Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Logistics Property Holdings / Event-Driven

China Logistics Property Holdings (1589 HK)

<p>On the 29 December 2020, <a href="https://www.smartkarma.com/entities/china-logistics-property-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:22799:1" rel="noopener">China Logistics Property Holdings (1589 HK)</a> (CLPH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1229/2020122901322.pdf" target="_blank" rel="noopener">announced</a> Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%), were <em>"conducting a preliminary strategic review of their stakes</em>", indicating a possible change of control for the company. Shares gained 16.4% over the following three trading days. </p>
<p>Fast forward to the 9 June,  and CLPH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0609/2021060900007.pdf" target="_blank" rel="noopener">announced</a> a placement of 220mn new shares at a placing price of $3.54/share, an 18.24% discount to last close. This was arguably not the news the market was anticipating, and shares closed down ~20% at HK$3.45 versus a post-money book value of ~HK$3.90. </p>
<p>That <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0617/2021061701380.pdf" target="_blank" rel="noopener">placement</a> was completed on the 17 June. Of interest, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> bumped its stake to 10.11%, on a fully diluted basis, from 9.87% (pre-placement), becoming a substantial shareholder in the process as defined in the Listing Rules. With JD.com no longer considered part of the float - which excludes shareholders with ≥10% of a company's voting power -  CLPH was now in breach of Hong Kong's public float.</p>
<p>The takeaway at the time was that JD.com was making a clear point it was not supportive of the placement. In addition, Li and RRJ didn't participate in the placement. </p>
<p>Then at the AGM on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0629/2021062901428.pdf" target="_blank" rel="noopener">29 June</a>, shareholders voted down the ordinary resolution giving CLPH's directors the mandate to purchase 10% of shares out. This was shortly followed by a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0707/2021070701481.pdf" target="_blank" rel="noopener">requisition for an EGM</a> from ESR Cayman (holding 18.1% of shares out) proposing four directors to the board. </p>
<p>On the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0722/2021072201203.pdf" target="_blank" rel="noopener">22 July</a>, "substantial shareholders (s)" - without naming names - had indicated to CLPH its intention to assist the Company to restore the public float by disposing of its existing shares to independent third parties.</p>
<p>Curiously, CLPH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0817/2021081701346.pdf" target="_blank" rel="noopener">announce</a>d on the 17 August that Li has entered into a call option to acquire a non-core office asset from CLPH.</p>
<div>
<p>Shares increased 14% yesterday on massive volume, before shares were suspended at <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0826/2021082600505.pdf" target="_blank" rel="noopener">3.08pm</a> "<em>pending the release of an announcement which contains inside information</em>". </p>
<h3>The New News</h3>
<p>CLPH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0826/2021082601774.pdf" target="_blank" rel="noopener">announced</a> that Li was is in discussion with a potential purchaser of 26.38% of the total issued shares, which, if completed, may lead to a change in control and a mandatory general offer.</p>
<p>Shares are off 5% today as I type, on sizeable volume.</p>
</div>
<div>
<p>More below the fold.</p>
</div>

On the 29 December 2020, China Logistics Property Holdings (1589 HK) (CLPH) announced Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%), were "conducting a preliminary strategic review of their stakes", indicating a possible change of control for the company. Shares gained 16.4% over the following three trading days. 
Fast forward to the 9 June,  and CLPH announced a placement of 220mn new shares at a placing price of $3.54/share, an 18.24% discount to last close. This was arguably not the news the market was anticipating, and shares closed down ~20% at HK$3.45 versus a post-money book value of ~HK$3.90. 
That placement was completed on the 17 June. Of interest, JD.com Inc. (9618 HK) bumped its stake to 10.11%, on a fully diluted basis, from 9.87% (pre-placement), becoming a substantial shareholder in the process as defined in the Listing Rules. With JD.com no longer considered part of the float - which excludes shareholders with ≥10% of a company's voting power -  CLPH was now in breach of Hong Kong's public float.
The takeaway at the time was that JD.com was making a clear point it was not supportive of the placement. In addition, Li and RRJ didn't participate in the placement. 
Then at the AGM on the 29 June, shareholders voted down the ordinary resolution giving CLPH's directors the mandate to purchase 10% of shares out. This was shortly followed by a requisition for an EGM from ESR Cayman (holding 18.1% of shares out) proposing four directors to the board. 
On the 22 July, "substantial shareholders (s)" - without naming names - had indicated to CLPH its intention to assist the Company to restore the public float by disposing of its existing shares to independent third parties.
Curiously, CLPH announced on the 17 August that Li has entered into a call option to acquire a non-core office asset from CLPH.

