Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Shinsei Bank, Huifu Payment, Vedanta, Cardinal Resources, Jih Sun Finance

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<p>Briefly: on the 20 April, <a href="https://www.smartkarma.com/entities/allied-group-ltd" target="_blank" data-smartkarma-citation="entities:4387:1" rel="noopener">Allied Group Limited (373 HK)</a> (AGL) made an <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0420/2020042001582.pdf" target="_blank" rel="noopener">Offer</a> for 75%-held <a href="https://www.smartkarma.com/entities/allied-properties-hk-ltd" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties Hk (56 HK)</a> (APH), by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close.  The Scheme Doc was despatched on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0618/2020061800579.pdf" target="_blank" rel="noopener">19 June</a>. The IFA opined the Offer was fair &amp; reasonable. Shareholders approved the Scheme on the 15 July. Then followed a bizarre delay wherein the judge <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1005/2020100502577.pdf" target="_blank" rel="noopener">refused to sanction</a> the Scheme, culminating in the Court of Appeals <a href="https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=132143&amp;currpage=T" target="_blank" rel="noopener">settling the matter</a>, and the Scheme became <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1124/2020112400688.pdf" target="_blank" rel="noopener">effective</a> on the 25 November. </p>
<p>This deal was extensively discussed on Smartkarma, beginning with <em><a href="https://skr.ma/p9urr" target="_blank" rel="noopener">Allied Prop (56 HK): Cash Offer From Parent</a></em>.</p>
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<h3>The New News</h3>
<p>AGL has now made an <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1218/2020121801069.pdf" target="_blank" rel="noopener">Offer</a> for 75%-held <a href="https://www.smartkarma.com/entities/shk-hong-kong-industries-ltd" target="_blank" data-smartkarma-citation="entities:2399:1" rel="noopener">Shk Hong Kong Industries (666 HK)</a>, by way of a Scheme, at $0.21/share (cash), a 50.00% premium to last close.  The Offer price is final. SHK is HK-incorporated, therefore there is no headcount test.</p>
<p>Should the Scheme complete - and I see no specific hurdle why it will not - AGL would have privatised its two key holdings, and at 0.4x P/B, may well be the next take-private target. </p>
<p>More below the fold.</p>
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Briefly: on the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for 75%-held Allied Properties Hk (56 HK) (APH), by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close.  The Scheme Doc was despatched on the 19 June. The IFA opined the Offer was fair &amp; reasonable. Shareholders approved the Scheme on the 15 July. Then followed a bizarre delay wherein the judge refused to sanction the Scheme, culminating in the Court of Appeals settling the matter, and the Scheme became effective on the 25 November. 
This deal was extensively discussed on Smartkarma, beginning with Allied Prop (56 HK): Cash Offer From Parent.


The New News
AGL has now made an Offer for 75%-held Shk Hong Kong Industries (666 HK), by way of a Scheme, at $0.21/share (cash), a 50.00% premium to last close.  The Offer price is final. SHK is HK-incorporated, therefore there is no headcount test.
Should the Scheme complete - and I see no specific hurdle why it will not - AGL would have privatised its two key holdings, and at 0.4x P/B, may well be the next take-private target. 
More below the fold.


SHK (666 HK): Allied Group Further Cleans House With Scheme Offer

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<p>To recap: on the 20 April, <a href="https://www.smartkarma.com/entities/allied-group-ltd" target="_blank" data-smartkarma-citation="entities:4387:1" rel="noopener">Allied Group Limited (373 HK)</a> (AGL) made an <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0420/2020042001582.pdf" target="_blank" rel="noopener">Offer</a> for 75%-held <a href="https://www.smartkarma.com/entities/allied-properties-hk-ltd" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties Hk (56 HK)</a> (APH), by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close. The Offer consideration was Final, and would be split between a $0.42/share Scheme Consideration and a $1.50 Scheme Dividend.  </p>
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<p>The Scheme Doc was despatched on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0618/2020061800579.pdf" target="_blank" rel="noopener">19 June</a>. The IFA has opined the Offer was fair &amp; reasonable. The Court Meeting was set for the 15 July. </p>
<p>Yesterday,  the resolution to approve the Scheme was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0715/2020071500859.pdf" target="_blank" rel="noopener">approved</a> by the holders of Scheme Shares at the Court Meeting. Shares will continue to trade until the 14 August (inclusive). Cheques will be despatched on or before the 8 Sept.</p>
<p>With APH fully taken into the fold, is the privatisation of AGL next for the Lee family?</p>
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<p>As always, more below the fold.</p>
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To recap: on the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for 75%-held Allied Properties Hk (56 HK) (APH), by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close. The Offer consideration was Final, and would be split between a $0.42/share Scheme Consideration and a $1.50 Scheme Dividend.  


The Scheme Doc was despatched on the 19 June. The IFA has opined the Offer was fair &amp; reasonable. The Court Meeting was set for the 15 July. 
Yesterday,  the resolution to approve the Scheme was approved by the holders of Scheme Shares at the Court Meeting. Shares will continue to trade until the 14 August (inclusive). Cheques will be despatched on or before the 8 Sept.
With APH fully taken into the fold, is the privatisation of AGL next for the Lee family?


As always, more below the fold.


Allied Prop (56 HK): Scheme Done. AGL Next?

