Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.</p>
<ul>
<li><a href="#lucror-entity-805" target="_blank" rel="noopener">SJM Holdings</a></li>
<li><a href="#lucror-entity-16122" target="_blank" rel="noopener">O-Net Technologies (Group) </a></li>
<li><a href="#lucror-entity-26178" target="_blank" rel="noopener">Zhenro Properties</a></li>
</ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

SJM Holdings
O-Net Technologies (Group) 
Zhenro Properties


Morning Views Asia: SJM Holdings, O-Net Technologies (Group) , Zhenro Properties

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900089.pdf" target="_blank" rel="noopener">halted</a> before trading opened on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers,  <a href="https://www.smartkarma.com/entities/cimc-tianda-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15431:1" rel="noopener">CIMC-TianDa Holdings (445 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1004/2020100400027.pdf" target="_blank" rel="noopener">announced</a> on the 4 October an Offer by way of a Scheme primarily from <a href="https://www.smartkarma.com/entities/china-international-marine-cntnrs-gp-ltd" target="_blank" data-smartkarma-citation="entities:11752:1" rel="noopener">China International Marine Cntnrs Gp (2039 HK)</a> (CIMC). </p>
<p>The cancellation price is HK$0.266/share, a 20.66% premium to last close. The price is final.</p>
<p>CIMC, together with joint offeror concert parties hold 75.53% of CIMC-Tianda, following the conversion of a CB held by <a href="https://www.smartkarma.com/entities/wison-engineering-services-co" target="_blank" data-smartkarma-citation="entities:24534:1" rel="noopener">Wison Engineering Services Co (2236 HK)</a>. Therefore Scheme Shareholders will comprise 24.47% of shares out.</p>
</div>
<div>
<p>Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.447% of shares out. The headcount applies as CIMC-Tianda is Cayman incorporated.</p>
</div>
<div>
<p>Despite solid 1H20 earnings, the announcement indicates those earnings were propped up by orders from last year, and it has proven challenging to procure a stable supply of raw materials and to complete new orders. Given this uncertain backdrop - one expected when exposed to the global aviation industry -  pricing appears <em>okay</em>.</p>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


After shares were halted before trading opened on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers,  CIMC-TianDa Holdings (445 HK) announced on the 4 October an Offer by way of a Scheme primarily from China International Marine Cntnrs Gp (2039 HK) (CIMC). 
The cancellation price is HK$0.266/share, a 20.66% premium to last close. The price is final.
CIMC, together with joint offeror concert parties hold 75.53% of CIMC-Tianda, following the conversion of a CB held by Wison Engineering Services Co (2236 HK). Therefore Scheme Shareholders will comprise 24.47% of shares out.


Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.447% of shares out. The headcount applies as CIMC-Tianda is Cayman incorporated.


Despite solid 1H20 earnings, the announcement indicates those earnings were propped up by orders from last year, and it has proven challenging to procure a stable supply of raw materials and to complete new orders. Given this uncertain backdrop - one expected when exposed to the global aviation industry -  pricing appears okay.


As always, more below the fold.


CIMC-Tianda (445 HK): Scheme Offer Lead By CIMC

<div>
<p>After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900255.pdf" target="_blank" rel="noopener">halted</a> after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, <a href="https://www.smartkarma.com/entities/hengxing-gold-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:8874:1" rel="noopener">Hengxing Gold Holding (2303 HK)</a> (HGH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0930/2020093001586.pdf" target="_blank" rel="noopener">announced</a> on the 30 September a pre-conditional Scheme from <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> ("SGM").</p>
<p>Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900669.pdf" target="_blank" rel="noopener">29 September</a>, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. </p>
<p>The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.</p>
<p>Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.</p>
<p>SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.</p>
<p>This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.</p>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


After shares were halted after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, Hengxing Gold Holding (2303 HK) (HGH) announced on the 30 September a pre-conditional Scheme from Shandong Gold Mining Co., Ltd. (1787 HK) ("SGM").
Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the 29 September, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. 
The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.
SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.
This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.


As always, more below the fold.


Hengxing (2303 HK): Offer From Shandong Gold

<p>After entering a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0903/2020090300110.pdf" target="_blank" rel="noopener">trading halt</a> on the 3 September "<em>pursuant to the Hong Kong Code on Takeovers and Mergers</em>", <a href="https://www.smartkarma.com/entities/changshouhua-food-co-ltd" target="_blank" data-smartkarma-citation="entities:18501:1" rel="noopener">Changshouhua Food (1006 HK)</a> ("CFC") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0907/2020090701303.pdf" target="_blank" rel="noopener">announced</a> late last night a privatisation by way of a Scheme.</p>
<p>The Cancellation price of HK$4.19/share is a 16.4% premium to last close, but a 43.2% and 64.1% premium over the average closing price on a 30-day and 60-day basis. The price is Final. No dividends are expected to be paid.</p>
<p>The Offeror, holding 52.14% of shares out, is a wholly-owned subsidiary of Sanxing Group. Independent Shareholders hold 46.82% of shares out. </p>
<p>Typical Scheme conditions apply: at least 75% of Independent Shares FOR &amp; not more than 10% of ALL Independent Shares against. Therefore the blocking stake is 4.682% of shares out, or 26.85mn shares.</p>
<p>Two shareholders have sufficient shares to block the vote - one has been a passive investor for almost five years; the other, FIL, was selling earlier this month at $3.50.</p>
<p>The headcount test applies as CFC is Cayman incorporated. </p>
<p>The Offer price <em>appears</em> enough to get this over the line. </p>
<p>As always, more below the fold</p>

