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

Sichuan Languang Justbon Service Group / Event-Driven

<p><a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> has despatched the composite document in relation to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. </p><p>The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). </p><p>Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. </p><p>The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> and <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> have previously failed due to the inability to meet the 90% minimum acceptance condition.  </p><div class="content-highlight"><p>Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.</p></div>

Sichuan Languang Justbon Service Group (2606 HK) has despatched the composite document in relation to Country Garden Services Holdings (6098 HK) base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for Beijing Jingneng Clean Energy (579 HK) and Harbin Electric Co Ltd H (1133 HK) have previously failed due to the inability to meet the 90% minimum acceptance condition.  Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p>On the 22 March, <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> ("Justbon") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0322/2021032201066.pdf" target="_blank" rel="noopener">announced</a> its major shareholder (plus two other vendors) had entered into MOUs with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS), such that 126,011,860 H shares AND 750,000 domestic shares or 71.17% of shares out would be acquired. Upon completion, CGS was obligated to make an unconditional mandatory general Offer (MGO) for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).</p>
<p>In addition, if a delisting resolution was approved by independent H-shareholders and a 90% acceptance condition (of independent H-shares)) was satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.</p>
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<div>On the 19 April, Justbon said all three agreements had completed, giving CGS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0419/2021041901491.pdf" target="_blank" rel="noopener">71.17%</a>.</div>
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<div>The Composite Document has now been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0502/2021050200153.pdf" target="_blank" rel="noopener">despatched</a>, and the Offer is open to acceptances. The H Share Class Meeting will be held on the 17 June, which is also the first closing date. </div>
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<div>Assuming the delisting resolution is approved, the latest time for the acceptance condition to be satisfied is the 3 September, four months from now. </div>
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<div>But as this is an unconditional MGO, this extended acceptance period tilts the deal in favour of CGS securing the 90% tendering condition.</div>
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<div>More below the fold.</div>


On the 22 March, Sichuan Languang Justbon Service Group (2606 HK) ("Justbon") announced its major shareholder (plus two other vendors) had entered into MOUs with Country Garden Services Holdings (6098 HK) (CGS), such that 126,011,860 H shares AND 750,000 domestic shares or 71.17% of shares out would be acquired. Upon completion, CGS was obligated to make an unconditional mandatory general Offer (MGO) for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).
In addition, if a delisting resolution was approved by independent H-shareholders and a 90% acceptance condition (of independent H-shares)) was satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.







On the 19 April, Justbon said all three agreements had completed, giving CGS 71.17%.







The Composite Document has now been despatched, and the Offer is open to acceptances. The H Share Class Meeting will be held on the 17 June, which is also the first closing date. 

Assuming the delisting resolution is approved, the latest time for the acceptance condition to be satisfied is the 3 September, four months from now. 

But as this is an unconditional MGO, this extended acceptance period tilts the deal in favour of CGS securing the 90% tendering condition.

More below the fold.

Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Zhejiang Cangnan Instrument / Event-Driven

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<p>Back on the 5 February, gas meter manufacturer <a href="https://www.smartkarma.com/entities/zhejiang-cangnan-h" target="_blank" data-smartkarma-citation="entities:27212:1" rel="noopener">Zhejiang Cangnan Instrument (1743 HK)</a>  <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020501022.pdf" target="_blank" rel="noopener">announced</a> the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.</p>
<p>This was followed by a conditional cash offer on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0312/2021031201722.pdf" target="_blank" rel="noopener">12 March</a>. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.</p>
<p>The Offer Document has been despatched with the IFA <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021040100071.pdf" target="_blank" rel="noopener">concluding</a> the Offer price to be fair and reasonable.</p>
<p>The EGM will take place on the 17 May and the first closing date is the 31 May.</p>
<p>Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.</p>
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<p>More below the fold.</p>
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Back on the 5 February, gas meter manufacturer Zhejiang Cangnan Instrument (1743 HK)  announced the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.
This was followed by a conditional cash offer on the 12 March. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.
The Offer Document has been despatched with the IFA concluding the Offer price to be fair and reasonable.
The EGM will take place on the 17 May and the first closing date is the 31 May.
Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.


More below the fold.


Zhejiang Cangnan (1743 HK): H-Share Buyback

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> has corrected sharply over the last 6 months despite showing stellar results. We believe that the correction in the stock is due to: </p><ul>
<li>A small probability of the parent ( <a href="https://www.smartkarma.com/entities/times-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:8085:1" rel="noopener">Times China (1233 HK)</a> ) breaching the three red lines.</li>
<li>Tightening by the Chinese government in the property sector.</li>
<li>IPO fatigue in the sector. 2020 featured the listing of several property management companies that raised lots of cash, casting doubt on the companies ability to make acquisitions at good prices to fuel its future growth.</li>
<li>Pivot by the company from a more acquisitive to a third party strategy + expansion of community VAS services.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/869/original/image_15589350561618115623007.png?1618115619" class="editor-image img-responsive" data-smartkarma-image-id="199869"></figure><p><em>Source: Bloomberg</em></p><h3>Why do we like <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>?</h3><ul>
<li>We believe that with the current valuation of 12.4x FY21/8.6x FY22 and 5.8x FY23 implying &gt;50% CAGR EPS growth from FY21-23,  <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> could potentially be an acquisition target for larger groups like <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>, <a href="https://www.smartkarma.com/entities/a-living-services-co-ltd" target="_blank" data-smartkarma-citation="entities:26728:1" rel="noopener">A-Living Services (3319 HK)</a> or <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services Holdings (1516 HK)</a> that are targeting aggressive growth over the next 2-3 years. We admit that we don't know if the controlling shareholders of <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> desire to sell out. Recently though, with the <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> founders having sold out to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK), </a>we believe this may be the first step towards increased M&amp;A activity in the listed company space. We believe this acquisition's consummation will lead to a rerating of the cheaper companies like <a href="https://www.smartkarma.com/entities/aoyuan-healthy-life-group-company-limited" target="_blank" data-smartkarma-citation="entities:29130:1" rel="noopener">Aoyuan Healthy Life Group (3662 HK)</a>, <a href="https://www.smartkarma.com/entities/central-china-new-life" target="_blank" data-smartkarma-citation="entities:28953:1" rel="noopener">Central China New Life (9983 HK), </a>and <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>.</li>
<li>
<a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>  has demonstrated good execution in its short time period as a listed company. </li>
</ul><p>We believe that <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> could double from here, trading up to 25x FY21 with a target PEG of 0.6x.</p>

