Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Orient Overseas (International) / Index Rebalance

<ul>
<li>The review period for the March review of the HSCI ends on 31 December. There are expected to be a lot more inclusions than deletions at the review.</li>
<li>There are quite a few stocks that should be included following their listing over the last couple of months while others are now potential inclusions after passing the velocity test.</li>
<li>Quite a few of the potential deletions from the HSCI and Stock Connect have large holdings via Southbound Stock Connect and these stock could see some selling.</li>
</ul>


The review period for the March review of the HSCI ends on 31 December. There are expected to be a lot more inclusions than deletions at the review.
There are quite a few stocks that should be included following their listing over the last couple of months while others are now potential inclusions after passing the velocity test.
Quite a few of the potential deletions from the HSCI and Stock Connect have large holdings via Southbound Stock Connect and these stock could see some selling.


HSCI Index Rebalance and Stock Connect: More Inclusions than Exclusions in March

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

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. </p><p>Unsurprisingly, the IFA considers the 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><div class="content-highlight">
<p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  </p>
<p>The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. </p>
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the 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 key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

<p><a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).</p><p>After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.</p><div class="content-highlight"><p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. </p></div>

Bestway Global Holding (3358 HK) is one of the leading and one of the most well-established branded companies in the global water leisure products market. Bestway listed on the HKEx on 16 November 2017 at HK$4.38 per share to raise net proceeds of HK$1,094.1 million ($141 million).After market close on Friday, Bestway announced a privatisation offer by way of a scheme of arrangement from Mr Zhu Qiang, who is the Founder, Chairman &amp; CEO. The offeror will offer HK$4.38 per scheme share. The bid represents a premium of 27.0% over the closing price of HK$3.45 per share on the last trading day (22 June 2021 prior to the trading halt). The privatisation price of HK$4.38 is in line with the IPO price.The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 234.9 million shares or 22.19% of shares outstanding, the 10% blocking stake is 23.5 million shares or 2.22% of shares outstanding. Fidelity holds a blocking stake of 2.46% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer, in our view. While not a knockout offer, we believe that the privatisation bid will be successful. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>On the 20 March, <a href="https://www.smartkarma.com/entities/li-fung-ltd" target="_blank" data-smartkarma-citation="entities:6290:1" rel="noopener">Li &amp; Fung Ltd (494 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0320/2020032000519.pdf" target="_blank" rel="noopener">announced</a> a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and Singapore's <a href="https://www.smartkarma.com/entities/global-logistic-properties-ltd" target="_blank" data-smartkarma-citation="entities:2894:1" rel="noopener">Global Logistic Properties (GLP SP)</a>), by way of a Scheme, at a Scheme Offer Price of HK$1.25, a 150% premium to last close. The Offer Price is final. No final FY19 dividend was declared.</p>
</div>
<div>
<p>Disinterested Shareholders comprise 5.701bn shares, or 66.77% of shares out. Therefore the blocking stake at the Scheme Meeting is 570.1mn shares or 6.677% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. </p>
<p>Silchester, with 10.9% of shares out, has the ability to torpedo the deal. </p>
<p>This is the key risk to the transaction. But I'm amending my prior conviction.</p>
<p>If concluding Li &amp; Fung is structurally, and permanently impaired, or facing ephemeral challenges (I would choose the former), this Offer Price is looking attractive.</p>
<p>As always, more below the fold.</p>
</div>
<div>
<p></p>
</div>


On the 20 March, Li &amp; Fung Ltd (494 HK) announced a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and Singapore's Global Logistic Properties (GLP SP)), by way of a Scheme, at a Scheme Offer Price of HK$1.25, a 150% premium to last close. The Offer Price is final. No final FY19 dividend was declared.


Disinterested Shareholders comprise 5.701bn shares, or 66.77% of shares out. Therefore the blocking stake at the Scheme Meeting is 570.1mn shares or 6.677% of shares out. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. 
Silchester, with 10.9% of shares out, has the ability to torpedo the deal. 
This is the key risk to the transaction. But I'm amending my prior conviction.
If concluding Li &amp; Fung is structurally, and permanently impaired, or facing ephemeral challenges (I would choose the former), this Offer Price is looking attractive.
As always, more below the fold.





<p><a href="https://www.smartkarma.com/entities/li-fung-ltd" target="_blank" data-smartkarma-citation="entities:6290:1" rel="noopener">Li &amp; Fung Ltd (494 HK)</a> is a global merchandise supply chain manager. It assists retail brands source products from manufacturers in Asia along with managing production and logistics processes. On 20 March, it announced a privatisation bid of HK$1.25 per scheme share from the Fung family and <a href="https://www.smartkarma.com/entities/global-logistic-properties-ltd" target="_blank" data-smartkarma-citation="entities:2894:1" rel="noopener">Global Logistic Properties (GLP SP)</a>, a logistics warehouse operator and investor.</p><div class="content-highlight"><p>The forward P/E implied by the privatisation price is attractive in comparison to historical and peer P/E multiples. However, the privatisation proposal also looks like an attempt to take advantage of the share price weakness caused in part due to the US-China trade tensions and covid-19 outbreak. Notwithstanding the 150% premium to last close, we think that the privatisation bid has a good chance of not getting shareholder approval. </p></div>

Li &amp; Fung Ltd (494 HK) is a global merchandise supply chain manager. It assists retail brands source products from manufacturers in Asia along with managing production and logistics processes. On 20 March, it announced a privatisation bid of HK$1.25 per scheme share from the Fung family and Global Logistic Properties (GLP SP), a logistics warehouse operator and investor.The forward P/E implied by the privatisation price is attractive in comparison to historical and peer P/E multiples. However, the privatisation proposal also looks like an attempt to take advantage of the share price weakness caused in part due to the US-China trade tensions and covid-19 outbreak. Notwithstanding the 150% premium to last close, we think that the privatisation bid has a good chance of not getting shareholder approval. 

Li & Fung’s Opportunistic Privatisation Bid?

Hong Kong

Stella International is an investment holding company primarily engaged in the development, manufacturing, and sale of premium footwear products and leather goods. The company also operates in footwear retailing and wholesaling, offering products under its own brands such as Stella Luna. It was founded in 1982 and is headquartered in Kowloon, Hong Kong.

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Stella International (1836 HK)

HSCI Index Rebalance and Stock Connect: More Inclusions than Exclusions in March

We expect there will be a lot more inclusions than exclusions at the March rebalance of the HSCI. The changes to the index will result in changes...

Brian Freitas

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

Bestway Global’s Privatisation Bid

Bestway announced a privatisation offer from Mr Zhu Qiang (the Founder, Chairman & CEO) at HK$4.38 per scheme share. While not a knockout offer, we...

Arun George

Li & Fung: Another Think About The Offer

On the 20 March, Li & Fung Ltd (494 HK) announced a privatisation Offer from Golden Lincoln (a vehicle owned by the Fung family and...

David Blennerhassett

Li & Fung’s Opportunistic Privatisation Bid?

Li & Fung Ltd (494 HK) is a global merchandise supply chain manager. It assists retail brands source products from manufacturers in Asia along...

Arun George

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