Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

*Greensill Blow Up: Greensill Capital (Greensill) is close to bankruptcy. Greensill’s troubles began when its credit insurer, Bond and Credit Company (BCC), a unit of Tokio Marine (8766.JP), decided to not renew Greensill’s insurance likely given the failures of NMC Health, Agritrade, and BrightHouse that borrowed through the Greensill-backed Credit Suisse Group (CSGN.VX) [Credit Suisse] funds; and *Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk.

*Greensill Blow Up: Greensill Capital (Greensill) is close to bankruptcy. Greensill’s troubles began when its credit insurer, Bond and Credit Company (BCC), a unit of Tokio Marine (8766.JP), decided to not renew Greensill’s insurance likely given the failures of NMC Health, Agritrade, and BrightHouse that borrowed through the Greensill-backed Credit Suisse Group (CSGN.VX) [Credit Suisse] funds; and *Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. 

Credit Suisse – Another European Daisy Chain

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Germany's chancellor Angela Merkel is on the way out. After 16 years she will resign as Chancellor later this year. Her likely successor, Mr. Laschet, has just been elected as CDU party leader.During Merkel's reign, her commitment to China was clear. She paid at least 12 official state visits to China to promote German interests. In hindsight, this led to debacles such as the promotion of <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a> to Chinese authorities.Another <a href="http://smart-home.haier.com/en/gsgg/P020200604563919508265.pdf" target="_blank" rel="noopener">interesting development was the 2018 announcement</a> between the Shanghai and German stock exchanges to list Chinese companies in Germany. They would be called "D Shares", D standing for Deutschland. The poster boy would be <a href="http://smart-home.haier.com/en/gsgg/P020200604563919508265.pdf" target="_blank" rel="noopener">Qingdao Haier</a>.Fast forward to 2021 and it is a late 2020 announcement by Haier that caught our attention. The company has announced in an official filing it will be aggressively buying D shares going forward.Why? After the recent Haier restructuring exercise, the D shares are now pari-passu with the H shares which are freely trading in HK. The D share experiment was clearly a flop and there is no logical reason for these D shares existing anymore. Outcome? Haier will buy 66 million EUR worth of D shares. It makes financial sense. Shareholders, in theory, should also be able to exchange D shares for H shares. Although, in practice, there is just one D share in the world and it has never been done before.Arbitrage Opportunity: <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home Co Ltd (6690 HK) closed at 35.20 HKD</a>Haier Smart Home D shares were recently trading at +/-2.48 EURAs a shareholder, you have the same rights (including dividends) when you are a D shareholder as an H shareholder. If this is true, the disconnect makes no sense, and once arbitrage funds find out it will disappear. ADTV for D shares is above 10M USD/day. This trade can be put on in size.The fair value of at today's FX is 3.74 EUR, which equates to +/-50% upside. The trade has more upside if the HK list-co does well, but has no downside unless the HK listing collapses significantly.

Germany's chancellor Angela Merkel is on the way out. After 16 years she will resign as Chancellor later this year. Her likely successor, Mr. Laschet, has just been elected as CDU party leader.During Merkel's reign, her commitment to China was clear. She paid at least 12 official state visits to China to promote German interests. In hindsight, this led to debacles such as the promotion of Wirecard AG (WDI GR) to Chinese authorities.Another interesting development was the 2018 announcement between the Shanghai and German stock exchanges to list Chinese companies in Germany. They would be called "D Shares", D standing for Deutschland. The poster boy would be Qingdao Haier.Fast forward to 2021 and it is a late 2020 announcement by Haier that caught our attention. The company has announced in an official filing it will be aggressively buying D shares going forward.Why? After the recent Haier restructuring exercise, the D shares are now pari-passu with the H shares which are freely trading in HK. The D share experiment was clearly a flop and there is no logical reason for these D shares existing anymore. Outcome? Haier will buy 66 million EUR worth of D shares. It makes financial sense. Shareholders, in theory, should also be able to exchange D shares for H shares. Although, in practice, there is just one D share in the world and it has never been done before.Arbitrage Opportunity: Haier Smart Home Co Ltd (6690 HK) closed at 35.20 HKDHaier Smart Home D shares were recently trading at +/-2.48 EURAs a shareholder, you have the same rights (including dividends) when you are a D shareholder as an H shareholder. If this is true, the disconnect makes no sense, and once arbitrage funds find out it will disappear. ADTV for D shares is above 10M USD/day. This trade can be put on in size.The fair value of at today's FX is 3.74 EUR, which equates to +/-50% upside. The trade has more upside if the HK list-co does well, but has no downside unless the HK listing collapses significantly.