Shares increased 14% yesterday on massive volume, before shares were suspended at 3.08pm "pending the release of an announcement which contains inside information". 
The New News
CLPH announced that Li was is in discussion with a potential purchaser of 26.38% of the total issued shares, which, if completed, may lead to a change in control and a mandatory general offer.
Shares are off 5% today as I type, on sizeable volume.


More below the fold.


China Logistics (1589 HK): More Talk On "Change Of Control"

In Game Of Ports: China's "Suez Blockage" Disruption, I discussed Yantian International Container Terminals (YICT), operating at around 20% capacity amid stringent COVID-19 prevention and restriction measures.
YICT forms part of the third busiest gateway in the world.

Source: World Shipping Council
The good news is that YICT is back to normal operations as of yesterday. 
That appears to be all the good news. 

The Backlog
"Normal" does not, in this instance, mean standard operating procedures immediately resume. There still remains the yet-to-be serviced queue of ships to be unloaded and discharged, in tandem with the cargo backlog to be exported from Asia.

Lars Jensen, the CEO and Partner of Sea Intelligence Consulting, provides his back-of-the-napkin numbers as to when this backlog of boxes would be cleared.
YICT handled 13.3mn TEUs in 2020, or 36,400 TEUs/day.
YICT has officially operated at 30% capacity over the past month, or a shortfall of ~25,500 TEUs/day.
Multiply that by 30 days to get a rough number of 765,000 TEUs impacted.
IICT handled a record of 45,800 TEUs/day in August 2020. So at peak operating capabilities, the backlog could be cleared in 17 days (765,000/45,800).
HOWEVER, we need to factor in normal cargo flow as more cargo arrives to feed demand in both the US and Europe. Assume 36,400 TEUs/day, which leaves 9,400 TEUs/day of excess to chip away at the backlog - implying 82 days (765,000/9,400) to clear.
Those numbers are pretty simplified.  Q3 peak season will be well underway for Xmas.

It could be argued that the diversion of cargo will lessen the backlog, however, diversion has been ongoing in recent weeks, which in turn is causing operational efficiencies at those ports, and the general flow of cargo.



The Die Had Already Been Cast

When Covid first took hold, the fallout from Asia was unknown, as was the impact on factory output. This resulted in carriers canceling sailings. It is estimated some shipping companies cut capacity by ~20% around the spring of last year.
Then people stuck at home in the US and elsewhere started buying stuff. Lots of it. Both the Port of Los Angeles and Port of Long Beach, the first and second-largest in the US, recently set new cargo handling records. US Census Bureau also indicates the ratio between inventory sizes and sales for the US retailers declined to a new historical low in April. 

This surge in demand created a bottleneck, resulting in unloading time for containers actually exceeding the time it took the ship to sail across the Pacific. Ports are physically overwhelmed getting the containers off ships, and trucks and rail to clear the port.
Suez compounded matters.  The  Suez Canal got blocked 3 months ago on the 23rd of March. Ships sailing from Asia to Europe were rerouted around Africa, and in turn, some ports were omitted on the return legs. Specific data suggests delays of up to 2 months for certain cargo that was expected to be loaded and shipped, meaning the knock-on effect from the Suze blockage still lingers in the system. 

And it's not just the US that is congested.  Just this week Maersk stopped its AE7 service from calling in on Hamburg on account of congestion and exceptional waiting times, and will discharge cargo in Bremerhaven over the next month. Hapag-Lloyd has temporarily suspended its eastbound call in Rotterdam on its FE4 service to Asia due to congestion. Platts said the Port of Liverpool in the UK suffers congestion due to understaffing, an IT outage, and a high density of stock. Re-routing to other European ports is a bigger issue than say re-routing from Yantian to Nansha in Guangdong province, on account of different customs and duties imposed. 


Maersk also reports reliability issues in Australia and New Zealand due to berth congestion.

