Category

Utilities Sector

Brief Utlilities: GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics) and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics)
  2. Glow Energy: An Imminent Delisting Offer?
  3. Xinyi Energy (信义能源) Post-IPO Trading Update

1. GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics)

Screenshot%202019 05 30%20at%207.54.42%20pm

David Blennerhassett has written about Glow Energy Pcl (GLOW TB) several times as since September last year. Links to the insights in the history of the situation of Global Power Synergy Company Ltd (GPSC TB) purchasing a majority then super-majority stake in Glow Energy (and the Quiddity Thailand M&A Guide 2019 he authored are below.

GPSC / GLOW Takeout Insight History

20-Sep-2018Anti-Trust Should Be A Non-Issue In The GPSC/Glow Deal
12-Feb-2019GPSC To Proceed With Glow Takeover, But At What Price?
14-Mar-2019GLOW’s Done Deal As SPA (Almost) Completes
30-May-2019Glow Energy: An Imminent Delisting Offer?
Reference:  Quiddity Thailand M&A Guide 2019

Earlier today, David published an insight discussing the possibility of an Imminent Delisting Offer. It was, as is David’s wont, very helpful in showing precedent and the rules to help investors decide how to deal with this situation. 

I thought it worthwhile to go one step further.

There is a trade here.

2. Glow Energy: An Imminent Delisting Offer?

May%2030

Glow Energy Pcl (GLOW TB) popped 9.56% yesterday on (relatively) decent volume.

The share price increase appears to be in response to media reports that Global Power Synergy Company Ltd (GPSC TB) will conduct a Delisting Offer for the remaining 4.75% of shares not owned, which would likely be done at the most recent Offer Price of Bt91.99/share.

To recap, GPSC launched a tender offer at Bt91.9906/share for an Offer period of 35 business days (25 March to 17 May) resulting in 26.14% of shares out tendering. Together with GPSC’s 69.11% stake acquired from Engie SA (ENGI FP), that gave it 95.25% of GLOW shares out.

In the tender offer doc (Form 247-4), GPSC said that if it held more than 80% of GLOW at the close of the offer (section 2.1 of page 38 of the PDF), it “has a plan to delist the securities of the Business from the SET within the period of 12 months after the end of the Offer period“.

That plan may occur sooner rather than later.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong Kong, Japan, Australia, Singapore and Malaysia. Watch for more soon!

3. Xinyi Energy (信义能源) Post-IPO Trading Update

Valuation%20sensitivity

Xinyi Energy’s IPO was priced near the low end and started trading today. We have highlighted in our earlier note that investors in Xinyi Energy acquired solar farm assets from its parent at premia to the market value of solar farms, and deal implies a low WACC thanks to the long term contract with the national grid. In this insight, we will summarize the allotment results and re-iterate our view on valuation.


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Brief Utlilities: TRADE IDEA – First Pacific Stub (142 HK): Round Two with Catalysts and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. TRADE IDEA – First Pacific Stub (142 HK): Round Two with Catalysts
  2. HK Connect Ideas: Six Weeks of Inflows, BEW, Solars (2019-06-21)
  3. China Power’s Scheme Document Dispatched
  4. GPSC Announces Delisting Offer Intent for GLOW
  5. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs

1. TRADE IDEA – First Pacific Stub (142 HK): Round Two with Catalysts

Capture2

At the end of May, I closed my trade on First Pacific Co (142 HK) ​ with a 5.33% return on gross notional over roughly six months, equating to 11.3% on gross notional in annualized terms in the insight TRADE IDEA – First Pacific (142 HK) Stub: Parent Pops, Close the Trade.

Now, roughly four weeks later, I propose getting back into the trade as the discount has widened again and the long-term fundamentals continue to support a long position in the undervalued holding company.

There have been significant developments (catalysts) that affect both the holding company and some of its major listed subsidiaries that I will explore in the body of this note.

This is, yet again, an exciting trade and catalysts abound! 

2. HK Connect Ideas: Six Weeks of Inflows, BEW, Solars (2019-06-21)

Hscei%20inflow%2006 21

In our weekly HK Connect Snippet series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine, and highlight interesting observations. 

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we will highlight recent issue with Beijing Enterprises Water Group (371 HK) ​and catalyst for solar companies, including Xinyi Solar Holdings (968 HK) ​and Flat Glass (6865 HK)​. Meanwhile, we will also review the flows of Tencent Holdings (700 HK)​, WH Group (288 HK) ​and Geely Auto (175 HK)​. 

