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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a>. </li>
<li>Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission. </li>
<li>An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.</li>
</ul>



CPMC Holdings (906 HK) has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from ORG Technology Co., Ltd. A (002701 CH). 
Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission. 
An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.


CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>We are convinced that both bids for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> will go ahead, as they are progressing well. The downside risk is minimal, in our view.</li>
<li>The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.</li>
<li>The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. </li>
</ul>


We are convinced that both bids for CPMC Holdings (906 HK) will go ahead, as they are progressing well. The downside risk is minimal, in our view.
The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.
The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for Shanghai Baosteel Packaging-A (601968 CH). 


CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> may potentially receive another takeover proposal from <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a> which has a 22% market share in the industry.</li>
<li>ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.</li>
<li>CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player <a href="https://www.smartkarma.com/entities/sunrise-group-company-limited" target="_blank" data-smartkarma-citation="entities:25257:1" rel="noopener">Sunrise Group (002752 CH)</a> will now become interesting.</li>
</ul>



CPMC Holdings (906 HK) may potentially receive another takeover proposal from ORG Technology Co., Ltd. A (002701 CH) which has a 22% market share in the industry.
ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.
CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player Sunrise Group (002752 CH) will now become interesting.


CPMC Holdings (906 HK): Another Potential Contender

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.</li>
<li>There are benefits to be realised as Baowu also owns a packaging A-share <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. CPMC's 1H23 result is very solid with good margin expansion.  </li>
<li>Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.</li>
</ul>



CPMC Holdings (906 HK) is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.
There are benefits to be realised as Baowu also owns a packaging A-share Shanghai Baosteel Packaging-A (601968 CH). CPMC's 1H23 result is very solid with good margin expansion.  
Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.


<p>We believe <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> is an attractive alternative consumption play given its exposure to the rise in demand for food, beverages and household chemical product packaging in China. It is among the top player in China's packaging manufacturing (1-piece cans, 2-piece cans, tinplate packaging and plastic containers) with prominent customer profile including Coca-Cola, Tsingtao, Carlsberg, Blue Moon, Feihe, Yili and Jiaduobao etc. </p><p>The combination of margin expansion, capacity growth and surging consumption demand, we expect CPMC to post a steady rising ROE. We expect special DPS payout on the receipt of Rmb1.5bn repurchase consideration from JDB settlement, and this will place its dividend yield at least at 7.8%. Its 8.9x PER and 0.69x P/B represent deep discounts to its customers (40x PER) and packaging peers (23.4x) which are unjustified in our view.</p>

We believe CPMC Holdings (906 HK) is an attractive alternative consumption play given its exposure to the rise in demand for food, beverages and household chemical product packaging in China. It is among the top player in China's packaging manufacturing (1-piece cans, 2-piece cans, tinplate packaging and plastic containers) with prominent customer profile including Coca-Cola, Tsingtao, Carlsberg, Blue Moon, Feihe, Yili and Jiaduobao etc. The combination of margin expansion, capacity growth and surging consumption demand, we expect CPMC to post a steady rising ROE. We expect special DPS payout on the receipt of Rmb1.5bn repurchase consideration from JDB settlement, and this will place its dividend yield at least at 7.8%. Its 8.9x PER and 0.69x P/B represent deep discounts to its customers (40x PER) and packaging peers (23.4x) which are unjustified in our view.

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

China

Shanghai Baosteel Packaging Co. Ltd., manufactures steel products. The Company also provides metal packaging services. Shanghai Baosteel Packaging serves customers and clients internationally.

Shanghai Baosteel Packaging-A (601968 CH)

Price Gauge
52-week Range	0.00 - 0.00
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Shanghai Baosteel Packaging-A (601968 CH)

CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer

An ORG offer has a low probability due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional...

Arun George

CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

Osbert Tang, CFA

CPMC Holdings (906 HK): Another Potential Contender

CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

Osbert Tang, CFA

CPMC Holdings (906 HK): What's Brewing?

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

CPMC is well positioned to capture the strong packaging demand from food, beverage and chemical products driven by China's consumption growth. Yet,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer

An ORG offer has a low probability due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional...

Arun George

CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

​Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

Osbert Tang, CFA

CPMC Holdings (906 HK): Another Potential Contender

​CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

Osbert Tang, CFA

CPMC Holdings (906 HK): What's Brewing?

​CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

CPMC Holdings (906 HK): An Attractive Inexpensive Alternative Consumption Play

CPMC is well positioned to capture the strong packaging demand from food, beverage and chemical products driven by China's consumption growth. Yet,...

Osbert Tang, CFA

Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...