Pan-Asia Equity Bottom-up, Wickhams Hill

Lloyd Moffatt

Pan-Asia Equity Bottom-up

Research-Intensive Fundamental Value Advisor

Wickhams Hill

Wickhams Hill Capital is a research-intensive fundamental value advisor, on long and occasionally short investment opportunities concentrated in small and mid-cap public companies.

Thematic (Sector/Industry)

<p>Asian small cap markets were poor performers across the board, with the exception of our WHC Hong Kong Index that eked out a gain of 2.9%. The strong USD can largely be attributed to the weak performance, noting that the larger MSCI indices fell more than their small-cap counterparts.</p><p>Year-to-date, Singapore continues to lead the pack with a 6.5% gain in the Wickhams Hill Singapore Index. This out performance is broadly reflected by the mainstream indices.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/054/959/original/1.png?1528801082" class="editor-image img-responsive" data-smartkarma-image-id="54959"></figure><div class="content-caption"><p style="text-align: left;">Source: WHC Analysis</p></div><p>Most interesting is…</p>

Asian small cap markets were poor performers across the board, with the exception of our WHC Hong Kong Index that eked out a gain of 2.9%. The strong USD can largely be attributed to the weak performance, noting that the larger MSCI indices fell more than their small-cap counterparts.Year-to-date, Singapore continues to lead the pack with a 6.5% gain in the Wickhams Hill Singapore Index. This out performance is broadly reflected by the mainstream indices.Source: WHC AnalysisMost interesting is…

Asia Small-Cap: Top Movers, Buybacks and Insider Dealing - May’18

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

Riedel provides equity research and analysis to leading financial organizations. By becoming members of a region (Asia, Latin America, Emerging Europe or Global), organizations have access to an integrated set of services including:

Regular company coverage reports
Up-to-date investment decision advice (buy, hold, sell)
Monthly regional and global conference calls
Customized company reports and unlimited on-line access to the program's services.

Riedel provides research coverage of companies across the full range of market capitalization. Experienced research professionals in each market develop company reports and analysis as well as earnings models and projections. Ratings are Buy, Hold and Sell with a focus on compelling investment ideas - both long and short. Downloadable, dynamic earnings models are built to facilitate sensitivity analysis.

Please feel free to contact us for complimentary access to our written research.  We want to show you that our unique research flow can add value and help develop a long-term, high value-add relationship.

Riedel's model focuses on providing clients with unique insights and consulting in addition to unlimited access to all produced research This model allows members to receive exponential benefits for their retainer fees.

<ul>
<li>This 5 minute interview on Bloomberg's DayBreak Asia show reviews current actionable ideas in India and China including some lesser-known tech and manufacturing companies.</li>
<li>China:  Find opportunities in the areas of focus for President Xi's second term.  Robotics and Digital Payments. <a href="https://www.smartkarma.com/entities/16185" target="_blank" data-smartkarma-citation="entities:16185:1">Midea Group Co Ltd A (000333 CH)</a> and <a href="https://www.smartkarma.com/entities/11467" target="_blank" data-smartkarma-citation="entities:11467:1">China Innovationpay Group (8083 HK)</a>
</li>
<li>Yuan likely to be stable going into October meetings.</li>
<li>India: Focus on niche manufacturers <a href="https://www.smartkarma.com/entities/6958" target="_blank" data-smartkarma-citation="entities:6958:1">Essel Propack Ltd (ESEL IN)</a> and <a href="https://www.smartkarma.com/entities/16586" target="_blank" data-smartkarma-citation="entities:16586:1">Aia Engineering Ltd</a>…</li>
</ul>


This 5 minute interview on Bloomberg's DayBreak Asia show reviews current actionable ideas in India and China including some lesser-known tech and manufacturing companies.
China:  Find opportunities in the areas of focus for President Xi's second term.  Robotics and Digital Payments. Midea Group Co Ltd A (000333 CH) and China Innovationpay Group (8083 HK)

Yuan likely to be stable going into October meetings.
India: Focus on niche manufacturers Essel Propack Ltd (ESEL IN) and Aia Engineering Ltd…


Under the Radar Tech and Mfg Ideas in India and China - Riedel Interview on Bloomberg Daybreak Asia

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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jst-group" target="_blank" data-smartkarma-citation="entities:39885:1" rel="noopener">JST Group (1703609D CH)</a> is China’s largest e-commerce SaaS ERP provider. It is seeking to raise US$250 million to US$300 million.     </li>
<li>JST (Jushuitan) is China’s largest e-commerce SaaS ERP provider in terms of relevant revenue in 2024, with a market share of 24.4%, according to CIC.</li>
<li>The investment case is bullish due to robust book-to-bill ratios, strong growth, high contract liabilities, underlying profitability and cash generation.  </li>
</ul>



JST Group (1703609D CH) is China’s largest e-commerce SaaS ERP provider. It is seeking to raise US$250 million to US$300 million.     
JST (Jushuitan) is China’s largest e-commerce SaaS ERP provider in terms of relevant revenue in 2024, with a market share of 24.4%, according to CIC.
The investment case is bullish due to robust book-to-bill ratios, strong growth, high contract liabilities, underlying profitability and cash generation.  


