
<p><em>Past insights on Cardinal:</em></p>
</div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 218.75px;">
<h3>Date</h3>
</td>
<td style="width: 484.782px;">
<h3>Insight</h3>
</td>
</tr>
<tr>
<td style="width: 218.75px;">22-Jun-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/sVxVB" target="_blank" rel="noopener">Shandong's Competing Offer For Cardinal</a></td>
</tr>
<tr>
<td style="width: 218.75px;">15-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/E1Wgv" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Nordgold Reloads</a></td>
</tr>
<tr>
<td style="width: 218.75px;">23-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/tVkqj" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer</a></td>
</tr>
<tr>
<td style="width: 218.75px;">2-Sep-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/eGXfx" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more: </a></td>
</tr>
</tbody>
</table>
</div>
</div>


Last Wednesday, Nordgold bumped its Offer for Cardinal Resources (CDV AU) by 36.4% to A$0.90/share from A$0.66/share. This was an unconditional on-market takeover Offer; and will remain open to acceptance until the close of trading on the 10 September - unless extended. Nordgold increased its stake to 28.39% (from 18.71% previously) as at 2 September. 
Under the Bid Implementation Agreement, Shandong Gold Mining Co., Ltd. (1787 HK) had the opportunity (but not the obligation) to match or provide a superior proposal to Nordgold by today. 
This morning CDV announced that Shandong intends to increase its Offer Price to A$1.00/share. This Offer remains subject to a minimum acceptance condition of 50.1%. 
Shandong's offer is a 118% premium to Nordgold's initial proposal back in March, and 300% above the one-day undisturbed price. The price of gold is up ~30% since Nordgold's March Offer.


Source: CapIQ, ASX

What now?  Shandong immediately responded to Nordgold's punchy proposal, but Shandong also had the benefit of two and a half months since its last offer to crunch numbers.
Currently trading through terms. My back-of-the-napkin calculation suggests there is upside, based on the current gold price and estimated IRR. Neither Shandong nor Nordgold declared their offers "final". And the price of gold remains high. 

As always, more below the fold.


Past insights on Cardinal:







Date


Insight



22-Jun-20
Shandong's Competing Offer For Cardinal


15-Jul-20
Cardinal Resource (CDV AU): Nordgold Reloads


23-Jul-20
Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer


2-Sep-20
Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more: 






Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer

China

Shandong Gold Mining Co., Ltd. operates gold mining and production businesses. The Company provides gold exploration, processing, and outsourcing gold smelting services. Shandong Gold Mining also conducts gold jewelry purification and non-ferrous metal production businesses.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
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Shandong Gold Mining (1787 HK)

Shandong Gold’s Privatisation Bid for Hengxing Gold

Hengxing Gold Holding (2303 HK) HXG is a gold miner and producer which owns the Gold Mountain Mine, the largest individual mine in Xinjiang, as...

Arun George

Hengxing (2303 HK): Offer From Shandong Gold

After shares were halted lunchtime on the 22 September pursuant to the Hong Kong Code on Takeovers and Mergers, Amvig Holdings (2300 HK) last...

David Blennerhassett

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer

Don't always believe what you hear (& read). Many in the market felt the agreement and placement of shares with Shandong Gold Mining Co.,...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Weekly H/A: Share Spread Monitor 16 Oct 2020

Weekly Monitor for H-Share/A-Share spreads showing spread/discount performance, spread Z-scores, southbound buying and selling and net activity...

Travis Lundy

Shandong Gold’s Privatisation Bid for Hengxing Gold

Hengxing Gold Holding (2303 HK) HXG is a gold miner and producer which owns the Gold Mountain Mine, the largest individual mine in Xinjiang, as...

Arun George

Hengxing (2303 HK): Offer From Shandong Gold

After shares were halted lunchtime on the 22 September pursuant to the Hong Kong Code on Takeovers and Mergers, Amvig Holdings (2300 HK) last...

David Blennerhassett

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer

Don't always believe what you hear (& read). Many in the market felt the agreement and placement of shares with Shandong Gold Mining Co.,...

David Blennerhassett