Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Machinery Engineering / Event-Driven

<a href="https://www.smartkarma.com/entities/china-machinery-engineering-corp" target="_blank" data-smartkarma-citation="entities:10998:1" rel="noopener">China Machinery Engineering (1829 HK)</a>'s (CMEC) shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0108/2021010701436.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading this morning  "pursuant to The Codes on Takeovers and Mergers which constitute inside information of the Company".
CMEC is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against) for the H shares. Such an Offer may or may not require an additional tendering acceptance condition.
CMEC's ultimate controlling shareholder is state-owned Chinese National Machinery Industry Corporation, also known as SINOMACH, which holds 77.99% of shares out, via CMEC's domestic shares. SINOMACH holds no H shares. 
CMEC is up 56.4% since the 29 December, on larger-than-average volume.
Funny that.
The most interesting facet attached to CMEC is that it has (adjusted) net cash of HK$8.8bn as at 30 June 2020, compared to market cap of HK$10.5bn.  Should a firm offer unfold, it is doubtful it will fully reflect the underlying business in addition to that cash pile.
More below the fold.

China Machinery Engineering (1829 HK)'s (CMEC) shares were suspended ahead of trading this morning  "pursuant to The Codes on Takeovers and Mergers which constitute inside information of the Company".
CMEC is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against) for the H shares. Such an Offer may or may not require an additional tendering acceptance condition.
CMEC's ultimate controlling shareholder is state-owned Chinese National Machinery Industry Corporation, also known as SINOMACH, which holds 77.99% of shares out, via CMEC's domestic shares. SINOMACH holds no H shares. 
CMEC is up 56.4% since the 29 December, on larger-than-average volume.
Funny that.
The most interesting facet attached to CMEC is that it has (adjusted) net cash of HK$8.8bn as at 30 June 2020, compared to market cap of HK$10.5bn.  Should a firm offer unfold, it is doubtful it will fully reflect the underlying business in addition to that cash pile.
More below the fold.

China Machinery Engineering (1829 HK): Possible Offer

AviChina Industry & Technology / Event-Driven

Civil-aviation and defense play <a href="https://www.smartkarma.com/entities/avichina-industry-tech-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">Avichina Industry &amp; Tech H (2357 HK)</a> is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.
In the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0918/2020091800348.pdf" target="_blank" rel="noopener">2020 interim report</a>, AviChina stated:
<blockquote>
During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.
</blockquote>
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<h3>The Fifth Plenum</h3>
China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.
One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. 
Concurrent with China's "dual circularity" development - discussed in <a href="https://skr.ma/ANkER" target="_blank" rel="noopener">China's Dual Circulation: Hedged Integration</a> - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.
Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. 
More below the fold.
</div>

Civil-aviation and defense play Avichina Industry &amp; Tech H (2357 HK) is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.
In the 2020 interim report, AviChina stated:

During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.


The Fifth Plenum
China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.
One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. 
Concurrent with China's "dual circularity" development - discussed in China's Dual Circulation: Hedged Integration - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.
Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. 
More below the fold.


AviChina (2357 HK): Buy The Modern Army Narrative

Powerleader Science & Technology / Event-Driven

Powerleader Science & Technology (8236 HK)

Cloud computing solutions provider <a href="https://www.smartkarma.com/entities/powerleader-science-technology-group-ltd" target="_blank" data-smartkarma-citation="entities:17036:1" rel="noopener">Powerleader Science &amp; Technology Group (8236 HK)</a> has announced a <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2020/1019/2020101901276.pdf" target="_blank" rel="noopener">delisting Offer</a> by way of a merger by absorption from Speed Top. The consideration price for the H-shares is $3.92/share, a 14.6% premium to last close. The price will not be increased.
Speed Top &amp; concert parties control 42.05% of the company via domestic shares.
There are 60.75mn H shares out - all can vote.
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As Powerleader is PRC-incorporated, this delisting proposal is by way of a merger by absorption, which involves a Scheme-like vote from disinterested shareholders. There is no tendering acceptance condition attached to this delisting.
</div>
<div>
This is a relatively clean deal, although not a particularly inspiring one. Timing is the only unknown. The Long Stop date is the 3 June 2021, but this should be completed well before. 
Trading at a wide gross/annualised spread of 13.6%/51.6%, assuming mid-Feb completion.
As always, more below the fold.
</div>

Cloud computing solutions provider Powerleader Science &amp; Technology Group (8236 HK) has announced a delisting Offer by way of a merger by absorption from Speed Top. The consideration price for the H-shares is $3.92/share, a 14.6% premium to last close. The price will not be increased.
Speed Top &amp; concert parties control 42.05% of the company via domestic shares.
There are 60.75mn H shares out - all can vote.

As Powerleader is PRC-incorporated, this delisting proposal is by way of a merger by absorption, which involves a Scheme-like vote from disinterested shareholders. There is no tendering acceptance condition attached to this delisting.


This is a relatively clean deal, although not a particularly inspiring one. Timing is the only unknown. The Long Stop date is the 3 June 2021, but this should be completed well before. 
Trading at a wide gross/annualised spread of 13.6%/51.6%, assuming mid-Feb completion.
As always, more below the fold.


Powerleader (8236 HK): Small Deal, Trading Wide

China

Powerleader Science & Technology Group Ltd. provides cloud computing solutions, including servers, storage, and related services, in the People's Republic of China and Hong Kong. The company also engages in the distribution of electronic equipment and accessories, operates Internet Data Centers, and develops and manages industrial parks. It was founded in 1997 and is headquartered in Shenzhen, China.

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Powerleader Science & Technology (8236 HK)

China Machinery Engineering (1829 HK): Possible Offer

Shares are suspended so there is nothing to do here. I think the Offer needs to be pitched closer to $4/share to dislodge Cape Ann. It will still...

David Blennerhassett

AviChina (2357 HK): Buy The Modern Army Narrative

One would think the "modern army" maxim will catalyse companies such as AviChina (2357 HK). That is positive. But why subject capex to outside...

David Blennerhassett

Powerleader (8236 HK): Small Deal, Trading Wide

Powerleader (8236 HK)'s takeover by way of a merger by absorption is trading at a wide gross/annualised spread of 13.6%/51.6%. However, this is not...

David Blennerhassett

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