After entering a trading halt on the 3 September "pursuant to the Hong Kong Code on Takeovers and Mergers", Changshouhua Food (1006 HK) ("CFC") announced late last night a privatisation by way of a Scheme.
The Cancellation price of HK$4.19/share is a 16.4% premium to last close, but a 43.2% and 64.1% premium over the average closing price on a 30-day and 60-day basis. The price is Final. No dividends are expected to be paid.
The Offeror, holding 52.14% of shares out, is a wholly-owned subsidiary of Sanxing Group. Independent Shareholders hold 46.82% of shares out. 
Typical Scheme conditions apply: at least 75% of Independent Shares FOR &amp; not more than 10% of ALL Independent Shares against. Therefore the blocking stake is 4.682% of shares out, or 26.85mn shares.
Two shareholders have sufficient shares to block the vote - one has been a passive investor for almost five years; the other, FIL, was selling earlier this month at $3.50.
The headcount test applies as CFC is Cayman incorporated. 
The Offer price appears enough to get this over the line. 
As always, more below the fold

O-Net Technologies (Group)  / Event-Driven

<div>
<p>On the 8 July, <a href="https://www.smartkarma.com/entities/o-net-technologies-group-limited" target="_blank" data-smartkarma-citation="entities:16122:1" rel="noopener">O-Net Technologies (Group) (877 HK)</a>, a leader in the provision of high-technology products and optical networking components,  <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0708/2020070800600.pdf" target="_blank" rel="noopener">announced</a> an Offer by way of a Scheme, with a cancellation price of HK$6.50/share, a 23.57% premium to last close and a 43.18% premium to the six-month average close. The Offer price was final.</p>
<p>Na Qinglin (chairman of O-Net) (34.5% of shares out), <a href="https://www.smartkarma.com/entities/shenzhen-kaifa-technology-a" target="_blank" data-smartkarma-citation="entities:20393:1" rel="noopener">Shenzhen Kaifa Technology A (000021 CH)</a> (20.52%) and HC Capital (0.33%) are acting in concert, leaving 44.65% (372.408mn shares) in the hands of Disinterested Shareholders.</p>
<p>Therefore the blocking stake at the Scheme Meeting is 37.24mn shares or 4.465% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. The headcount test applies as O-Net is Cayman incorporated. </p>
</div>
<div>
<p>The Scheme Document is now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0901/2020090101388.pdf" target="_blank" rel="noopener">out</a>. The Scheme Meeting will be held on 25 September with expected payment (assuming shareholders approve the Scheme) on the 27 October, just under a week past my initial timetable expectation. The IFA (Somerley) considers the offer to be "fair and reasonable."</p>
</div>
<div>
<p>This is a pretty clean deal. I'd get involved at a gross/annualised spread at 2.7%/19.2%.</p>
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<div>
<p>As always, more below the fold.</p>
<hr>
<div>
<p><em>Past insights on O-Net</em></p>
</div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 218.75px;">
<h3>Date</h3>
</td>
<td style="width: 484.782px;">
<h3>Insight</h3>
</td>
</tr>
<tr>
<td style="width: 218.75px;">7-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/nqHJk" target="_blank" rel="noopener">O-Net Tech (877 HK): Tripping The Light Fantastic</a></td>
</tr>
<tr>
<td style="width: 218.75px;">9-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/8Bd58" target="_blank" rel="noopener">O-Net (877 HK): Swish Switches Offer</a></td>
</tr>
</tbody>
</table>
</div>
</div>
</div>


On the 8 July, O-Net Technologies (Group) (877 HK), a leader in the provision of high-technology products and optical networking components,  announced an Offer by way of a Scheme, with a cancellation price of HK$6.50/share, a 23.57% premium to last close and a 43.18% premium to the six-month average close. The Offer price was final.
Na Qinglin (chairman of O-Net) (34.5% of shares out), Shenzhen Kaifa Technology A (000021 CH) (20.52%) and HC Capital (0.33%) are acting in concert, leaving 44.65% (372.408mn shares) in the hands of Disinterested Shareholders.
Therefore the blocking stake at the Scheme Meeting is 37.24mn shares or 4.465% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. The headcount test applies as O-Net is Cayman incorporated. 


The Scheme Document is now out. The Scheme Meeting will be held on 25 September with expected payment (assuming shareholders approve the Scheme) on the 27 October, just under a week past my initial timetable expectation. The IFA (Somerley) considers the offer to be "fair and reasonable."


This is a pretty clean deal. I'd get involved at a gross/annualised spread at 2.7%/19.2%.


As always, more below the fold.


Past insights on O-Net







Date


Insight



7-Jul-20
O-Net Tech (877 HK): Tripping The Light Fantastic


9-Jul-20
O-Net (877 HK): Swish Switches Offer







O-Net (877 HK): Offer Doc Out. Priced To Complete

China

O-Net Technologies Group Ltd. supplies passive optical networking subcomponents,  components, modules and subsystems used in high-speed telecommunications and data communications networks.

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