Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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After <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a> ("KPL") and <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") were both <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020500081.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading on the 5 February, KLN has now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> ("SFH").
SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.
There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.
Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a>,  amongst other conditions, a number of which are waivable. 
The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. 
The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders other than the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). 
Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.
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Lots more below the fold.  Plus Ye Olde Arb Grids (or at least one of them). 
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After Kerry Properties (683 HK) ("KPL") and Kerry Logistics Network (636 HK) ("KLN") were both suspended ahead of trading on the 5 February, KLN has now announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH) ("SFH").
SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.
There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.
Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for Kerry Express Thailand (KEX TB),  amongst other conditions, a number of which are waivable. 
The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. 
The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders other than the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). 
Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.


Lots more below the fold.  Plus Ye Olde Arb Grids (or at least one of them). 


Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

<a href="https://www.smartkarma.com/entities/52" target="_blank" data-smartkarma-citation="entities:52:1" rel="noopener">Wheelock &amp; (20 HK)</a> /<a href="https://www.smartkarma.com/entities/51" target="_blank" data-smartkarma-citation="entities:51:1" rel="noopener">Wharf Holdings (4 HK)</a>/<a href="https://www.smartkarma.com/entities/26031" target="_blank" data-smartkarma-citation="entities:26031:1" rel="noopener">Wharf Real Estate Investment (1997 HK)</a>
Inputting the 2019 interim numbers for all three companies backs out a discount to NAV of ~33%, compared to Wheelock's one-year average of 38%.
Net debt at the parent level widened to ~$40bn from ~$28bn as at December 18, which was largely offset by the increase in development property and available for sale assets during the same period. 
With both WREIC and Wharf underperforming in the face of Hong Kong's prevailing political atmosphere, Wheelock's implied negative stub is now at its lowest negative level (i.e. its best level) since WREIC's 2017 listing.

Wheelock &amp; (20 HK) /Wharf Holdings (4 HK)/Wharf Real Estate Investment (1997 HK)
Inputting the 2019 interim numbers for all three companies backs out a discount to NAV of ~33%, compared to Wheelock's one-year average of 38%.
Net debt at the parent level widened to ~$40bn from ~$28bn as at December 18, which was largely offset by the increase in development property and available for sale assets during the same period. 
With both WREIC and Wharf underperforming in the face of Hong Kong's prevailing political atmosphere, Wheelock's implied negative stub is now at its lowest negative level (i.e. its best level) since WREIC's 2017 listing.

StubWorld: Wheelock Stub Gains on Ructions in Retail

Singapore Property Analyst

Anni Kum

Thematic (Sector/Industry)

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we look into the first white site at Pasir Ris Central launched by the Housing Development Board (HDB). The white site, which is next to the Pasir Ris MRT station on the East-West Line, is to be developed into a mixed-use commercial and residential development and is likely to be also seamlessly connected to the bus interchange and MRT station.  On 14 December 2018 at the close of the tender, the Pasir Ris white site saw a weak response from developers with only three bids received. This was below expectations given its prime location next to the MRT station and was likely the result of the July 2018 property cooling measures which made developer turn more cautious. The three bidders for the white site were Far East Organization, <a href="https://www.smartkarma.com/entities/9952" target="_blank" data-smartkarma-citation="entities:9952:1">Singapore Press Holdings (SPH SP)</a> (SPH) and Kajima Developments in a joint bid, and Phoenix Residential and Phoenix Commercial; both owned by Allgreen Properties and Kerry Properties.On 25 January 2019, the Land Transport Authority (LTA) announced the alignment and 12 station locations for Phase 1 of the Cross Island Line (CRL), Singapore’s eighth MRT line. The CRL Phase 1, to be completed by 2029, is 29-km long and comprises 12 stations from Aviation Park to Bright Hill. The line will pass through the Pasir Ris MRT station, making it into a MRT interchange station. Spanning about 50-km in length in its entirety, the CRL will serve existing and future developments in the eastern, western, and north-eastern corridors, linking major hubs such as Jurong Lake District, Punggol Digital District and Changi region when fully completed.Now that the Pasir Ris MRT station is being named as an interchange station with the CRL, the potential of a successful integrated mixed-use property development will be greater. According to the LTA, the projected daily ridership of the entire CRL is more than 600,000 in the initial years, increasing to over 1 million in the longer term.The prices of private homes in the future Pasir Ris Central mixed-use development will very much depend on the land price paid by the winning bidder and also other macro and micro factors including the interest rate environment, product mix, design, and cost of integration with amenities and etc. However, we attempted to predict a reasonable price point for the private homes at this future mixed-use development by using two other integrated mixed-development projects currently under-construction as references. The two references are The Woodleigh Residences above Woodleigh MRT station in the up-and-coming Bidadari estate and Park Place Residences at PLQ in the new business district at Paya Lebar Central. We also work backwards to estimate the bid price. Market conditions are assumed to remain the same two years from now.