Event-Driven

<p><a href="https://www.smartkarma.com/entities/bairong" target="_blank" data-smartkarma-citation="entities:31486:1" rel="noopener">Bairong (6608 HK)</a> is a leading independent AI-powered technology platform in China serving the financial services industry. It is the largest independent financial big data analytics solutions provider in China with a 9.0% revenue market share in 2020, according to Frost &amp; Sullivan.</p><p>Bairong was listed on the HKEx on 31 March 2021 and raised net proceeds of HK$3,759.0 million at HK$31.80 per share. The shares currently trade 62% below their IPO price. Bairong priced its IPO at the market peak and the shares have collapsed in part due to China’s regulatory reset. </p><p><a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> fell 15% on 5 August after a lockup expiry, as early backers headed for the exit amid fears of China’s widening online crackdown. The ongoing regulatory crackdown has alerted investors to the risk of upcoming expiring lockups.  </p><div class="content-highlight"><p>Bairong’s pre-IPO investors’ lock-up period expires on 20 September. The cornerstones investors lock-up period expires on 30 September. In this note, we look at the returns of the pre-IPO investors and potential share sales post-lockup expiry.</p></div>

Bairong (6608 HK) is a leading independent AI-powered technology platform in China serving the financial services industry. It is the largest independent financial big data analytics solutions provider in China with a 9.0% revenue market share in 2020, according to Frost &amp; Sullivan.Bairong was listed on the HKEx on 31 March 2021 and raised net proceeds of HK$3,759.0 million at HK$31.80 per share. The shares currently trade 62% below their IPO price. Bairong priced its IPO at the market peak and the shares have collapsed in part due to China’s regulatory reset. Kuaishou Technology (1024 HK) fell 15% on 5 August after a lockup expiry, as early backers headed for the exit amid fears of China’s widening online crackdown. The ongoing regulatory crackdown has alerted investors to the risk of upcoming expiring lockups.  Bairong’s pre-IPO investors’ lock-up period expires on 20 September. The cornerstones investors lock-up period expires on 30 September. In this note, we look at the returns of the pre-IPO investors and potential share sales post-lockup expiry.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>Back on the 28 February this year, SaaS provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "<em>way of introduction</em>". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.</p>
</div>
<div>
<p>In <em><a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a></em>, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. </p>
</div>
<div>
<p>Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.</p>
<p>At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. </p>
<p>And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. </p>
<p>The Scheme Document was expected to be posted on or before the 15 June, but was <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">delayed</a> on that day to at least the 19 October. </p>
<p>Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0813/2021081300886.pdf" target="_blank" rel="noopener">13 August</a> said <em>"Youzan Technology has been revising features of its application</em>", a slightly varied statement to "<em>Youzan Technology has continued to progress its application with the Stock Exchange</em>" seen in previous monthly <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">updates</a>. </p>
<p>Shares touched a low of HK$0.71/share on the 23 August. </p>
<h3>The New News</h3>
<p>China Youzan <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0830/2021083000295.pdf" target="_blank" rel="noopener">announced</a> yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. </p>
<p>Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.</p>
<p>The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. </p>
<p>Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. </p>
<p>Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.</p>
<p>There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?</p>
<p>More below the fold.</p>
</div>


Back on the 28 February this year, SaaS provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "way of introduction". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.


In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 


Disinterested Scheme Shareholders approved at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.
At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 
And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 
The Scheme Document was expected to be posted on or before the 15 June, but was delayed on that day to at least the 19 October. 
Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the 13 August said "Youzan Technology has been revising features of its application", a slightly varied statement to "Youzan Technology has continued to progress its application with the Stock Exchange" seen in previous monthly updates. 
Shares touched a low of HK$0.71/share on the 23 August. 
The New News
China Youzan announced yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 
Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.
The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 
Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 
Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.
There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?
More below the fold.


Hong Kong

Youzan Technology Limited is an investment holding company that provides online and offline e-commerce solutions and merchant services. It offers a suite of Software-as-a-Service (SaaS) products, including Youzan WeiMall, Youzan Retail, and Youzan Beauty, alongside third-party payment and related consultancy services. The company was founded in 1995 and is headquartered in Wan Chai, Hong Kong.

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Youzan (6051 HK)

Asia Small-Cap: Top Movers, Buybacks and Insider Dealing - May’18

Asian small cap markets were poor performers across the board, with the exception of our WHC Hong Kong Index that eked out a gain of 2.9%. The...

Lloyd Moffatt

Under the Radar Tech and Mfg Ideas in India and China - Riedel Interview on Bloomberg Daybreak Asia

This 5 minute interview on Bloomberg's DayBreak Asia show reviews current actionable ideas in India and China including some lesser-known tech and...

David Riedel

JST Group IPO: The Investment Case

JST is China’s largest e-commerce SaaS ERP provider. It is seeking to raise US$250 million to US$300 million. In this note, I discuss the...

Arun George

Bairong: Upcoming Lock-Up Expiry

Bairong’s pre-IPO investors’ lock-up period expires on 20 September. In this note, we look at the returns of the pre-IPO investors and potential...

Arun George

China Youzan (8083 HK): Once Bitten ...

But I would avoid this stock and extremely volatile. Plus there is a question mark over timing, and whether the listing gets Exchange approval. I...

David Blennerhassett

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