In this briefing:
- Metanet Mplatform IPO Valuation & Interest Levels of Lemon, JNTC, Metanet Mplatform, & NPD IPOs
- Atlas Copco Bid For ISRA Vision: Good Exit Premium for ISRA Shareholders
- China Internet Weekly (17Feb2020): Companies May Hide Profits, BABA Fee Exemption Not a Big Deal
- Alibaba: China E-Commerce Continues to Slowdown but Alibaba Cloud Losses Are Now “Under Control”
- AVIC: The Vote Is In; Now For The Acceptances
Our base case valuation of Metanet Mplatform is EV of 296 billion won, a market cap of 360 billion won, and an implied price of 17,215 won, which is 25% higher than the mid-point of the bankers’ IPO price range of 12,500 won to 15,000 won. As such, we have a positive view of the Metanet Mplatform IPO.
The company’s core business is in the customer/contact centers. Driven by technology innovation, customer/contact centers are becoming increasingly automated, which will likely provide an attractive opportunity for the company to capitalize on its know-how of this business to further improve upon its economies of scale and reduce costs.
Lemon has received the highest interest level (measured in terms of platform views per report) among the four Korean IPOs that we have written about. So if the level of interest in Lemon is 100, JNTC is 90 and Metanet Mplatform is much lower at 50. Overall, among these four companies, Lemon is likely to receive the highest institutional investors’ interest, followed by JNTC, Metanet Mplatform, and NPD. Now, the more difficult part (this is where the art of investing really comes into play) is to perceive and understand how much of this investors’ interest will have factored in the IPO demand and their share prices.
Atlas Copco AB (ATCOA SS) has offered €50/share for Isra Vision AG (ISR GR) in a friendly takeover bid. The offer represents a premium of ~30% on volume-weighted three months’ average price and 43% on the last close before the announcement. With ISRA’s management and Board tendering 29% of shares, Atlas Copco has already secured ~35% of shares. We expect the deal to complete given the significant premium offered by Atlas Copco.
The acquisition will only make sense if ISRA would provide meaningful revenue synergies and potential cost synergies. This deal provides a good exit premium for ISRA shareholders.
- We believe many Chinese companies will hide profits for future under the excuse of epidemic.
- Alibaba Group (BABA US)’s exemption of service fee is not a big deal for total revenues.
- Both Xiaomi Corp (1810 HK)’s TV and handset businesses will be negatively impacted.
Alibaba’s 3Q FY03/19 results are a mixed bag. The China Commerce Retail sub-segment seems to be slowing down with new customers generating less incremental revenue. However, the marginal profitability of the Core Commerce business has increased, implying that the profitability of international and new e-commerce operations are improving. Moreover, Alibaba Cloud continues to grow at a healthy rate and the losses now seem to be more “under-control” than “unruly”.
AVIC International Holdings (161 HK) overwhelmingly gains shareholder approval for the merger by absorption. The next step is to clear the 90% acceptance condition.
The H Class Meeting Vote
There were two special resolutions voted on:
- For the Delisting. ≥ 75% for, ≤10% against the delisting resolution.
- For the Merger Agreement and Merger. ≥ 75% for, ≤10% against the merger resolution.
Summary of The H-Share Class Meeting |
| Total H Shares present and via proxy at the meeting | 189.1mn | |
| As a % of total H shares | | 55.9% |
| | |
| Shares voting FOR the Delisting resolution | 182.1mn | |
| As a % of those present and voting | | 99.9% |
| Shares voting AGAINST the Delisting resolution | 0.3mn | |
| As a % of those present and voting | | 0.1% |
|
| Shares voting FOR the Merger Agreement and Merger resolution | 188.9mn | |
| As a % of those present and voting | | 99.9% |
| Shares voting AGAINST the Merger Agreement and Merger resolution | 0.3mn | |
| As a % of those present and voting | | 0.1% |
Source:
Announcement my estimates
AVIC holds 6.786mn H shares which were required to abstain at the H Class meeting. This reduced the independent H shares to 326.3mn.
To put this attendance % in perspective, 42.04% of the total number of the votes attaching to all the H Shares held by the independent shareholders were present at the H Share class meeting for Harbin Electric Co Ltd H (1133 HK) and 72.43% for Huaneng Renewables Corp H (958 HK) (HRC).
Past AGMs for AVIC provide little guidance with minimal independent shareholders bothering to attend and vote, when stripping out domestic shares held by AVIC international and AVIC Shenzhen.
The Acceptances
The Offer remains open for acceptances until the 6 March, 60 days from the dispatch of the Composite Document, although, there is an ever-increasing possibility this is extended. The Offer was extended for Harbin Electric for 60 days; HRC was also extended, seemingly without reference to any deadline date, ostensibly to secure regulatory approvals.
Since the dispatch of the composite offer document on the 8 January, wherein the Offer was open to acceptances, 5.44% of shares out appear to have tendered when analysing CCASS data.
There will be a higher degree of confidence this acceptance condition will be met after HRC’s was secured. Yet, 91.42% of the total issued H shares held by the independent H shareholders of HRC tendered into the Offer on the closing date, and it is still only ~92.50% with a final closing date of the 4 March. Harbin failed with 85.84% of H shares tendering on its first closing date and 88.32% after the extension. There remains a very fine line between success and failure.