3. China Power’s Scheme Document Dispatched

Peer

On the 28 March, SOE State Power Investment Corporation (SPIC) announced an intention to privatise China Power New Energy Development Co (735 HK) by way of a Scheme at $5.45/share, a 41.9% premium to last close and a 78.1% premium to the 30-day average.

A scrip alternative (6 New shares for one Scheme shares) into an unlisted vehicle under SPIC is also available.

The Scheme Document has now been dispatched. The Scheme Meeting is to be held on 12 July with payment expected on 28 August. The IFA has given a “fair and reasonable” opinion and recommends independent shareholders take the cash option.

China Three Gorges (CTG), CPNED’s largest shareholder with 27.10%, had given an irrevocable undertaking to vote for the Scheme in the initial announcement and to elect the share alternative. The SFC has now concluded CTG is deemed not to be acting in concert and is therefore permitted to vote at the Scheme Meeting.

As the effective date for the Scheme is expected to be the 19 August, shareholders will be entitled to the 2018 dividend of RMB0.0546/share. The record date is the 27 June – the 21 June is the latest date for lodging the transfer of shares to become entitled.

This looks like a pretty clean deal. The stock is currently trading tight at a gross/annualised spread of 1.5%/8.1%. I recommend shareholders vote For the Scheme.

4. GPSC Announces Delisting Offer Intent for GLOW

Thaidelistingofferprice

Late on on 19 June 2019, Glow Energy Pcl (GLOW TB) released a statement[NB: link downloads PDF] on the Stock Exchange of Thailand website (GLOW website link for the same doc) noting it had received a letter from Global Power Synergy Company Ltd (GPSC TB) which recently completed a Tender Offer on GLOW, obtaining 95.25% of the shares, that it intended to support the board of GLOW if it decided to conduct a Delisting Offer (as is expected). The letter from GPSC to the SET and the public is here. It provides a little additional information.

The Delisting Offer, if accepted (and there is every reason to expect it would be) would take place at THB 90.8136/share less any dividends paid out by GLOW in between now and the close of the Offer. 

GLOW’s statement said that it would conduct a Board Meeting on 20 June 2019 to consider the Delisting of Securities and GPSC’s Offer, and would disclose the results promptly. 

You had the warning from David Blennerhassett‘s Glow Energy: An Imminent Delisting Offer? on 30 May and my GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics) a day later. The stock traded low 82s for a week after that.

Now (or later today) it should become more official.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong KongJapanAustraliaSingapore and Malaysia. Watch for more soon!

5. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs

Hh%20gas%20price

In the current environment of very low Asian LNG and European gas prices it is worth looking at whether US LNG economics still justify production or if there is the chance of shut-ins. We have analysed the various factors that influence the US LNG delivered price both on a full cycle cost basis and a variable cost basis.  

Get Straight to the Source on Smartkarma

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Brief Utlilities: Glow Energy: An Imminent Delisting Offer? and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Glow Energy: An Imminent Delisting Offer?
  2. Xinyi Energy (信义能源) Post-IPO Trading Update

1. Glow Energy: An Imminent Delisting Offer?

May%2030

Glow Energy Pcl (GLOW TB) popped 9.56% yesterday on (relatively) decent volume.

The share price increase appears to be in response to media reports that Global Power Synergy Company Ltd (GPSC TB) will conduct a Delisting Offer for the remaining 4.75% of shares not owned, which would likely be done at the most recent Offer Price of Bt91.99/share.

To recap, GPSC launched a tender offer at Bt91.9906/share for an Offer period of 35 business days (25 March to 17 May) resulting in 26.14% of shares out tendering. Together with GPSC’s 69.11% stake acquired from Engie SA (ENGI FP), that gave it 95.25% of GLOW shares out.

In the tender offer doc (Form 247-4), GPSC said that if it held more than 80% of GLOW at the close of the offer (section 2.1 of page 38 of the PDF), it “has a plan to delist the securities of the Business from the SET within the period of 12 months after the end of the Offer period“.

That plan may occur sooner rather than later.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong Kong, Japan, Australia, Singapore and Malaysia. Watch for more soon!

2. Xinyi Energy (信义能源) Post-IPO Trading Update

Valuation%20sensitivity

Xinyi Energy’s IPO was priced near the low end and started trading today. We have highlighted in our earlier note that investors in Xinyi Energy acquired solar farm assets from its parent at premia to the market value of solar farms, and deal implies a low WACC thanks to the long term contract with the national grid. In this insight, we will summarize the allotment results and re-iterate our view on valuation.


Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Utlilities: HK Connect Ideas: Six Weeks of Inflows, BEW, Solars (2019-06-21) and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. HK Connect Ideas: Six Weeks of Inflows, BEW, Solars (2019-06-21)
  2. China Power’s Scheme Document Dispatched
  3. GPSC Announces Delisting Offer Intent for GLOW
  4. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs
  5. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals

1. HK Connect Ideas: Six Weeks of Inflows, BEW, Solars (2019-06-21)

Wuxi biologics %28cayman%29 inc. %282269 hk%29 daily southbound inflow2019 06 24%2013 29 17

In our weekly HK Connect Snippet series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine, and highlight interesting observations. 

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we will highlight recent issue with Beijing Enterprises Water Group (371 HK) ​and catalyst for solar companies, including Xinyi Solar Holdings (968 HK) ​and Flat Glass (6865 HK)​. Meanwhile, we will also review the flows of Tencent Holdings (700 HK)​, WH Group (288 HK) ​and Geely Auto (175 HK)​. 

2. China Power’s Scheme Document Dispatched

Peer

On the 28 March, SOE State Power Investment Corporation (SPIC) announced an intention to privatise China Power New Energy Development Co (735 HK) by way of a Scheme at $5.45/share, a 41.9% premium to last close and a 78.1% premium to the 30-day average.

A scrip alternative (6 New shares for one Scheme shares) into an unlisted vehicle under SPIC is also available.

The Scheme Document has now been dispatched. The Scheme Meeting is to be held on 12 July with payment expected on 28 August. The IFA has given a “fair and reasonable” opinion and recommends independent shareholders take the cash option.

China Three Gorges (CTG), CPNED’s largest shareholder with 27.10%, had given an irrevocable undertaking to vote for the Scheme in the initial announcement and to elect the share alternative. The SFC has now concluded CTG is deemed not to be acting in concert and is therefore permitted to vote at the Scheme Meeting.

As the effective date for the Scheme is expected to be the 19 August, shareholders will be entitled to the 2018 dividend of RMB0.0546/share. The record date is the 27 June – the 21 June is the latest date for lodging the transfer of shares to become entitled.

This looks like a pretty clean deal. The stock is currently trading tight at a gross/annualised spread of 1.5%/8.1%. I recommend shareholders vote For the Scheme.

3. GPSC Announces Delisting Offer Intent for GLOW

Thaidelistingofferprice

Late on on 19 June 2019, Glow Energy Pcl (GLOW TB) released a statement[NB: link downloads PDF] on the Stock Exchange of Thailand website (GLOW website link for the same doc) noting it had received a letter from Global Power Synergy Company Ltd (GPSC TB) which recently completed a Tender Offer on GLOW, obtaining 95.25% of the shares, that it intended to support the board of GLOW if it decided to conduct a Delisting Offer (as is expected). The letter from GPSC to the SET and the public is here. It provides a little additional information.

The Delisting Offer, if accepted (and there is every reason to expect it would be) would take place at THB 90.8136/share less any dividends paid out by GLOW in between now and the close of the Offer. 

GLOW’s statement said that it would conduct a Board Meeting on 20 June 2019 to consider the Delisting of Securities and GPSC’s Offer, and would disclose the results promptly. 

You had the warning from David Blennerhassett‘s Glow Energy: An Imminent Delisting Offer? on 30 May and my GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics) a day later. The stock traded low 82s for a week after that.

Now (or later today) it should become more official.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong KongJapanAustraliaSingapore and Malaysia. Watch for more soon!

4. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs

Hh%20gas%20price

In the current environment of very low Asian LNG and European gas prices it is worth looking at whether US LNG economics still justify production or if there is the chance of shut-ins. We have analysed the various factors that influence the US LNG delivered price both on a full cycle cost basis and a variable cost basis.  

5. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals

  • Neoenergia registered its IPO on June 6th; Banco Do Brasil Sa (BBAS3 BZ) is expected to raise between BRL1.64bn and BRL1.92bn from its 9.35% stake
  • We estimate that the Banco do Brasil capital contribution from the Neoenergia stake disposal should be small, but it should serve to add to positive sentiment for non-core disposals
  • More importantly, its 49.9% stake in Banco Votorantim is also up for sale and its returns are improving; we estimate that BVoto’s disposal would be the biggest capital relief contribution of its non-core sales 
  • Banco Patagonia Sa (BPAT AR), in which Banco do Brasil has an 80.4% stake, is more of a challenge for disposal given the approaching Argentinian presidential election – and the uncertain outcome – in October 2019, but could be slated for sale in early 2020
  • Banco do Brasil management has added the 10.1% stake in reinsurance company IRB Brasil Resseguros S/A (IRBR3 BZ) to its list of non-core disposals
  • Overall, we see that these key disposals in total, through capital gains and RWA reduction in the case of the banks, should bring between 93bps to 100bps of capital relief to Banco do Brasil’s CET1 ratio; even if we exclude the BPAT disposal, we estimate capital build from the other disposals could reach 75bps of CET1

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Brief Utlilities: Xinyi Energy (信义能源) Post-IPO Trading Update and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Xinyi Energy (信义能源) Post-IPO Trading Update
  2. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust

1. Xinyi Energy (信义能源) Post-IPO Trading Update

Valuation%20sensitivity

Xinyi Energy’s IPO was priced near the low end and started trading today. We have highlighted in our earlier note that investors in Xinyi Energy acquired solar farm assets from its parent at premia to the market value of solar farms, and deal implies a low WACC thanks to the long term contract with the national grid. In this insight, we will summarize the allotment results and re-iterate our view on valuation.


2. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust

2019 total deals 2019 accuracy rate  chartbuilder%20%283%29

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.

This will be the third week in a row we are saying: there are more IPOs coming in Hong Kong!Momentum seems to be holding up as we head into the end of Q2. First off, there will be 4 IPOs starting to trade throughout next week. Mulsanne Group Holding Ltd (1817 HK) will debut first on Monday.

This would be interesting to watch because the IPO utilized the new pricing mechanism in Hong Kong to price its IPO below the bottom end of its indicated price range rather than withdraw and refile. This mechanism reminds us of the pricing flexibility of US IPOs wherein companies could price below its indicative price range to ensure that it performs well on its debut despite poor demand during bookbuild. Xinyi Energy Holdings Ltd (3868 HK), Frontage Holdings (1521 HK), and MabPharm (2181 HK) will trade on Tuesday, Thursday, and Friday respectively.

For upcoming bookbuilds, Tai Hing (1719303D HK) and China Tobacco International (GHALPZ CH) have filed their PHIP this week and will be likely be opening their books next week. We are also hearing that CSSC Hong Kong Shipping Co Ltd (0931049D CH) and China East Education (EASTEDU HK) will open books on Monday while Hansoh Pharmaceutical (HANSOH HK) will be on Tuesday.

IPO activity in other countries have been fairly muted. Eagle Hospitality Trust (EAGLEHT SP)  finally started trading in Singapore. Its share price closed 6% down as the IPO was undersubscribed. We will leave the updates on the IPO to Sumeet Singh on Monday.

In the U.S, GSX Techedu (GSX US) will launch its book next week while Meten (MEDU US) which just filed its US$100m IPO with the SEC will be premarketing next week.

Accuracy Rate:

Our overall accuracy rate is 72.4% for IPOs and 63.9% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings

  • Sinic Holdings (Hong Kong, >US$100m)
  • Meten International Edu (the U.S, US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

Source: Aequitas Research, Smartkarma

News on Upcoming IPOs

Analysis on Upcoming IPOs

NameInsight
Hong Kong
AB InbevAb InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
AB InbevAb InBev Asia Pre-IPO – Quick Note – More like CR Beer Rather than Tsingtao
AB InbevAb InBev Asia Pre-IPO – On Its Way to Potentially Being the Biggest HK IPO This Year
AB Inbev

Budweiser Brewing APAC Pre-IPO – It Will Be a US$5bn+ Raise Owing to Its Clean Balance Sheet

AscentageAscentage Pharma (亚盛医药) IPO: Too Early for an IPO
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
CIMC VehCIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
ClarityClarity Medical (清晰医疗) IPO: Proxy to HK SMILE Surgery Demand
ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

East EduChina East Education (中国东方教育) Pre-IPO – The Company Known for Its Culinary School
China TobacChina Tobacco International (IPO): The Monopolist Will Not Recover
China TobacChina Tobacco Intl (HK) IPO: Proxy For the Chinese Cigarette Consumption
CSSCCSSC (HK) Shipping IPO: A Cyclical Business Masked as an Income Stock
ESRESR Cayman Pre-IPO – A Giant in the Making
ESR