All of this has an accordion or squeeze box effect. A two-week delay in the US will have result in a two-week delay on the return leg, which may well be following a ship that itself may also have been delayed. This could lead to the carrier canceling the ship an exporter was expecting to load its goods onto, forcing that customers to seek a replacement elsewhere, at a cost. 
When the Yantian backlog is gradually cleared, what will be the knock-on effect? 
And there is a lack of containers. Apart from ships being delayed, and anchored, waiting to be unloaded in the US and Europe, a lot of these containers don't make the return leg to Asia. According to FreightWaves, import volume from China into the US via ocean shipping is up 54% year-on-year, whereas exports are up by 4.4%.   Ideally, carriers need to carry more empty containers.


The Indices

The China (Export) Containerized Freight Index (CCFI) recorded its ninth consecutive weekly increase, and is now up 200% from a year ago, and 36% since mid-April, subsequent to which the Suez blockage occurred, followed by the Yantian slowdown. 
The CCFI is a composite index. Separate trade routes are up even more - the contract index for Asia-North Europe is up 310% compared to last year – more than quadrupling from a year ago.


Source: SSE


The World Container Index eked out its largest increase since its 2012 inception. The rates from Shanghai to Los Angeles increased 34% in the past week, to $8,548/FFE (Forty Foot container Equivalent unit) from $6,358/FFE. From Shanghai to New York, the weekly increase was 39%, from $8,017/FFE to $11,180/FFE.


Source: World Container Index, Lars Jensen

There are no indications that the rates are about to level off.


Contracts

Ocean container rates are either fixed-rates (“contract rates”), or variable-rates (“spot rates”).  If you are a large player like Walmart or Target, you're probably on a Tier-1 contract, meaning you need 10,000+ TEUs annually or roughly 200 TEUs per week.
On the 21st of June, Mitsui Osk Lines (9104 JP) published a revision to its H1 (Apr-Sep) forecast, raising Net Profit Forecast by 240% because container business profits from its One Ocean Network affiliate are vastly above expectations . This comes 7 weeks after the company made its original forecast for the fiscal year. They did not revise H2 at all, meaning the guidance is a stale number still. Other companies are likely to see similar effects, depending on their split of contract vs spot.
Transpacific contracts show no sign of abating, with carriers asking ~$17,000 per 40ft container for US east coast ports, a 1,000% increase year on year. US$20,000 appears within reach.
Not surprisingly, carriers are increasingly leaning towards spot versus contract given the current trajectory. Data is difficult to come by but I understand spot rates now exceed 50% of containers on ships, up from the teens a few years ago.
To this, based on Xeneta's data, the gap between contract and spot is widening on the Asia-Europe trade, and often exceeds US$10,000/FFE, when comparing the spot rates of small shippers compared to contract rates with large shippers. This suggests smaller import/export players are getting the short end of the stick.
Also, entering into contracts is not a water-tight guarantee you will move your cargo. Reportedly shippers are being forced to pay additional surcharges over and above contracted box prices to move goods.


Blank Sailings

A liner service is allocated a certain number of days to complete a full rotation covering all the ports of call on a schedule. When a ship does not call at one or more of its scheduled intermediate ports - due to weather issues, strikes, or what transpired at YICT - it is called a blank sailing or void sailing from these ports. This avoids the congestion and knock-on waiting time.

project44 estimates container lines blanked 298 sailings globally between 1 – 15 June with a combined vessel capacity of over 3m TEUs. This is a 300% increase in one month. The disruption at YICT did not cause all of these bank sailings, but the vast majority.

There are also planned blank sailings, wherein a ship is simply taken out of a group loop to reduce capacity on certain trade routes.  For example, if a shipping company has eight ships plying a particular transpacific route in a loop formation, if a blank sailing does occur, that liner may opt to put that ship at the back of the loop, so as to not disrupt the natural flow of capacity.  That is also removing (temporarily) supply from the system.
You can observe this by looking at the number of vessels laid up outside Yantian and other congested ports which are primary source ports (rather than destination ports). 


