Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Thematic (Sector/Industry)

Street observers&nbsp;are blaming the slow down in visitor traffic from mainland as a result of the pro-democratic Occupy Central,&nbsp;increasing tension between Hongkongers and mainland Chinese, and anti-corruption campaign in China for the weak retail sales in Hong Kong.Would this be a one off event?Behind the scene, however, we think there are three important long term bearish structural trends that will have persistent&nbsp;impact on Hong Kong's tourism industry:&nbsp;<ul><li>We examined how Hong Kong is loosing its attractiveness to mainland Chinese.</li><li>We looked at how&nbsp;it is getting easier for Chinese to explore the world</li><li>We highlight some factors that are deterring Chinese from choosing Hong Kong &nbsp;as their holiday destination</li></ul>

Street observers&nbsp;are blaming the slow down in visitor traffic from mainland as a result of the pro-democratic Occupy Central,&nbsp;increasing tension between Hongkongers and mainland Chinese, and anti-corruption campaign in China for the weak retail sales in Hong Kong.Would this be a one off event?Behind the scene, however, we think there are three important long term bearish structural trends that will have persistent&nbsp;impact on Hong Kong's tourism industry:&nbsp;We examined how Hong Kong is loosing its attractiveness to mainland Chinese.We looked at how&nbsp;it is getting easier for Chinese to explore the worldWe highlight some factors that are deterring Chinese from choosing Hong Kong &nbsp;as their holiday destination

Hong Kong's Future? 3 structural bears for retailer/tourism

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
Back on the 28 February this year, SaaS provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "way of introduction". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.
</div>
<div>
In <a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a>, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 
</div>
<div>
Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.
At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 
And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 
The Scheme Document was expected to be posted on or before the 15 June, but was <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">delayed</a> on that day to at least the 19 October. 
Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0813/2021081300886.pdf" target="_blank" rel="noopener">13 August</a> said "Youzan Technology has been revising features of its application", a slightly varied statement to "Youzan Technology has continued to progress its application with the Stock Exchange" seen in previous monthly <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">updates</a>. 
Shares touched a low of HK$0.71/share on the 23 August. 
<h3>The New News</h3>
China Youzan <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0830/2021083000295.pdf" target="_blank" rel="noopener">announced</a> yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 
Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.
The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 
Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 
Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.
There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?
More below the fold.
</div>


Back on the 28 February this year, SaaS provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "way of introduction". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.


In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 


Disinterested Scheme Shareholders approved at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.
At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 
And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 
The Scheme Document was expected to be posted on or before the 15 June, but was delayed on that day to at least the 19 October. 
Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the 13 August said "Youzan Technology has been revising features of its application", a slightly varied statement to "Youzan Technology has continued to progress its application with the Stock Exchange" seen in previous monthly updates. 
Shares touched a low of HK$0.71/share on the 23 August. 
The New News
China Youzan announced yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 
Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.
The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 
Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 
Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.
There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?
More below the fold.


Equity Bottom-Up

<div>
On the 28 February, e-commerce and payment solutions provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In <a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a>, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.
</div>


On the 28 February, e-commerce and payment solutions provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders approved at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.


China Youzan (8083 HK): Reality Check As Shares Rollover

<a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a>, a provider of e-commerce and payment solutions for merchants, has <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard.
Shareholders are offered HK$0.1352/share in cash plus 0.05077265 Youzan Technology shares for every China Youzan share held. All in, the indicative Offer price is HK$2.3088/share, a 30.2% discount to last close. China Youzan is up 283% in the past year, and 44% YTD prior to the offer. 
The Offeror - China Youzan's CEO Zhu Ning -  will not increase the Scheme Consideration and does not reserve the right to do so.
Pre-conditions include SEHK approving Youzan Tech's listing; together with a handful of ordinary resolutions to be voted on by Disinterested Scheme shareholders at an SGM, none of which are expected to be cause for concern.
The Scheme vote is standard: at least 75% of Disinterested Scheme Shares voting FOR the Scheme &amp; not more than 10% of ALL Disinterested Scheme Shares against. China Youzan is incorporated in the Caymans so the headcount test applies. No single shareholder holds a blocking stake.
The in-specie ratio distribution of Youzan Tech is equivalent to the control ratio. The pushback, if any, may come from the fair value assigned to China Youzan's rump. 
More below the fold.

China Youzan Limited (8083 HK), a provider of e-commerce and payment solutions for merchants, has announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard.
Shareholders are offered HK$0.1352/share in cash plus 0.05077265 Youzan Technology shares for every China Youzan share held. All in, the indicative Offer price is HK$2.3088/share, a 30.2% discount to last close. China Youzan is up 283% in the past year, and 44% YTD prior to the offer. 
The Offeror - China Youzan's CEO Zhu Ning -  will not increase the Scheme Consideration and does not reserve the right to do so.
Pre-conditions include SEHK approving Youzan Tech's listing; together with a handful of ordinary resolutions to be voted on by Disinterested Scheme shareholders at an SGM, none of which are expected to be cause for concern.
The Scheme vote is standard: at least 75% of Disinterested Scheme Shares voting FOR the Scheme &amp; not more than 10% of ALL Disinterested Scheme Shares against. China Youzan is incorporated in the Caymans so the headcount test applies. No single shareholder holds a blocking stake.
The in-specie ratio distribution of Youzan Tech is equivalent to the control ratio. The pushback, if any, may come from the fair value assigned to China Youzan's rump. 
More below the fold.

China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech

Hong Kong

China Smartpay Group Holdings Limited is an investment holding company primarily engaged in providing payment-focused e-commerce, fintech, and high-end rights customization services. The company offers prepaid cards, internet payment, cross-border payment, and personalized payment services, operating platforms like Colourful and SmartPay. It was founded in 2001 and is headquartered in Hong Kong.

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China Smartpay Group (8325 HK)

Hong Kong's Future? 3 structural bears for retailer/tourism

Street observers are blaming the slow down in visitor traffic from mainland as a result of the pro-democratic Occupy Central, increasing tension...

Ke Yan, CFA, FRM

China Youzan (8083 HK): Once Bitten ...

But I would avoid this stock and extremely volatile. Plus there is a question mark over timing, and whether the listing gets Exchange approval. I...

David Blennerhassett

China Youzan (8083 HK): Reality Check As Shares Rollover

Buying China Youzan means you are buying the Youzan Tech IPO at an Implied EV/sales multiple. That's around a 10% premium to peers currently. The...

David Blennerhassett

China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech

I would avoid the stock. Valuations exceed what the independent valuer considers is fair. I'd look to re-enter if this closes in on the implied...

David Blennerhassett

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