Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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After <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a> ("KPL") and <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") were both <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020500081.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading on the 5 February, KLN has now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> ("SFH").
SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.
There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.
Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a>,  amongst other conditions, a number of which are waivable. 
The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. 
The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders other than the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). 
Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.
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Lots more below the fold.  Plus Ye Olde Arb Grids (or at least one of them). 
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After Kerry Properties (683 HK) ("KPL") and Kerry Logistics Network (636 HK) ("KLN") were both suspended ahead of trading on the 5 February, KLN has now announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH) ("SFH").
SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.
There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.
Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for Kerry Express Thailand (KEX TB),  amongst other conditions, a number of which are waivable. 
The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. 
The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders other than the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). 
Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.


Lots more below the fold.  Plus Ye Olde Arb Grids (or at least one of them). 


Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

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

Equity Bottom-Up

*Bankrupt: On February 5, 2021, Luckin filed for Chapter 15 bankruptcy protection - less than a year after Luckin’s admission that its former COO, Jian Liu, “had engaged in certain misconduct, including fabricating certain transactions" beginning in 2019 amounting to about USD 310 mn ahead of its IPO; and*Will CAR Crash Next?: In addition to the common ownership of Luckin Coffee and CAR, Inc. (699.HK), and common former senior company officer problem, we also note that Ernst &amp; Young in mainland China audits both Luckin Coffee and CAR, Inc. That in and of itself does not suggest there is a problem, but the commonality does raise eyebrows. While we are not suggesting that there is a problem with CAR Inc., there are areas where we see where the investment community could challenge CAR Inc. and seek a re-audit for CAR between 2008-18.

*Bankrupt: On February 5, 2021, Luckin filed for Chapter 15 bankruptcy protection - less than a year after Luckin’s admission that its former COO, Jian Liu, “had engaged in certain misconduct, including fabricating certain transactions" beginning in 2019 amounting to about USD 310 mn ahead of its IPO; and*Will CAR Crash Next?: In addition to the common ownership of Luckin Coffee and CAR, Inc. (699.HK), and common former senior company officer problem, we also note that Ernst &amp; Young in mainland China audits both Luckin Coffee and CAR, Inc. That in and of itself does not suggest there is a problem, but the commonality does raise eyebrows. While we are not suggesting that there is a problem with CAR Inc., there are areas where we see where the investment community could challenge CAR Inc. and seek a re-audit for CAR between 2008-18. 

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

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.

Credit

In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year, with a substantial share of them being SOEs. We review broader trends as well as select cases, and discuss our takeaways on how best to asses the credit profiles of Chinese issuers. 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”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year, with a substantial share of them being SOEs. We review broader trends as well as select cases, and discuss our takeaways on how best to asses the credit profiles of Chinese issuers.   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 - USD Bond Defaults In China - Lucror Analytics

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There were some anxious moments after China's State Administration for Market Regulation (SAMR) <a href="http://www.samr.gov.cn/fldj/ajgs/jzjyajgs/202011/t20201125_323881.html" target="_blank" rel="noopener">announced</a> on the 25 November it was reviewing the MBK/ <a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1113/2020111301538.pdf" target="_blank" rel="noopener">deal</a> as a simple case  - then promptly took near-on sixty day to assess the transaction rather than the "normal" 30 days. But Car <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0125/2021012501159.pdf" target="_blank" rel="noopener">announced</a> on 25 January the pre-conditions had been fulfilled and the Composite Document would be despatched on or before 29 January. 
That despatch was pushed to the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0129/2021012901138.pdf" target="_blank" rel="noopener">1 February</a>, and now the Doc is <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0131/2021013100161.pdf" target="_blank" rel="noopener">out</a>. 
The First Closing Date is the 22 February. The IFA (Halcyon) says "fair &amp; reasonable."
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The Offer is subject to a 50% tendering condition - with MBK holding 47.43% at the completion of its SPA with UCAR, together with irrevocables. Warburg/Amber, holding 4.96% at last count, is a seller. This is done.
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More thoughts below the fold.
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There were some anxious moments after China's State Administration for Market Regulation (SAMR) announced on the 25 November it was reviewing the MBK/ Car Inc (699 HK) deal as a simple case  - then promptly took near-on sixty day to assess the transaction rather than the "normal" 30 days. But Car announced on 25 January the pre-conditions had been fulfilled and the Composite Document would be despatched on or before 29 January. 
That despatch was pushed to the 1 February, and now the Doc is out. 
The First Closing Date is the 22 February. The IFA (Halcyon) says "fair &amp; reasonable."


The Offer is subject to a 50% tendering condition - with MBK holding 47.43% at the completion of its SPA with UCAR, together with irrevocables. Warburg/Amber, holding 4.96% at last count, is a seller. This is done.


More thoughts below the fold.


Car (699 HK): Doc Out. IFA Says Fair. Done Deal

The Asia HY Trade Book for the month of January 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 January 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 - January 2021 - Lucror Analytics

China

CAR Inc generates revenue primarily from car rental business and used car sales. The Company provides short-term and long-term rentals, and financial leasing services.  In addition, Car Inc offers other value-added services including accident coverage packages, GPS navigation systems, 24/7 roadside assistance, etc.

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Car Inc (699 HK)

Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

Undisturbed is ~HK$16.92/sh, or $9.64/sh ex-SpecDiv. At HK$24.75, there are a lot of assumptions embedded. If public shareholders hold on b/c a...

David Blennerhassett

Luckin Coffee – Chapter 15

LUCKIN COFFEE: On February 5, 2021, Luckin filed for Chapter 15 bankruptcy protection after COO engaged in misconduct. Luckin and CAR have common...

Thomas J. Monaco

Asia HY Monthly - USD Bond Defaults In China - Lucror Analytics

In this month's “In-Focus”, we look at the Chinese offshore bond defaults in 2020. A record 12 issuers defaulted on USD Notes during the year,...

Lucror Analytics

Car (699 HK): Doc Out. IFA Says Fair. Done Deal

This is a done deal. Trading tight at 0.5%/6.3% gross/annualised. Watch for any last-minute weakness to pick up a spread o two below here.

David Blennerhassett

Asia HY Trade Book - January 2021 - Lucror Analytics

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

Lucror Analytics

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