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

<p><strong><em>*Results Better Than Expected: </em></strong>Bank of East Asia (23.HK) [BEA] reported 1H21 results of HKD 2.3 bn – improving HKD 579 mn (34.3%) HOH despite a tax rate of 14.9% (negative 6.8% in 2H20). Results were supported by both a reduced loss provision and net interest income improvement; and  </p><p><strong><em>*Credit Turn, But Premature Provision Cut: </em></strong> By our analysis, we find that credit deterioration appears to be decelerating as net new NPLs have increased 29.3% on an annualized basis versus over 60% at 2H20. Assuming that the decelerated breakdown in credit at BEA holds, we find that loss reserves remain wanting by HKD 4.5 bn or nearly one year of bottom-line results. </p>

*Results Better Than Expected: Bank of East Asia (23.HK) [BEA] reported 1H21 results of HKD 2.3 bn – improving HKD 579 mn (34.3%) HOH despite a tax rate of 14.9% (negative 6.8% in 2H20). Results were supported by both a reduced loss provision and net interest income improvement; and  *Credit Turn, But Premature Provision Cut:  By our analysis, we find that credit deterioration appears to be decelerating as net new NPLs have increased 29.3% on an annualized basis versus over 60% at 2H20. Assuming that the decelerated breakdown in credit at BEA holds, we find that loss reserves remain wanting by HKD 4.5 bn or nearly one year of bottom-line results. 

Bank of East Asia – Premature Provision Cut

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/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a>/CHB has despatched the scheme document in relation to a privatisation offer from Yuexiu Holdings, the largest shareholder who holds 74.97% of outstanding shares. The offeror will offer HK$20.80 per scheme share.</p><p>Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the privatisation precedent comparison could be improved. </p><div class="content-highlight"><p>The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). With no shareholder holding a blocking stake, we continue to believe that the substantial premium of the offer price to long-term average share prices and P/B multiples, makes it likely that the offer gains approval at the court meeting on 30 August (cheques dispatched on or before 7 October). At the current price of HK$20.45 per share, the gross spread to the offer price stands at 1.7%.</p></div>

Chong Hing Bank (1111 HK)/CHB has despatched the scheme document in relation to a privatisation offer from Yuexiu Holdings, the largest shareholder who holds 74.97% of outstanding shares. The offeror will offer HK$20.80 per scheme share.Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the privatisation precedent comparison could be improved. The key condition is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). With no shareholder holding a blocking stake, we continue to believe that the substantial premium of the offer price to long-term average share prices and P/B multiples, makes it likely that the offer gains approval at the court meeting on 30 August (cheques dispatched on or before 7 October). At the current price of HK$20.45 per share, the gross spread to the offer price stands at 1.7%.

Chong Hing’s Scheme Document, IFA Opinion

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p>On the 18 May, Yue Xiu (the investment arm of the Guangzhou municipal government) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0519/2021051900117.pdf" target="_blank" rel="noopener">made an Offer</a>, by way of a Scheme, for <a href="https://www.smartkarma.com/entities/chong-hing-bank-ltd" target="_blank" data-smartkarma-citation="entities:344:1" rel="noopener">Chong Hing Bank (1111 HK)</a> shares not owned, at HK$20.80/share, a 51.2% premium to last close, and a 97% premium to the day preceding the last trading day. The Cancellation Price, which was a 10.1% discount to the NAV, would NOT be increased.</p>
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<p>Standard Scheme conditions apply. Chong Hing is Hong Kong incorporated, therefore there is no headcount test.</p>
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<p>The Scheme Document is now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0730/2021073000133.pdf" target="_blank" rel="noopener">out</a>.  The Scheme Meeting will be held on the 30 August with expected payment (assuming the Scheme resolutions are approved by independent shareholders) on the 7 October.</p>
<p>The IFA considers the Offer to be fair and reasonable, although that report covered the bare minimum. </p>
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<p>More below the fold.</p>
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On the 18 May, Yue Xiu (the investment arm of the Guangzhou municipal government) made an Offer, by way of a Scheme, for Chong Hing Bank (1111 HK) shares not owned, at HK$20.80/share, a 51.2% premium to last close, and a 97% premium to the day preceding the last trading day. The Cancellation Price, which was a 10.1% discount to the NAV, would NOT be increased.


Standard Scheme conditions apply. Chong Hing is Hong Kong incorporated, therefore there is no headcount test.


The Scheme Document is now out.  The Scheme Meeting will be held on the 30 August with expected payment (assuming the Scheme resolutions are approved by independent shareholders) on the 7 October.
The IFA considers the Offer to be fair and reasonable, although that report covered the bare minimum. 


More below the fold.


Chong Hing Bank (1111 HK): Scheme Doc Out. IFA Says Fair

Last Week in Event SPACE: Sembcorp, Milton, Toshiba, Dah Sing Bank, WH Group, 51job, Port Congestion

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<p>This week in StubWorld ...</p>
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<p>Both <a href="https://www.smartkarma.com/entities/dah-sing-financial-holdings" target="_blank" data-smartkarma-citation="entities:589:1" rel="noopener">Dah Sing Financial (440 HK)</a> and 74.4%-held <a href="https://www.smartkarma.com/entities/dah-sing-banking-group-ltd" target="_blank" data-smartkarma-citation="entities:342:1" rel="noopener">Dah Sing Banking (2356 HK)</a> enjoyed massive upward moves last Friday, and equally impressive downward moves earlier this week. And not a peep from either company on these unusual moves. </p>
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<p>Preceding my comments on Dah Sing are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Both Dah Sing Financial (440 HK) and 74.4%-held Dah Sing Banking (2356 HK) enjoyed massive upward moves last Friday, and equally impressive downward moves earlier this week. And not a peep from either company on these unusual moves. 

Preceding my comments on Dah Sing are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.







StubWorld: Mysteriously, No News Or Suspension For Dah Sing's Roller Coaster

Hong Kong

Operates as an investment holding company, which provides banking, financial and other related services

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Dah Sing Banking (2356 HK)

Bank of East Asia – Premature Provision Cut

BANK OF EAST ASIA: BEA reported 1H21 HOH results improvement of 34.3% supported by both a reduced loss provision and net interest income...

Thomas J. Monaco

Chong Hing’s Scheme Document, IFA Opinion

We broadly agree with the IFA analysis with the exception that the privatisation precedent comparison could be improved. The proposal will likely...

Arun George

Chong Hing Bank (1111 HK): Scheme Doc Out. IFA Says Fair

Taking over a bank at below book, not just with respect to precedent transactions, appears too cheap. Nevertheless, no other suitor will emerge....

David Blennerhassett

Last Week in Event SPACE: Sembcorp, Milton, Toshiba, Dah Sing Bank, WH Group, 51job, Port Congestion

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

StubWorld: Mysteriously, No News Or Suspension For Dah Sing's Roller Coaster

I'd still be long both DSF (440 HK) and DSB (2356 HK) here. I find it wholly unlikely there was no substance to that move last Friday.

David Blennerhassett

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