Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Last Week in Event SPACE ...
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<li>Reportedly <a href="https://www.smartkarma.com/entities/faw-car-company-limited-a" target="_blank" data-smartkarma-citation="entities:6497:1" rel="noopener">Faw Car Company Limited A (000800 CH)</a> is allegedly jostling to take a turn at the wheel of <a href="https://www.smartkarma.com/entities/brilliance-china-automotive" target="_blank" data-smartkarma-citation="entities:469:1" rel="noopener">Brilliance China Automotive (1114 HK)</a>.</li>
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<a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener">Harmonic Drive Systems (6324 JP)</a> is now an overpriced stock with a supply overhang. The hope of a <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a> event is now gone.</li>
<li>Whoever takes control of <a href="https://www.smartkarma.com/entities/sawada-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">Sawada Holdings (8699 JP)</a> is going to see the bulk of its major asset liquidated. Buy this stock with both hands at ¥760/share.</li>
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Murakami-affiliated bidder City Index Eleventh has launched an overbid for <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> at ¥1,210/share. The explanation is an eye-opener, and the strategy is very well done.
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<li>Ahead of the three-year anniversary lock-up expiring next month, enabling <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>/<a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> to sell more shares of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>,  Naspers' look-thru discount of 55% compares with 34% at the time of the Prosus spin-off in September 2019. </li>
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<li>Plus, other events, CCASS movements and Mood Spins.</li>
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(This insight covers specific insights &amp; comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)


Last Week in Event SPACE ...



Reportedly Faw Car Company Limited A (000800 CH) is allegedly jostling to take a turn at the wheel of Brilliance China Automotive (1114 HK).

Harmonic Drive Systems (6324 JP) is now an overpriced stock with a supply overhang. The hope of a Nabtesco Corp (6268 JP) event is now gone.
Whoever takes control of Sawada Holdings (8699 JP) is going to see the bulk of its major asset liquidated. Buy this stock with both hands at ¥760/share.

Murakami-affiliated bidder City Index Eleventh has launched an overbid for Japan Asia (3751 JP) at ¥1,210/share. The explanation is an eye-opener, and the strategy is very well done.

Ahead of the three-year anniversary lock-up expiring next month, enabling Prosus (PRX NA)/Naspers (NPN SJ) to sell more shares of Tencent Holdings (700 HK),  Naspers' look-thru discount of 55% compares with 34% at the time of the Prosus spin-off in September 2019. 




Plus, other events, CCASS movements and Mood Spins.


(This insight covers specific insights &amp; comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)

Last Week in Event SPACE: Brilliance China, Harmonic Drive, Sawada, Japan Asia, Naspers/Tencent

Brilliance China Automotive / Event-Driven

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Last September, Reuters <a href="https://www.reuters.com/article/brilliance-china-take-private-idUSKCN26F0FF" target="_blank" rel="noopener">reported</a> that state-controlled Liaoning Provincial Transportation Investment Group (LPTIG),  was planning to lead a consortium of Chinese investors to take PRC-automaker (&amp; BMW's main Chinese JV partner) <a href="https://www.smartkarma.com/entities/brilliance-china-automotive" target="_blank" data-smartkarma-citation="entities:469:1" rel="noopener">Brilliance China Automotive (1114 HK)</a> private. No deal transpired, allegedly due to "differences in valuations and financing difficulties".
A possible take-private transaction is <a href="https://www.reuters.com/article/us-faw-group-brilliance-china-m-a-exclus/exclusive-chinas-faw-considers-acquiring-bmw-partner-brilliance-for-about-7-2-billion-sources-idUSKBN2A30I5?il=0" target="_blank" rel="noopener">again in the press</a>, this time from state-owned <a href="https://www.smartkarma.com/entities/faw-car-company-limited-a" target="_blank" data-smartkarma-citation="entities:6497:1" rel="noopener">Faw Car Company Limited A (000800 CH)</a>, China’s No. 2 automaker.
Reportedly FAW will acquire the 30.43% stake held by Huachen Automotive Group, Liaoning’s state asset regulator, and 11.89% from LPTIG, triggering a Mandatory General Offer (MGO). The Offer price is rumoured to be HK$11/share, a 73% premium to the undisturbed price. 
The on-again, off-again, transaction comes amid HAG's <a href="https://www.scmp.com/business/companies/article/3107281/parent-bmws-chinese-partner-defaults-bond-declining-car-sales" target="_blank" rel="noopener">inability</a> to repay a corporate bond that matured in October last year, culminating in the group <a href="https://www.shine.cn/biz/auto/2011210271/" target="_blank" rel="noopener">entering</a> a bankruptcy restructuring the following month.
Brilliance has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0203/2021020300609.pdf" target="_blank" rel="noopener">announced</a> it has no knowledge of the potential acquisition of shares and the privatisation of the company.
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As always, more below the fold.
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Concerning the title, one of the automotive world’s most distinctive features, that immediately identifies a BMW as being a BMW, is its ‘kidney grille’.
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Last September, Reuters reported that state-controlled Liaoning Provincial Transportation Investment Group (LPTIG),  was planning to lead a consortium of Chinese investors to take PRC-automaker (&amp; BMW's main Chinese JV partner) Brilliance China Automotive (1114 HK) private. No deal transpired, allegedly due to "differences in valuations and financing difficulties".
A possible take-private transaction is again in the press, this time from state-owned Faw Car Company Limited A (000800 CH), China’s No. 2 automaker.
Reportedly FAW will acquire the 30.43% stake held by Huachen Automotive Group, Liaoning’s state asset regulator, and 11.89% from LPTIG, triggering a Mandatory General Offer (MGO). The Offer price is rumoured to be HK$11/share, a 73% premium to the undisturbed price. 
The on-again, off-again, transaction comes amid HAG's inability to repay a corporate bond that matured in October last year, culminating in the group entering a bankruptcy restructuring the following month.
Brilliance has announced it has no knowledge of the potential acquisition of shares and the privatisation of the company.


As always, more below the fold.

Concerning the title, one of the automotive world’s most distinctive features, that immediately identifies a BMW as being a BMW, is its ‘kidney grille’.


Brilliance China (1114 HK): Grilling Kidneys

China Specialist, Auto and Industrial Specialist

Victoria Li

Equity Bottom-Up

Brilliance China Automotive / Equity Bottom-Up

For the last two days there has been news that a bankruptcy petition with reference to Brilliance Group (which is now the listed co's "grandparent" company), was submitted by its supplier, because Brilliance Group failed to service its corporate bonds.Irrespective of the acceptance or rejection of this petition, short term pain on the listed Co (and consequent pressure on its share performance) is unavoidable - due to uncertainty on the management team and business strategy of the listed Co. However, we believe Brilliance Group is planning to initiate a corporate restructuring. It furnished its most valuable asset, the shares of Brilliance China (1114.HK) as loan guaranty. This means the group might want to use it as a key attractive asset for potential strategic investors. Weakness on share performance would be a good investment opportunity on Brilliance China (1114.HK)

For the last two days there has been news that a bankruptcy petition with reference to Brilliance Group (which is now the listed co's "grandparent" company), was submitted by its supplier, because Brilliance Group failed to service its corporate bonds.Irrespective of the acceptance or rejection of this petition, short term pain on the listed Co (and consequent pressure on its share performance) is unavoidable - due to uncertainty on the management team and business strategy of the listed Co. However, we believe Brilliance Group is planning to initiate a corporate restructuring. It furnished its most valuable asset, the shares of Brilliance China (1114.HK) as loan guaranty. This means the group might want to use it as a key attractive asset for potential strategic investors. Weakness on share performance would be a good investment opportunity on Brilliance China (1114.HK)