Times Neighborhood (9928 HK) has corrected sharply over the last 6 months despite showing stellar results. We believe that the correction in the stock is due to: 
A small probability of the parent ( Times China (1233 HK) ) breaching the three red lines.
Tightening by the Chinese government in the property sector.
IPO fatigue in the sector. 2020 featured the listing of several property management companies that raised lots of cash, casting doubt on the companies ability to make acquisitions at good prices to fuel its future growth.
Pivot by the company from a more acquisitive to a third party strategy + expansion of community VAS services.
Source: BloombergWhy do we like Times Neighborhood (9928 HK)?
We believe that with the current valuation of 12.4x FY21/8.6x FY22 and 5.8x FY23 implying &gt;50% CAGR EPS growth from FY21-23,  Times Neighborhood (9928 HK) could potentially be an acquisition target for larger groups like Country Garden Services Holdings (6098 HK), China Resources Mixc Lifestyle Services (1209 HK), A-Living Services (3319 HK) or Sunac Services Holdings (1516 HK) that are targeting aggressive growth over the next 2-3 years. We admit that we don't know if the controlling shareholders of Times Neighborhood (9928 HK) desire to sell out. Recently though, with the Sichuan Languang Justbon Service Group (2606 HK) founders having sold out to Country Garden Services Holdings (6098 HK), we believe this may be the first step towards increased M&amp;A activity in the listed company space. We believe this acquisition's consummation will lead to a rerating of the cheaper companies like Aoyuan Healthy Life Group (3662 HK), Central China New Life (9983 HK), and Times Neighborhood (9928 HK).

Times Neighborhood (9928 HK)  has demonstrated good execution in its short time period as a listed company. 
We believe that Times Neighborhood (9928 HK) could double from here, trading up to 25x FY21 with a target PEG of 0.6x.

Times Neighborhood - Value+Growth, Could It Be an Acquisition Target?

<div>
<p>Back on the 25 February, property management service provider <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> ("SLJS") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0225/2021022500961.pdf" target="_blank" rel="noopener">announced</a> its major shareholder had entered into a MOU with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of <a href="https://www.smartkarma.com/entities/sichuan-languang-development-co-ltd" target="_blank" data-smartkarma-citation="entities:7403:1" rel="noopener">Sichuan Languang Development (600466 CH)</a>. Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.</p>
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<p>On the 11 March, SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0311/2021031101126.pdf" target="_blank" rel="noopener">announced</a> some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.</p>
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<h3>The New News</h3>
<p>Late last night SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0322/2021032201066.pdf" target="_blank" rel="noopener">announced</a> a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).</p>
<p>CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.</p>
<p>The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?</p>
<p>More below the fold.</p>


Back on the 25 February, property management service provider Sichuan Languang Justbon Service Group (2606 HK) ("SLJS") announced its major shareholder had entered into a MOU with Country Garden Services Holdings (6098 HK) (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of Sichuan Languang Development (600466 CH). Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.


On the 11 March, SLJS announced some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.

The New News
Late last night SLJS announced a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).
CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.
The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?
More below the fold.

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

China

Sichuan Languang Justbon Services Group Co., Ltd. offers property management services. The Company provides services for residential properties, commercial properties, office properties, urban complexes, headquarters bases, and tourism real estate projects. Sichuan Languang Justbon Services Group provides services worldwide.

Sichuan Languang Justbon Service Group (2606 HK)

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Sichuan Languang Justbon Service Group (2606 HK)

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Mindful of the four-month acceptance period, one in which shares tendred are not entitled (by my reckoning) to be withdrawn, I believe the...

David Blennerhassett

Times Neighborhood - Value+Growth, Could It Be an Acquisition Target?

This insight highlights an opportunity in the property management company Times Neighborhood, having a 50% CAGR in profits from 2020-23 and trading...

Sameer Taneja

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Mindful of the four-month acceptance period, one in which shares tendred are not entitled (by my reckoning) to be withdrawn, I believe the...

David Blennerhassett

Zhejiang Cangnan (1743 HK): H-Share Buyback

Given the company's dubious price action and shareholder concentration, I would normally give this stock a wide birth. Bit it is precisely this...

David Blennerhassett

Times Neighborhood - Value+Growth, Could It Be an Acquisition Target?

This insight highlights an opportunity in the property management company Times Neighborhood, having a 50% CAGR in profits from 2020-23 and trading...

Sameer Taneja

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett