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

Guotai Junan International / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/guotai-junan-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:13438:1" rel="noopener">Guotai Junan International (1788 HK)</a>/GJTAI announced a preconditional scheme offer from <a href="https://www.smartkarma.com/entities/guotai-haitong-securities-co-ltd-class-h" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Haitong Securities (2611 HK)</a> at HK$3.00, a 44.2% premium to the last close. The offer price is final. </li>
<li>HKEx privatisations, which require regulatory approvals, have recently been shunned. However, the precondition related to NDRC and Shanghai SASAC regulatory approvals is low risk. </li>
<li>While the offer is below the six-month high, it is attractive compared to peer and precedent transaction multiples. Barring a significant re-rating of peers, this should get done. </li>
</ul>



Guotai Junan International (1788 HK)/GJTAI announced a preconditional scheme offer from Guotai Haitong Securities (2611 HK) at HK$3.00, a 44.2% premium to the last close. The offer price is final. 
HKEx privatisations, which require regulatory approvals, have recently been shunned. However, the precondition related to NDRC and Shanghai SASAC regulatory approvals is low risk. 
While the offer is below the six-month high, it is attractive compared to peer and precedent transaction multiples. Barring a significant re-rating of peers, this should get done. 


Guotai Junan International (1788 HK): Precon Privatisation by Guotai Haitong Securities at HK$3.00

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Yesterday morning (23rd July), broker/investment bank <a href="https://www.smartkarma.com/entities/guotai-junan-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:13438:1" rel="noopener">Guotai Junan International (1788 HK)</a>  (GJI) was suspended pursuant to the Takeovers Code. </li>
<li>GJI is 73.92%-controlled by the recently formed state-backed <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:22740:1" rel="noopener">Guotai Haitong Securities (601211 CH)</a> (GHS) - see <a href="https://skr.ma/aWiHx" target="_blank" rel="noopener">GJS/Haitong Merger: One Formality Reg To Go</a>. </li>
<li>GHS will be taking out GJI. The key question is at what price? </li>
</ul>


Yesterday morning (23rd July), broker/investment bank Guotai Junan International (1788 HK)  (GJI) was suspended pursuant to the Takeovers Code. 
GJI is 73.92%-controlled by the recently formed state-backed Guotai Haitong Securities (601211 CH) (GHS) - see GJS/Haitong Merger: One Formality Reg To Go. 
GHS will be taking out GJI. The key question is at what price? 


Musings On Guotai Haitong (601211 CH)'s Expected Offer For Guotai Junan (1788 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/guotai-junan-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:13438:1" rel="noopener">Guotai Junan International (1788 HK)</a>/GJTAI is in a trading halt “pending the issuance of an announcement pursuant to the Code on Takeovers and Mergers.” </li>
<li>It is likely that <a href="https://www.smartkarma.com/entities/guotai-haitong-securities-co-ltd-class-h" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Haitong Securities (2611 HK)</a> is seeking to privatise GJTAI. The timing would be opportunistic, as GJTAI has underperformed its peers over the last 12 months.</li>
<li>I use three methods to triangulate the likely offer price. My methods suggest a price range of HK$2.80 to HK$3.50 per share, a 34.6%-68.3% premium to the last close.</li>
</ul>



Guotai Junan International (1788 HK)/GJTAI is in a trading halt “pending the issuance of an announcement pursuant to the Code on Takeovers and Mergers.” 
It is likely that Guotai Haitong Securities (2611 HK) is seeking to privatise GJTAI. The timing would be opportunistic, as GJTAI has underperformed its peers over the last 12 months.
I use three methods to triangulate the likely offer price. My methods suggest a price range of HK$2.80 to HK$3.50 per share, a 34.6%-68.3% premium to the last close.


Guotai Junan International (1788 HK): Privatisation by Guotai Haitong Securities?

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Bright Smart Securities & Commodities / Equity Bottom-Up

Bright Smart Securities & Commodities (1428 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-commodities-group" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a> rallied by 132% since our last Insight, fueled by the euphoria in the brokerage and securities sector on the HK government's stablecoin initiative.</li>
<li>At HK$16.44, it is at 100% PER premium to the sector average, ex-<a href="https://www.smartkarma.com/entities/guotai-junan-international" target="_blank" data-smartkarma-citation="entities:13438:1" rel="noopener">Guotai Junan International (1788 HK)</a>. The risk-reward payoff now looks less attractive.</li>
<li>It also implies net profit to grow by 150% by FY31F and priced at 18x PER. This appears stretched in the near term, though long-term prospects stay decent. </li>
</ul>



Bright Smart Securities (1428 HK) rallied by 132% since our last Insight, fueled by the euphoria in the brokerage and securities sector on the HK government's stablecoin initiative.
At HK$16.44, it is at 100% PER premium to the sector average, ex-Guotai Junan International (1788 HK). The risk-reward payoff now looks less attractive.
It also implies net profit to grow by 150% by FY31F and priced at 18x PER. This appears stretched in the near term, though long-term prospects stay decent. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-and" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a>'s earnings rebounded solidly by 20.4% YoY in 2H FY25, fueled by higher client accounts and assets, and better HK market turnover.</li>
<li>BSS has been an underperformer against peers since May, as other brokerage companies rallied on the back of potential entry into the virtual asset dealing business. </li>
<li>Ant Financial will be able to transform BSS into a sizeable cross-asset house. The share price's current implied earnings growth and PER valuations are conservative.</li>
</ul>



Bright Smart Securities (1428 HK)'s earnings rebounded solidly by 20.4% YoY in 2H FY25, fueled by higher client accounts and assets, and better HK market turnover.
BSS has been an underperformer against peers since May, as other brokerage companies rallied on the back of potential entry into the virtual asset dealing business. 
Ant Financial will be able to transform BSS into a sizeable cross-asset house. The share price's current implied earnings growth and PER valuations are conservative.


Bright Smart (1428 HK): Bright and Smart FY25

Hong Kong

Guotai Junan International is an integrated financial service provider offering wealth management, institutional investor services, corporate finance, and investment management. Its diverse offerings include brokerage, asset management, and digital asset trading. The company was established in Hong Kong in 1993 and is headquartered there.

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Guotai Junan International (1788 HK)