Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On the 6th Dec 2023, packaging play <strong><a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a></strong> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2023/1206/2023120601566.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF). </li>
<li>A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag - this Offer looked done. Then ORG announced a possible competing proposal.</li>
<li>Nearly four months have elapsed and details on ORG's Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.</li>
</ul>


On the 6th Dec 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF). 
A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag - this Offer looked done. Then ORG announced a possible competing proposal.
Nearly four months have elapsed and details on ORG's Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.


CPMC (906 HK): Shares Retrace As Clock Ticks On ORG's Bid

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>We are convinced that both bids for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> will go ahead, as they are progressing well. The downside risk is minimal, in our view.</li>
<li>The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.</li>
<li>The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. </li>
</ul>


We are convinced that both bids for CPMC Holdings (906 HK) will go ahead, as they are progressing well. The downside risk is minimal, in our view.
The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.
The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for Shanghai Baosteel Packaging-A (601968 CH). 


CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

<ul>
<li>Underpinned by higher ASP and sequentially lower input costs, <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> should achieve better margin in 2H22. Its 17% fall in share price YTD makes it appealing.</li>
<li>Average aluminum price was down 14% so far in 2H22, vs. 1H21, good to its costs. Well-controlled selling and administrative costs will help to support profitability recovery.</li>
<li>New two-piece can capacity will grow by 54% over the next three years as 5 production lines are expected to be added. Most of them already have demand lined up.</li>
</ul>


Underpinned by higher ASP and sequentially lower input costs, CPMC Holdings (906 HK) should achieve better margin in 2H22. Its 17% fall in share price YTD makes it appealing.
Average aluminum price was down 14% so far in 2H22, vs. 1H21, good to its costs. Well-controlled selling and administrative costs will help to support profitability recovery.
New two-piece can capacity will grow by 54% over the next three years as 5 production lines are expected to be added. Most of them already have demand lined up.


CPMC Holdings (906 HK): Good Time to Re-Visit

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> may potentially receive another takeover proposal from <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a> which has a 22% market share in the industry.</li>
<li>ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.</li>
<li>CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player <a href="https://www.smartkarma.com/entities/sunrise-group-company-limited" target="_blank" data-smartkarma-citation="entities:25257:1" rel="noopener">Sunrise Group (002752 CH)</a> will now become interesting.</li>
</ul>



CPMC Holdings (906 HK) may potentially receive another takeover proposal from ORG Technology Co., Ltd. A (002701 CH) which has a 22% market share in the industry.
ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.
CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player Sunrise Group (002752 CH) will now become interesting.


CPMC Holdings (906 HK): Another Potential Contender

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/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> disclosed that <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a>, the second-largest shareholder, is considering a competing voluntary conditional general cash offer.</li>
<li>It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals. </li>
<li>The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.</li>
</ul>



CPMC Holdings (906 HK) disclosed that ORG Technology Co., Ltd. A (002701 CH), the second-largest shareholder, is considering a competing voluntary conditional general cash offer.
It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals. 
The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.


CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer

China

CPMC Holdings Ltd. manufactures food packaging products.

CPMC Holdings (906 HK)

CPMC (906 HK): Shares Retrace As Clock Ticks On ORG's Bid

I wouldn't enter here. I think ORG has run out of time to make an Offer. I'd be a buyer ~HK$6.75, should shares dip to this level. Otherwise, I'd...

David Blennerhassett