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

<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. 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. <div class="content-highlight">
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%. 
</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

<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).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.<div class="content-highlight">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. </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. 

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

Tonly Electronics Holdings / Event-Driven

<a href="https://www.smartkarma.com/entities/tonly-electronics-holdings-ltd" target="_blank" data-smartkarma-citation="entities:1320:1" rel="noopener">Tonly Electronics Holdings (1249 HK)</a> is engaged in the sales of audio-visual products (excluding TV sets) for third parties’ brands on an original design manufacture basis. Tonly has received a privatisation offer at HK$12.00 in cash per share. The offeror is its largest shareholder, T.C.L. Industries Holdings, which is wholly-owned by TCL Holdings. The Offeror also has a significant investment in <a href="https://www.smartkarma.com/entities/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia Technology (1070 HK)</a>. The privatisation price is a 19.0% premium to the share price of HK$10.08 on the last trading day (29 October).<div class="content-highlight">The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 204.2 million shares or 74.69% of shares outstanding. Disinterested scheme shareholders represent 69.2 million shares or 25.31% of shares outstanding which implies the 10% blocking stake is 6.9 million shares or 2.53% of shares outstanding. Overall, we believe that the privatisation price is attractive, and the bid will succeed. </div>

Tonly Electronics Holdings (1249 HK) is engaged in the sales of audio-visual products (excluding TV sets) for third parties’ brands on an original design manufacture basis. Tonly has received a privatisation offer at HK$12.00 in cash per share. The offeror is its largest shareholder, T.C.L. Industries Holdings, which is wholly-owned by TCL Holdings. The Offeror also has a significant investment in Tcl Multimedia Technology (1070 HK). The privatisation price is a 19.0% premium to the share price of HK$10.08 on the last trading day (29 October).The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 204.2 million shares or 74.69% of shares outstanding. Disinterested scheme shareholders represent 69.2 million shares or 25.31% of shares outstanding which implies the 10% blocking stake is 6.9 million shares or 2.53% of shares outstanding. Overall, we believe that the privatisation price is attractive, and the bid will succeed. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

On the 17 June, <a href="https://www.smartkarma.com/entities/skyworth-digital-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10941:1" rel="noopener">Skyworth Digital (751 HK)</a> announced a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0617/2020061701026.pdf" target="_blank" rel="noopener">partial buyback</a> - 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close.
The Offer was open to acceptances after the Circular was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0727/2020072700015.pdf" target="_blank" rel="noopener">despatched</a> on the 27 July.  The SGM (to vote on the Offer and the whitewash waiver) was initially expected to be held yesterday, but was pushed back a day on account of Typhoon Higos.
The votes are now in for the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0820/2020082000642.pdf" target="_blank" rel="noopener">delayed SGM</a>. The Offer was approved by 99.69% of those in attendance; and the special resolution to approve the whitewash waiver was approved by 98.56%.
The close of the Offer has been revised to the 3 September, from the 2 September. Cheques are expected to be despatched on or before the 14 September, from 11 September under the previous timetable. 
As always, more below the fold. Plus Ye Olde Arb Grids.

On the 17 June, Skyworth Digital (751 HK) announced a partial buyback - 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close.
The Offer was open to acceptances after the Circular was despatched on the 27 July.  The SGM (to vote on the Offer and the whitewash waiver) was initially expected to be held yesterday, but was pushed back a day on account of Typhoon Higos.
The votes are now in for the delayed SGM. The Offer was approved by 99.69% of those in attendance; and the special resolution to approve the whitewash waiver was approved by 98.56%.
The close of the Offer has been revised to the 3 September, from the 2 September. Cheques are expected to be despatched on or before the 14 September, from 11 September under the previous timetable. 
As always, more below the fold. Plus Ye Olde Arb Grids. 

Skyworth (751 HK): Partial Unconditional As Whitewash Waiver Approved

Hong Kong

TCL Multimedia Technology Holdings Limited, through its subsidiaries, manufactures television sets, trades television related components, and manufactures audio visual products.  The Company also manufactures personal computers and peripheral products. In addition, TCL Intenational operates information technology and other business.

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Tcl Multimedia Technology (1070 HK)

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

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. 25 stocks...

David Lepper

Tonly Electronics’ Privatisation Bid

Tonly has received a privatisation offer at HK$12.00 in cash per share, a 19.0% premium to last close. Overall, we believe that the privatisation...

Arun George

Skyworth (751 HK): Partial Unconditional As Whitewash Waiver Approved

On the 17 June, Skyworth Digital (751 HK) announced a partial buyback - 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium...

David Blennerhassett

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