Alliances

The three large alliances account for 80-85% of the shipping market and include all of the top 10 container lines.
2M was formed by the two world leaders in the sector, the Ap Moller - Maersk A/S (MAERSKA DC) and the Italian-Mediterranean Mediterranean Shipping Company (MSC);
The Ocean Alliance formed by COSCO Shipping Holdings Co., Ltd (H) (1919 HK) (together with OOCL), France's CMA CGM, and Evergreen Marine Corp (2603 TT), which are the third, fourth, and seventh largest in the sector;
And THE Alliance formed by Hapag-Lloyd AG (HLAG GR),  Japan's Ocean Network Express (ONE), and Yang Ming Marine Transport (2609 TT), who are the fifth, sixth, and eighth companies in the market.
Ships are getting larger on average. But given tight margins, these massive ships often need to be at ~90% capacity in the past in order to keep these carriers in the black.
With box spot prices skyrocketing, accusations of a cartel are being fielded. That's probably a stretch - given any vessel that can be used, is probably being used. Arguably, the current supply/demand situation is out of the hands of carriers.
Carriers could keep a fixed price and simply reject some shippers (customers). But we are not seeing this.
But as and when box spot prices do eventually level off, expect those accusations to become louder.  To what degree can carriers enforce higher contractual rates once the market normalises?



Filling The Void

American Shipper reported a 5,060-TEUs was chartered at $135,000/day per day for 45-90 days. Alphaliner subsequently reported that the 4,506-TEUs was chartered for two months at $125,000/day.
MPC Container also reported it just chartered out a 2,800-TEUs vessel at above $100,000/day for 65 to 80 days. That ship, built in 2008, was bought for US$8mn. The charter alone covers that $8mn cost.
If we assume that last ship is put into the transpacific route, you're looking at ~US$3,000/FFE for the round trip, at ~80 days. And that's just the vessel cost. There will be all the other costs added on top - fuel, etc. So with spot rates at US$7,000/FFE, the chartering company is probably still making decent coin.
The flipside is that this vessel was probably plying a regional route. By taking that volume out of the equation, that regional route cost will then be hit. 


Chassis

To get an idea of the contagion effect at work here, there is currently a shortage of chassis in the US. These are the truck beds a container is placed on.
As a guide, chassis have a normal turnaround time (say 80% of chassis) of 11 days or less. That number is down to 60%. That means the ports are struggling to clear containers, resulting in a build of containers at the ports. Shippers then occur fees for storage, not to mention the delay in picking up their containers. The return of those empty containers is similarly compounded.
This week, the US International Trade Commission applied anti-dumping duties on CIMC's chassis. Ironically, this only exacerbates the shortage of chassis in the system.


What Else? How About Vessel Collisions



This video show's the Hamburg Süd vessel Cap San Antonio sustaining damage after colliding with a pier in Santos.
At ~10,000TEUs and ~50% of the weekly capacity between  East Coast South America to North Europe, taking this ship out of the loop will impact this trade route.

Again, this serves to illustrate factors that could aggravate an already existing stretched logistic situation. 





Where to Invest?

The shipping liners are making money hand over fist. 
Container manufacturers
Warehouse operators
Chassis manufacturers - although no pure listed players as far as I'm aware.


Shipping Liners

I still like COSCO Shipping Holdings Co., Ltd (H) (1919 HK) here.


        



Trading Comps


Mkt Cap (USDm)


PER (E)


EV/EBITDA (E)


P/B



Hapag-Lloyd Aktiengesellschaft
39,752
8.2x
7.0x
4.8x


A.P. Møller - Mærsk A/S
54,484
5.8x
4.1x
1.8x


DSV Panalpina A/S
52,810
37.0x
21.1x
6.8x


Kuehne + Nagel International AG
41,586
33.3x
15.7x
15.3x


Atlas Corp.
3,545
10.9x
8.6x
1.0x


COSCO SHIPPING Holdings Co., Ltd.
46,062
3.9x
5.2x
6.8x


Nippon Yusen Kabushiki Kaisha
8,576
2.8x
10.2x
1.5x


Kawasaki Kisen Kaisha, Ltd.
3,281
2.1x
20.1x
1.7x


Mitsui O.S.K. Lines, Ltd.
5,643
3.0x
15.9x
1.1x


Yang Ming Marine Transport Corporation
17,728
4.6x
3.7x
14.0x


Evergreen Marine Corporation (Taiwan) Ltd.
28,609
6.0x
4.8x
8.5x


Max
54,484
37.0x
21.1x
15.3x


Median
28,609
5.8x
8.6x
4.8x


Min 
3,281
2.1x
3.7x
1.0x


Mean
27,461
10.7x
10.6x
5.8x


Source: CapIQ



 