ESR Cayman Pre-IPO – Earnings and Segment Analysis 

ESR

ESR Cayman Pre-IPO- First Stab at Valuation

ESR

ESR Cayman Pre-IPO – Updates from PHIP – Growth Remains on Track 

ESR

ESR Cayman Pre-IPO – Updated Valuation and Key Risks

ESR

ESR Cayman Pre-IPO – Peer Comparison Quick Take – Bigger than Some, Much Smaller than Others 

Hansoh

Hansoh Pharma (翰森制药) IPO: New Numbers, Pre-IPO Dividend and Boyu Investment (Part 3)

Hansoh

Hansoh Pharma (翰森制药) IPO: Thoughts on Valuation

Hansoh

Hansoh Pharma (翰森制药) IPO: Competitive Landscape of HS-10296

Helenbergh

Helenbergh (海伦堡) Early Thoughts – The Usual Red Flag – Related Party Transactions

Hut Chi-Med

Hutchison-China Med (和黄医药) H-Share Listing: MNC Partnerships Endorsed Its R&D Capabilities

Jinxin

Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector

MicuRxMicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
MabPharmMabPharma (迈博医药) IPO: Assembled for a Trade?
MabPharmMabPharm (迈博医药) IPO: Thoughts on Valuation (Part 2)
SH Henlius

Shanghai Henlius (复宏汉霖) IPO: Not an Impressive Biosimilar Portfolio 

TubatuTubatu Group Pre-IPO – Performing Better than Qeeka but Growing Much Slower, US$1bn a Stretch
TubatuTubatu Group Pre-IPO – Online -> Online + Offline -> Online -> ?
South Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 1) – Highly Profitable Operator of Public Golf Courses in Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 2) – Valuation Analysis
Plakor

Plakor IPO Preview (Part 1)

ZinusZinus IPO Preview (Part 1) – An Amazing Comeback Story (#1 Mattress Brand on Amazon)
India
Aakash EduAakash Education Pre-IPO – Fast Growth in an Attractive Sector
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotels

Bharat Hotels Pre-IPO – Catching up with Peers 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
IndiaMartIndiaMART Pre-IPO – Getting and Retaining Subscribers Seems to Be Difficult
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S
DouyuDouyu (斗鱼直播) IPO: Leader At a Cost
DouyuDouyu (斗鱼直播) IPO: Comparison with Huya (Part 2)
GSXGSX Techedu (跟谁学) IPO Early Thoughts – Successful Pivot Away from Marketplace Model
MetenMeten International Edu (美联国际教育) Early Thoughts – Unclear Strategies

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Utlilities: Xinyi Energy (信义能源) Post-IPO Trading Update and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Xinyi Energy (信义能源) Post-IPO Trading Update
  2. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust
  3. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy
  4. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

1. Xinyi Energy (信义能源) Post-IPO Trading Update

Valuation%20sensitivity

Xinyi Energy’s IPO was priced near the low end and started trading today. We have highlighted in our earlier note that investors in Xinyi Energy acquired solar farm assets from its parent at premia to the market value of solar farms, and deal implies a low WACC thanks to the long term contract with the national grid. In this insight, we will summarize the allotment results and re-iterate our view on valuation.


2. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust

2019 total deals 2019 accuracy rate  chartbuilder%20%283%29

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.

This will be the third week in a row we are saying: there are more IPOs coming in Hong Kong!Momentum seems to be holding up as we head into the end of Q2. First off, there will be 4 IPOs starting to trade throughout next week. Mulsanne Group Holding Ltd (1817 HK) will debut first on Monday.

This would be interesting to watch because the IPO utilized the new pricing mechanism in Hong Kong to price its IPO below the bottom end of its indicated price range rather than withdraw and refile. This mechanism reminds us of the pricing flexibility of US IPOs wherein companies could price below its indicative price range to ensure that it performs well on its debut despite poor demand during bookbuild. Xinyi Energy Holdings Ltd (3868 HK), Frontage Holdings (1521 HK), and MabPharm (2181 HK) will trade on Tuesday, Thursday, and Friday respectively.

For upcoming bookbuilds, Tai Hing (1719303D HK) and China Tobacco International (GHALPZ CH) have filed their PHIP this week and will be likely be opening their books next week. We are also hearing that CSSC Hong Kong Shipping Co Ltd (0931049D CH) and China East Education (EASTEDU HK) will open books on Monday while Hansoh Pharmaceutical (HANSOH HK) will be on Tuesday.

IPO activity in other countries have been fairly muted. Eagle Hospitality Trust (EAGLEHT SP)  finally started trading in Singapore. Its share price closed 6% down as the IPO was undersubscribed. We will leave the updates on the IPO to Sumeet Singh on Monday.