Haier Smart Home: Forgotten D Shares = Equal to H Shares. Creates a Minimum 50% Return Opportunity

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Third-party service provider <a href="https://www.smartkarma.com/entities/huifu-payment-ltd" target="_blank" data-smartkarma-citation="entities:27145:1" rel="noopener">Huifu Payment Limited (1806 HK)</a> was listed on the 15 June 2018 at <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0614/01806_3366860/e102.pdf" target="_blank" rel="noopener">HK$7.50</a>/share. The IPO was discussed in <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh</a>'s insight <a href="https://skr.ma/9JNGu" target="_blank" rel="noopener">Huifu Payment IPO Review - Regulation May Take Away a Major Source of Income</a>. He recommended avoiding the issue - that was a great call.
Shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1218/2020121800101.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading this past Friday "pursuant to the Hong Kong Code on Takeovers and Mergers". Shares last changed hands at HK$2.76/share. 
At the time of listing, Huifu had about 2% market share of third-party payment in China. Its market share compared to <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> and Tenpay's 34.7% and 25.1% respectively at the time, according to the prospectus (<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0601/ltn20180601025.pdf" target="_blank" rel="noopener">page 88</a>).  
The eleventh-hour failure to list Ant has been copiously discussed here on Smartkarma, including my two kuai worth in <a href="https://skr.ma/X4WWM" target="_blank" rel="noopener">Party Poopers: Reining In China's Internet</a>. Huifu would also be captured under this increased regulatory oversight on tech companies and micro-lending.
At the time of Huyifu's listing, the most commonly asked question was how does Huifu compete against other third-party payment service providers such as Tenpay and Ant.
That remains the key question.
More below the fold.

Third-party service provider Huifu Payment Limited (1806 HK) was listed on the 15 June 2018 at HK$7.50/share. The IPO was discussed in Zhen Zhou, Toh's insight Huifu Payment IPO Review - Regulation May Take Away a Major Source of Income. He recommended avoiding the issue - that was a great call.
Shares were suspended ahead of trading this past Friday "pursuant to the Hong Kong Code on Takeovers and Mergers". Shares last changed hands at HK$2.76/share. 
At the time of listing, Huifu had about 2% market share of third-party payment in China. Its market share compared to Ant Group (6688 HK) and Tenpay's 34.7% and 25.1% respectively at the time, according to the prospectus (page 88).  
The eleventh-hour failure to list Ant has been copiously discussed here on Smartkarma, including my two kuai worth in Party Poopers: Reining In China's Internet. Huifu would also be captured under this increased regulatory oversight on tech companies and micro-lending.
At the time of Huyifu's listing, the most commonly asked question was how does Huifu compete against other third-party payment service providers such as Tenpay and Ant.
That remains the key question.
More below the fold.

Huifu Payment (1806 HK): Early Withdrawal?

European Event-Driven Analyst

Patryk Basiewicz

PGB Research

Forensic Accounting

Network International / Forensic Accounting

<a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" rel="noopener">Network International Holdings (NETW LN)'</a>s share price has fallen by half this year. Though much of this decline likely occurred due to COVID-related hit in its brick-and-mortar retail/tourist business, it is quite likely that <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a> crisis had a part to play. Seemingly, there are several parallels. There are already some Twitter haters out there. 
Below I analyse <a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" data-smartkarma-citation="entities:28918:1" rel="noopener">Network International Holdings (NETW LN)</a> cash flow dynamics using the information they provided in public disclosure. I do that because Wirecard's poor cash generation was the canary in the coal mine, that many (myself included) overlooked and downplayed. I show how different business models between NETW and Wirecard lead to different adjustments of reported cash flow figures. Note that, just like Wirecard, NETW does not disclose cash flow in a way that fully reflects economic reality.

Network International Holdings (NETW LN)'s share price has fallen by half this year. Though much of this decline likely occurred due to COVID-related hit in its brick-and-mortar retail/tourist business, it is quite likely that Wirecard AG (WDI GR) crisis had a part to play. Seemingly, there are several parallels. There are already some Twitter haters out there. 
Below I analyse Network International Holdings (NETW LN) cash flow dynamics using the information they provided in public disclosure. I do that because Wirecard's poor cash generation was the canary in the coal mine, that many (myself included) overlooked and downplayed. I show how different business models between NETW and Wirecard lead to different adjustments of reported cash flow figures. Note that, just like Wirecard, NETW does not disclose cash flow in a way that fully reflects economic reality. 

Network International (NETW LN): It Is Not Wirecard Just Yet. Cashflow Comparison.

Germany

Wirecard AG offers Internet payment and processing services.  The Company provides software and systems for online payment, electronic funds transfer, fraud protection and enterprise solutions.  Wirecard also offers call center services.

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Wirecard AG (WDI GR)

Credit Suisse – Greensill Goes BK

CREDIT SUISSE: Greensill has filed for insolvency. Lawyers for Greensill cited its inability to repay a USD 140 mn bridge loan from Credit Suisse...

Thomas J. Monaco

Credit Suisse – Another European Daisy Chain

CREDIT SUISSE: Greensill is close to bankruptcy. Credit Suisse , GAM , Tokio Marine, SoftBank and others are likely to see additional weakness...

Thomas J. Monaco

Haier Smart Home: Forgotten D Shares = Equal to H Shares. Creates a Minimum 50% Return Opportunity

German listed Haier Smart Home D shares have been forgotten by Mr Market and create an arbitrage opportunity of 50% as they should trade pari-passu...

Nicolas Van Broekhoven

Huifu Payment (1806 HK): Early Withdrawal?

Shares are currently suspended, so there's nothing to be done as such. An Offer, possibly from the CEO, may be on the cards.

David Blennerhassett

Network International (NETW LN): It Is Not Wirecard Just Yet. Cashflow Comparison.

Network International does not seem like another Wirecard-type scandal just yet. But, reading its cash flow structure is equally hard. I try to...

Patryk Basiewicz

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