      



Trading Comps


One-Mth


Three-Mth


Six-Mth


One-YR



Hapag-Lloyd Aktiengesellschaft
19%
49%
119%
291%


A.P. Møller - Mærsk A/S
5%
27%
29%
153%


DSV Panalpina A/S
-1%
24%
44%
102%


Kuehne + Nagel International AG
2%
22%
54%
113%


Atlas Corp.
6%
1%
36%
97%


COSCO SHIPPING Holdings Co., Ltd.
28%
104%
133%
739%


Nippon Yusen Kabushiki Kaisha
22%
37%
116%
256%


Kawasaki Kisen Kaisha, Ltd.
31%
49%
76%
247%


Mitsui O.S.K. Lines, Ltd.
14%
24%
51%
160%


Yang Ming Marine Transport Corporation
54%
360%
561%
2367%


Evergreen Marine Corporation (Taiwan) Ltd.
84%
278%
374%
1460%


Max
84%
360%
561%
2367%


Median
19%
37%
76%
247%


Min 
-1%
1%
29%
97%


Mean
24%
88%
145%
544%



Source: CapIQ 




Containers

The three key Chinese container manufacturing companies are China International Marine Cntnrs Gp (2039 HK), Singamas Container Hldgs (716 HK), and unlisted CXIC.
Container manufacturing accounts for around 23%/33% of CIMC's revs/NPBT. So not a clean player. A mentioned above, it also makes chassis.
And Singamas is tiny - around US$200mn market cap.

Warehousing

When Global Logistics Properties, the logistic giant and largest operator of warehouse space in China, was privatised in 2017, Prologis Inc (PLD US) and Goodman Group (GMG AU) were cited as GLP's closest peers at the time
As discussed in CLPH (1589 HK): Free Float Breached As JD.com Bumps Stake, China Logistics Property Holdings (1589 HK) has also been in the news recently over possible interest from JD.com Inc. (9618 HK).
Separately, Kerry Logistics Network (636 HK)'s independent shareholders approved last month the sale of its Hong Kong and Taiwan warehouse businesses to Kerry Holdings. See  Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer. That looks to be a fortuitous transaction for Kery Holdings.



"Squeezebox" is a slang term for accordion.



Squeeze Box: The Port Congestion Contagion

<div>
<p>On the 9 June, <a href="https://www.smartkarma.com/entities/china-logistics-property-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:22799:1" rel="noopener">China Logistics Property Holdings (1589 HK)</a> (CLPH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0609/2021060900007.pdf" target="_blank" rel="noopener">announced</a> a placement of 220mn new shares at a placing price of $3.54/share, an 18.24% discount to last close. </p>
</div>
<div>
<p>Given the market anticipated a possible change of control after CLPH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1229/2020122901322.pdf" target="_blank" rel="noopener">announced</a> on the 29 December 2020 Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%), were "<em>conducting a preliminary strategic review of their stakes</em>", the market response was swift. Shares closed down ~20% at HK$3.45.</p>
<p>That seemed like an overly harsh knee-jerk reaction given a post-money book value of ~HK$3.90. </p>
<p>Yesterday CLPH announced it had completed the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0617/2021061701380.pdf" target="_blank" rel="noopener">placement</a>. What <em>is </em>interesting is that <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> bumped its stake to 10.11%, on a fully diluted basis, from 9.87% (pre-placement), the result of which sees CLPH in breach of Hong Kong's public float.</p>
<p>Evidently, JD.com is still keen to increase its stake. And perhaps take a dig at the company for the placement.</p>
<p>Separately, Li and RRJ didn't participate in the placement. But I think they remain sellers.</p>
<p>CLPH remains attractive here. </p>
</div>
<div>
<p>More below the fold.</p>
</div>


On the 9 June, China Logistics Property Holdings (1589 HK) (CLPH) announced a placement of 220mn new shares at a placing price of $3.54/share, an 18.24% discount to last close. 


Given the market anticipated a possible change of control after CLPH announced on the 29 December 2020 Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%), were "conducting a preliminary strategic review of their stakes", the market response was swift. Shares closed down ~20% at HK$3.45.
That seemed like an overly harsh knee-jerk reaction given a post-money book value of ~HK$3.90. 
Yesterday CLPH announced it had completed the placement. What is interesting is that JD.com Inc. (9618 HK) bumped its stake to 10.11%, on a fully diluted basis, from 9.87% (pre-placement), the result of which sees CLPH in breach of Hong Kong's public float.
Evidently, JD.com is still keen to increase its stake. And perhaps take a dig at the company for the placement.
Separately, Li and RRJ didn't participate in the placement. But I think they remain sellers.
CLPH remains attractive here. 


More below the fold.


CLPH (1589 HK): Free Float Breached As JD.com Bumps Stake

<div>
<p>Back on the 29 December <a href="https://www.smartkarma.com/entities/china-logistics-property-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:22799:1" rel="noopener">China Logistics Property Holdings (1589 HK)</a> (CLPH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1229/2020122901322.pdf" target="_blank" rel="noopener">announced</a> its two largest shareholders - Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%) - are "<em>conducting a preliminary strategic review of their stakes in the Company, which involves up to approximately 51.5% shareholding of the Company</em>." </p>
<p>Reportedly the two key shareholders were seeking an exit price of ~$4.70, which is roughly equivalent to a four-year high. If a deal was struck, this would trigger an unconditional mandatory general offer.</p>
<p>This possible Offer was discussed in <em><a href="https://skr.ma/QiiCi" target="_blank" rel="noopener">China Logistics (1589 HK): Possible Offer As Major Shareholders Seek Exit</a></em>. </p>
<p>Then nothing - not even an update pursuant to Rule 3.7 of the Takeovers Code.</p>
<p>Now CLPH has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0609/2021060900007.pdf" target="_blank" rel="noopener">announced</a> a placement of 220mn new shares (6.67% of shares out, 6.33% on a diluted basis) at a placing price of $3.54/share, an 18.24% discount to last close. Net proceeds are expected to total HK$767mn to new land acquisition and the development and construction of warehousing facilities.</p>
<p>The question is whether Li and RRJ are still in the mix to exit, or whether this placement is mutually exclusive to their end-game?</p>
<p>My initial takeaway is the latter. But shares have been cremated in this morning's trading session.</p>
<p>More below the fold.</p>
</div>
<div>
<p></p>
</div>


Back on the 29 December China Logistics Property Holdings (1589 HK) (CLPH) announced its two largest shareholders - Li Shifa (chairman, holding ~28.2%) and RRJ Capital (~23.35%) - are "conducting a preliminary strategic review of their stakes in the Company, which involves up to approximately 51.5% shareholding of the Company." 
Reportedly the two key shareholders were seeking an exit price of ~$4.70, which is roughly equivalent to a four-year high. If a deal was struck, this would trigger an unconditional mandatory general offer.
This possible Offer was discussed in China Logistics (1589 HK): Possible Offer As Major Shareholders Seek Exit. 
Then nothing - not even an update pursuant to Rule 3.7 of the Takeovers Code.
Now CLPH has announced a placement of 220mn new shares (6.67% of shares out, 6.33% on a diluted basis) at a placing price of $3.54/share, an 18.24% discount to last close. Net proceeds are expected to total HK$767mn to new land acquisition and the development and construction of warehousing facilities.
The question is whether Li and RRJ are still in the mix to exit, or whether this placement is mutually exclusive to their end-game?
My initial takeaway is the latter. But shares have been cremated in this morning's trading session.
More below the fold.