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

<p>Where so many of us are focused on the impact of China slowdown on its banks, it is worth highlighting the risks to Hong Kong’s banks. But what we are focused on here is their domestic lending, not the stuff booked locally but for use in China. For most, the perception is that Hong Kong banks have little risk due to a strong emphasis on mortgage lending, but we are not convinced this is holding up, and we believe it will worsen.  Of course, the new marginally higher interest costs in Hong Kong…</p>

Where so many of us are focused on the impact of China slowdown on its banks, it is worth highlighting the risks to Hong Kong’s banks. But what we are focused on here is their domestic lending, not the stuff booked locally but for use in China. For most, the perception is that Hong Kong banks have little risk due to a strong emphasis on mortgage lending, but we are not convinced this is holding up, and we believe it will worsen.  Of course, the new marginally higher interest costs in Hong Kong…

Domestic NPLs in Hong Kong Can Surprise – Not Just Those in Neighboring China

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

<p>While the share price appreciation for the Singapore and Hong Kong banks was not as strong as its U.S. and Japan peers in the post-U.S. election rally, banks in Singapore and Hong Kong saw moderate increases in their share prices. Banks in Singapore and Hong Kong will not benefit directly from long-term positive in a more favorable financial regulatory environment in the U.S. The U.S banks should see a general reduction in regulatory oversight and rules, lower compliance costs and capital requirements and the risk of a break-up of the big U.S. banks. Singapore banks have a regional reach in Asia while Hong Kong banks are limited to domestic operations and those in Greater China.</p><p>U.S. dollar interbank rates were steady post the election. Similarly, the three months and 12 months Singapore Interbank Offered Rates, or SIBOR, were largely flat at 0.87% and 1.31%, respectively. Likewise in Hong Kong, the Hong Kong Interbank Offered Rates, or HIBOR, were also unchanged. With political uncertainty post the election, a delay in the increase in the federal-funds rate could see net interest margins, or NIM, for the banks to continue to be pressured in the near term. We maintain our NIMs assumption for the Singapore and Hong Kong banks, factoring in largely steady margins for the next two years before increases from fiscal 2018. Over the past 12 months, SIBOR have eased off in the second half of 2016, pressuring asset yields for the Singapore banks, while high liquidity in Hong Kong and weak loan demand saw rising competition in Hong Kong, also leading to weaker asset yields.</p><p><em>Analyst: Michael Wu, CAIA</em></p>

While the share price appreciation for the Singapore and Hong Kong banks was not as strong as its U.S. and Japan peers in the post-U.S. election rally, banks in Singapore and Hong Kong saw moderate increases in their share prices. Banks in Singapore and Hong Kong will not benefit directly from long-term positive in a more favorable financial regulatory environment in the U.S. The U.S banks should see a general reduction in regulatory oversight and rules, lower compliance costs and capital requirements and the risk of a break-up of the big U.S. banks. Singapore banks have a regional reach in Asia while Hong Kong banks are limited to domestic operations and those in Greater China.U.S. dollar interbank rates were steady post the election. Similarly, the three months and 12 months Singapore Interbank Offered Rates, or SIBOR, were largely flat at 0.87% and 1.31%, respectively. Likewise in Hong Kong, the Hong Kong Interbank Offered Rates, or HIBOR, were also unchanged. With political uncertainty post the election, a delay in the increase in the federal-funds rate could see net interest margins, or NIM, for the banks to continue to be pressured in the near term. We maintain our NIMs assumption for the Singapore and Hong Kong banks, factoring in largely steady margins for the next two years before increases from fiscal 2018. Over the past 12 months, SIBOR have eased off in the second half of 2016, pressuring asset yields for the Singapore banks, while high liquidity in Hong Kong and weak loan demand saw rising competition in Hong Kong, also leading to weaker asset yields.Analyst: Michael Wu, CAIA

Singapore and Hong Kong Banks Sound Post U.S. Election; Interbank Rates Steady

Hong Kong

SHK Hong Kong Industries Ltd., through its subsidiaries, invests in listed securities, unlisted securities, and properties.

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SHK Hong Kong Industries (666 HK)

Last Week in Event SPACE: Shinsei Bank, Huifu Payment, Vedanta, Cardinal Resources, Jih Sun Finance

The weekend is upon us - pour yourself some coffee (or mulled wine) and sift through a brief summary of insights on various events discussed during...

David Blennerhassett

SHK (666 HK): Allied Group Further Cleans House With Scheme Offer

It's an attractive spread to terms here, but not a particularly liquid arb situation. I like AGL as it further simplifies its holdings. I think...

David Blennerhassett

Allied Prop (56 HK): Scheme Done. AGL Next?

To recap: on the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for 75%-held Allied Properties Hk (56 HK) (APH), by way of a Scheme,...

David Blennerhassett

Domestic NPLs in Hong Kong Can Surprise – Not Just Those in Neighboring China

Where so many of us are focused on the impact of China slowdown on its banks, it is worth highlighting the risks to Hong Kong’s banks. But what we...

Daniel Tabbush

Singapore and Hong Kong Banks Sound Post U.S. Election; Interbank Rates Steady

While the share price appreciation for the Singapore and Hong Kong banks was not as strong as its U.S. and Japan peers in the post-U.S. election...

Morningstar, Inc.

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52-week Range

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P/E

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