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we look into the first white site at Pasir Ris Central launched by the Housing Development Board (HDB). The white site, which is next to the Pasir Ris MRT station on the East-West Line, is to be developed into a mixed-use commercial and residential development and is likely to be also seamlessly connected to the bus interchange and MRT station.  On 14 December 2018 at the close of the tender, the Pasir Ris white site saw a weak response from developers with only three bids received. This was below expectations given its prime location next to the MRT station and was likely the result of the July 2018 property cooling measures which made developer turn more cautious. The three bidders for the white site were Far East Organization, Singapore Press Holdings (SPH SP) (SPH) and Kajima Developments in a joint bid, and Phoenix Residential and Phoenix Commercial; both owned by Allgreen Properties and Kerry Properties.On 25 January 2019, the Land Transport Authority (LTA) announced the alignment and 12 station locations for Phase 1 of the Cross Island Line (CRL), Singapore’s eighth MRT line. The CRL Phase 1, to be completed by 2029, is 29-km long and comprises 12 stations from Aviation Park to Bright Hill. The line will pass through the Pasir Ris MRT station, making it into a MRT interchange station. Spanning about 50-km in length in its entirety, the CRL will serve existing and future developments in the eastern, western, and north-eastern corridors, linking major hubs such as Jurong Lake District, Punggol Digital District and Changi region when fully completed.Now that the Pasir Ris MRT station is being named as an interchange station with the CRL, the potential of a successful integrated mixed-use property development will be greater. According to the LTA, the projected daily ridership of the entire CRL is more than 600,000 in the initial years, increasing to over 1 million in the longer term.The prices of private homes in the future Pasir Ris Central mixed-use development will very much depend on the land price paid by the winning bidder and also other macro and micro factors including the interest rate environment, product mix, design, and cost of integration with amenities and etc. However, we attempted to predict a reasonable price point for the private homes at this future mixed-use development by using two other integrated mixed-development projects currently under-construction as references. The two references are The Woodleigh Residences above Woodleigh MRT station in the up-and-coming Bidadari estate and Park Place Residences at PLQ in the new business district at Paya Lebar Central. We also work backwards to estimate the bid price. Market conditions are assumed to remain the same two years from now.

Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

Kerry Logistics Network / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/367" target="_blank" data-smartkarma-citation="entities:367:1">Kerry Logistics Network Ltd (636 HK)</a>, <a href="https://www.smartkarma.com/entities/22799" target="_blank" data-smartkarma-citation="entities:22799:1">China Logistics Property Holdings Co Ltd (1589 HK)</a>, and  <a href="https://www.smartkarma.com/entities/11557" target="_blank" data-smartkarma-citation="entities:11557:1">CJ Logistics Corp (000120 KS)</a> are three smaller logistics firms that have one thing in common: to the extent investors pay much attention to them, they do so to see whether the companies can profitably tap into growing demand for modern logistics in China. In this note, we review the progress made by the three companies to grow profitably, specifically their ability to generate sustainable profits from their logistics operations in China. For Kerry Logistics Network (KLN), a sharp increase in revenue last year (+28% Y/Y) was not matched by growth in profits (core OP +13% Y/Y). Much of the company's growth in 2017 was in fact driven by acquisitions in the low-margin freight forwarding segment and expansion into the US and Asia-ex China. KLN remains inexpensive on earnings, but its aggressive push into freight forwarding (now 57% of revenue) and unexciting China business give us concern. We retain a neutral view on the stock.Unlike the other two companies in this note, China Logistics Property Holdings (CLPH) is a pure play, with 100% of its business activities domiciled in China. Revenue last year rose sharply (+49% Y/Y) as many of the company's newer warehouse properties were stabilized, and occupancy climbed over 300 bps to reach 90% by the end of 2017. Now that <a href="https://www.smartkarma.com/entities/2894" target="_blank" data-smartkarma-citation="entities:2894:1">Global Logistic Properties Ltd (GLP SP)</a> has been taken private, we view owning CLPH as a unique way to invest in growing Chinese demand for modern logistics facilities.The Chinese investments of Korea's CJ Logistics's are beginning to generate a noticeable improvement in sales momentum for the company. We believe China now accounts for about 16% of sales and slightly lower portion of earnings for the company, which is encouraging. However, even on an extremely optimistic consensus 2018e EPS of about 4,100 Won (vs 2017's &lt; 2,600 Won), CJ Logistics trades on a PER of 35x. In our view, that's simply too expensive to make CJ Logistics attractive.