Brilliance China (1114.HK): Restructuring Could Provide a New Start

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Yongcheng Coal Default: According to Shanghai Clearing House, Yongcheng Coal and Electricity (YCE) in Henan Province failed to repay a CNY 1 bn (USD 151 mn) short-term bond despite being given the highest rating by one of mainland China’s awful domestic credit ratings agencies; and*Watch Your Banks: The yield on benchmark five-year “AAA” rated mainland Chinese corporates was 3.99% - up over 100 bp from their April 2020 low. Investor flight is pushing financing costs higher and squeezing local corporate funding in a market which is just barely recovering from the COVID-19 pandemic. Concerns remain over higher problem loans as debt service risk is heightened over higher rates, unreliable financial statements and ratings agency reports, and now an inability to refinance public debt with a number of bond sales being canceled. Further, the degradation of corporate bond values is limiting their usage as collateral.

*Yongcheng Coal Default: According to Shanghai Clearing House, Yongcheng Coal and Electricity (YCE) in Henan Province failed to repay a CNY 1 bn (USD 151 mn) short-term bond despite being given the highest rating by one of mainland China’s awful domestic credit ratings agencies; and*Watch Your Banks: The yield on benchmark five-year “AAA” rated mainland Chinese corporates was 3.99% - up over 100 bp from their April 2020 low. Investor flight is pushing financing costs higher and squeezing local corporate funding in a market which is just barely recovering from the COVID-19 pandemic. Concerns remain over higher problem loans as debt service risk is heightened over higher rates, unreliable financial statements and ratings agency reports, and now an inability to refinance public debt with a number of bond sales being canceled. Further, the degradation of corporate bond values is limiting their usage as collateral.

EV demand is booming with Shanghai's new restriction rules on non-Shanghai number plate cars. It is estimated there's 1.7mn cars in use in Shanghai use non-Shanghai plates, vs. China's EV PV car sales volume was 1.06mn in 2019. We believe Tesla (TSLA.US) and Xiaopeng (XPEV.US) would benefit more than other brands.Overall car demand in China has come in better than expected in first four weeks of October. CPCA data says China's PV retail sales increased by 17% in the first 25 days of October.Reiterate BUY on Geely (0175.HK).

EV demand is booming with Shanghai's new restriction rules on non-Shanghai number plate cars. It is estimated there's 1.7mn cars in use in Shanghai use non-Shanghai plates, vs. China's EV PV car sales volume was 1.06mn in 2019. We believe Tesla (TSLA.US) and Xiaopeng (XPEV.US) would benefit more than other brands.Overall car demand in China has come in better than expected in first four weeks of October. CPCA data says China's PV retail sales increased by 17% in the first 25 days of October.Reiterate BUY on Geely (0175.HK). 

China Auto: Oct Better than Expected, EV Demand Booming

Hong Kong

Brilliance China Automotive Holdings Limited, through its subsidiaries, manufactures and distributes minibuses and sedans in the People's Republic of China.  The Company also manufactures and trades automotive components.

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Brilliance China Automotive (1114 HK)

Last Week in Event SPACE: Brilliance China, Harmonic Drive, Sawada, Japan Asia, Naspers/Tencent

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Brilliance China (1114 HK): Grilling Kidneys

Brilliance is cheap with respect to peers, ostensibly held back by HAG's financial concerns. Brilliance is even cheaper when taking into account...

David Blennerhassett

Brilliance China (1114.HK): Restructuring Could Provide a New Start

For the last two days there has been news that a bankruptcy petition with reference to Brilliance Group (which is now the listed co's "grandparent"...

Victoria Li

Another Day, Another Default

MAINLAND CHINA DEFAULT: Yongcheng Coal Defaulted On Its Debt, Leading To Concerns About The Credibility Of AAA Rated Corporates In Mainland China...

Thomas J. Monaco

China Auto: Oct Better than Expected, EV Demand Booming

EV demand is booming with Shanghai's new restriction rules. It is estimated there's 1.7mn cars in use in Shanghai use non-Shanghai plates, vs....

Victoria Li

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