CLPH (1589 HK): No-Deal Or Business As Usual Following Placement?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

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<div><p>Warburg Pincus (WP) is looking to raise around US$219m by selling about 2.1% of <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a>. This is a clean-up trade.</p></div><div><p>We have covered the IPO and previous placements, links to which are below. In this insight, we will discuss the deal dynamics and run the deal through our ECM framework.</p></div><div>
<p></p>
<p>June, September and November 2020 placement:</p>
</div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/esr-cayman-placement-back-to-sell-again" target="_blank" rel="noopener">ESR Cayman Placement - Back to Sell Again</a></li>
<li>
<a href="https://www.smartkarma.com/insights/esr-cayman-placement-even-more-to-come-soon" target="_blank" data-smartkarma-citation="insights:43310" rel="noopener">ESR Cayman Placement - Even More to Come Soon</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/esr-cayman-placement-hasn-t-done-much-since-listing-liquidity-remains-tight" target="_blank" data-smartkarma-citation="insights:40084" rel="noopener">ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight</a> </li>
</ul></div><div>
<p></p>
<p>Links to our earlier insights, from its IPO:</p>
</div><div><ul style="list-style-type: disc;">
<li>Company's business model and provided an overview of its operations, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-a-giant-in-the-making" target="_blank" rel="noopener">ESR Cayman Pre-IPO - A Giant in the Making</a>; </li>
<li>Talked about the financials and the drivers for each of the three segments, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-earnings-and-segment-analysis" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Earnings and Segment Analysis</a>.</li>
<li>Derived valuation for each of the segments: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Pre-IPO- First Stab at Valuation</a>
</li>
<li>Provided updates from the PHIP: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updates-from-phip-growth-remains-on-track" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track</a>
</li>
<li>Provided an update on valuations and key risks: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updated-valuation-and-key-risks" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updated Valuation and Key Risks</a>
</li>
<li>Did a quick comparison with peers: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-peer-comparison-quick-take-bigger-than-some-much-smaller-than-others" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others</a>
</li>
<li>Details of the previous listing attempt and comments on final valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-richly-valued" target="_blank" rel="noopener">ESR Cayman IPO - Richly Valued</a>
</li>
<li>Updates from the re-filed application proof: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-the-more-things-change-the-more-they-remain-the-same" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same</a>
</li>
<li>Re-look at valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-another-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - Another Stab at Valuation</a>
</li>
<li>Final comment on valuations post deal launch: <a href="https://www.smartkarma.com/insights/esr-cayman-re-ipo-trying-to-hitch-a-ride-on-momentum-other-cheaper-ways-to-play-on-e-commerce" target="_blank" rel="noopener">ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce</a>
</li>
<li>Trading update at the time of listing: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-trading-riding-higher-on-momentum-some-book-colour-privatisation-comparison" target="_blank" rel="noopener">ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison</a>
</li>
</ul></div>

Warburg Pincus (WP) is looking to raise around US$219m by selling about 2.1% of ESR Cayman (1821 HK). This is a clean-up trade.We have covered the IPO and previous placements, links to which are below. In this insight, we will discuss the deal dynamics and run the deal through our ECM framework.

June, September and November 2020 placement:

ESR Cayman Placement - Back to Sell Again

ESR Cayman Placement - Even More to Come Soon 

ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight 


Links to our earlier insights, from its IPO:

Company's business model and provided an overview of its operations, ESR Cayman Pre-IPO - A Giant in the Making; 
Talked about the financials and the drivers for each of the three segments, ESR Cayman Pre-IPO - Earnings and Segment Analysis.
Derived valuation for each of the segments: ESR Cayman Pre-IPO- First Stab at Valuation

Provided updates from the PHIP: ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track

Provided an update on valuations and key risks: ESR Cayman Pre-IPO - Updated Valuation and Key Risks

Did a quick comparison with peers: ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others

Details of the previous listing attempt and comments on final valuations: ESR Cayman IPO - Richly Valued

Updates from the re-filed application proof: ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same

Re-look at valuations: ESR Cayman Re-Pre-IPO - Another Stab at Valuation

Final comment on valuations post deal launch: ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce

Trading update at the time of listing: ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison



ESR Cayman Placement - Past Deals Have Generally Done Well

Australia

Goodman Group is an integrated industrial property group. The Group has operations in Australia, New Zealand, UK, Asia and Europe. Goodman's activities include property investment, funds management, property development and property services. The Group's property portfolio includes business parks, industrial estates, office parks and warehouse/distribution centers.

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Goodman Group (GMG AU)

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ESR Cayman Placement - Past Deals Have Generally Done Well

Warburg Pincus (WP) is looking to raise around US$219m by selling about 2.1% of ESR Cayman (1821 HK). This is a clean-up trade.

Sumeet Singh

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