Kerry Logistics Network Ltd (636 HK), China Logistics Property Holdings Co Ltd (1589 HK), and  CJ Logistics Corp (000120 KS) are three smaller logistics firms that have one thing in common: to the extent investors pay much attention to them, they do so to see whether the companies can profitably tap into growing demand for modern logistics in China. In this note, we review the progress made by the three companies to grow profitably, specifically their ability to generate sustainable profits from their logistics operations in China. For Kerry Logistics Network (KLN), a sharp increase in revenue last year (+28% Y/Y) was not matched by growth in profits (core OP +13% Y/Y). Much of the company's growth in 2017 was in fact driven by acquisitions in the low-margin freight forwarding segment and expansion into the US and Asia-ex China. KLN remains inexpensive on earnings, but its aggressive push into freight forwarding (now 57% of revenue) and unexciting China business give us concern. We retain a neutral view on the stock.Unlike the other two companies in this note, China Logistics Property Holdings (CLPH) is a pure play, with 100% of its business activities domiciled in China. Revenue last year rose sharply (+49% Y/Y) as many of the company's newer warehouse properties were stabilized, and occupancy climbed over 300 bps to reach 90% by the end of 2017. Now that Global Logistic Properties Ltd (GLP SP) has been taken private, we view owning CLPH as a unique way to invest in growing Chinese demand for modern logistics facilities.The Chinese investments of Korea's CJ Logistics's are beginning to generate a noticeable improvement in sales momentum for the company. We believe China now accounts for about 16% of sales and slightly lower portion of earnings for the company, which is encouraging. However, even on an extremely optimistic consensus 2018e EPS of about 4,100 Won (vs 2017's &lt; 2,600 Won), CJ Logistics trades on a PER of 35x. In our view, that's simply too expensive to make CJ Logistics attractive.

Quick Updates on Kerry Logistics Network, China Logistics Property, CJ Logistics Post 2017 Results

Last week <a href="https://www.smartkarma.com/entities/367" target="_blank" data-smartkarma-citation="entities:367:1">Kerry Logistics Network Ltd (636 HK)</a> reported a disappointing set of H1 results that reinforce our growing concerns about its lack of focus. The results also suggest the company's recent acquisitions in International Freight Forwarding in the US and EU have failed to add much, if anything, to KLN's bottom line.<h2>90% of H1 Turnover Growth in Low-margin Freight Forwarding</h2>KLN reported impressive Turnover growth of 31% in H1, but over 90% of that increase came from the company's…

Last week Kerry Logistics Network Ltd (636 HK) reported a disappointing set of H1 results that reinforce our growing concerns about its lack of focus. The results also suggest the company's recent acquisitions in International Freight Forwarding in the US and EU have failed to add much, if anything, to KLN's bottom line.90% of H1 Turnover Growth in Low-margin Freight ForwardingKLN reported impressive Turnover growth of 31% in H1, but over 90% of that increase came from the company's…

Kerry Logistics Network: Still Struggling to Convert Revenue Growth into Higher Profits in H1

Hong Kong

Kerry Properties Limited, through its subsidiaries, invests in and develops real estate.  The Company also owns and operates logistics, freight and warehouses business.  In addition, Kerry Properties invests in infrastructure-related projects and operates hotels.

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Kerry Properties (683 HK)

Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

Undisturbed is ~HK$16.92/sh, or $9.64/sh ex-SpecDiv. At HK$24.75, there are a lot of assumptions embedded. If public shareholders hold on b/c a...

David Blennerhassett

StubWorld: Wheelock Stub Gains on Ructions in Retail

Wheelock & (20 HK) /Wharf Holdings (4 HK)/Wharf Real Estate Investment (1997 HK) Inputting the 2019 interim numbers for all three companies...

David Blennerhassett

Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we...

Anni Kum

Quick Updates on Kerry Logistics Network, China Logistics Property, CJ Logistics Post 2017 Results

Kerry Logistics Network Ltd (636 HK), China Logistics Property Holdings Co Ltd (1589 HK), and CJ Logistics Corp (000120 KS) are three smaller...

Daniel Hellberg

Kerry Logistics Network: Still Struggling to Convert Revenue Growth into Higher Profits in H1

Last week Kerry Logistics Network Ltd (636 HK) reported a disappointing set of H1 results that reinforce our growing concerns about its lack of...

Daniel Hellberg

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