In the U.S, GSX Techedu (GSX US) will launch its book next week while Meten (MEDU US) which just filed its US$100m IPO with the SEC will be premarketing next week.

Accuracy Rate:

Our overall accuracy rate is 72.4% for IPOs and 63.9% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings

  • Sinic Holdings (Hong Kong, >US$100m)
  • Meten International Edu (the U.S, US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

Source: Aequitas Research, Smartkarma

News on Upcoming IPOs

Analysis on Upcoming IPOs

NameInsight
Hong Kong
AB InbevAb InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
AB InbevAb InBev Asia Pre-IPO – Quick Note – More like CR Beer Rather than Tsingtao
AB InbevAb InBev Asia Pre-IPO – On Its Way to Potentially Being the Biggest HK IPO This Year
AB Inbev

Budweiser Brewing APAC Pre-IPO – It Will Be a US$5bn+ Raise Owing to Its Clean Balance Sheet

AscentageAscentage Pharma (亚盛医药) IPO: Too Early for an IPO
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
CIMC VehCIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
ClarityClarity Medical (清晰医疗) IPO: Proxy to HK SMILE Surgery Demand
ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

East EduChina East Education (中国东方教育) Pre-IPO – The Company Known for Its Culinary School
China TobacChina Tobacco International (IPO): The Monopolist Will Not Recover
China TobacChina Tobacco Intl (HK) IPO: Proxy For the Chinese Cigarette Consumption
CSSCCSSC (HK) Shipping IPO: A Cyclical Business Masked as an Income Stock
ESRESR Cayman Pre-IPO – A Giant in the Making
ESR

ESR Cayman Pre-IPO – Earnings and Segment Analysis 

ESR

ESR Cayman Pre-IPO- First Stab at Valuation

ESR

ESR Cayman Pre-IPO – Updates from PHIP – Growth Remains on Track 

ESR

ESR Cayman Pre-IPO – Updated Valuation and Key Risks

ESR

ESR Cayman Pre-IPO – Peer Comparison Quick Take – Bigger than Some, Much Smaller than Others 

Hansoh

Hansoh Pharma (翰森制药) IPO: New Numbers, Pre-IPO Dividend and Boyu Investment (Part 3)

Hansoh

Hansoh Pharma (翰森制药) IPO: Thoughts on Valuation

Hansoh

Hansoh Pharma (翰森制药) IPO: Competitive Landscape of HS-10296

Helenbergh

Helenbergh (海伦堡) Early Thoughts – The Usual Red Flag – Related Party Transactions

Hut Chi-Med

Hutchison-China Med (和黄医药) H-Share Listing: MNC Partnerships Endorsed Its R&D Capabilities

Jinxin

Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector

MicuRxMicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
MabPharmMabPharma (迈博医药) IPO: Assembled for a Trade?
MabPharmMabPharm (迈博医药) IPO: Thoughts on Valuation (Part 2)
SH Henlius

Shanghai Henlius (复宏汉霖) IPO: Not an Impressive Biosimilar Portfolio 

TubatuTubatu Group Pre-IPO – Performing Better than Qeeka but Growing Much Slower, US$1bn a Stretch
TubatuTubatu Group Pre-IPO – Online -> Online + Offline -> Online -> ?
South Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 1) – Highly Profitable Operator of Public Golf Courses in Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 2) – Valuation Analysis
Plakor

Plakor IPO Preview (Part 1)

ZinusZinus IPO Preview (Part 1) – An Amazing Comeback Story (#1 Mattress Brand on Amazon)
India
Aakash EduAakash Education Pre-IPO – Fast Growth in an Attractive Sector
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotels

Bharat Hotels Pre-IPO – Catching up with Peers 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
IndiaMartIndiaMART Pre-IPO – Getting and Retaining Subscribers Seems to Be Difficult
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S
DouyuDouyu (斗鱼直播) IPO: Leader At a Cost
DouyuDouyu (斗鱼直播) IPO: Comparison with Huya (Part 2)
GSXGSX Techedu (跟谁学) IPO Early Thoughts – Successful Pivot Away from Marketplace Model
MetenMeten International Edu (美联国际教育) Early Thoughts – Unclear Strategies

3. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

Xinyi%20stub

XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

4. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

Haitongspinoff

A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Utlilities: China Power’s Scheme Document Dispatched and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. China Power’s Scheme Document Dispatched
  2. GPSC Announces Delisting Offer Intent for GLOW
  3. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs
  4. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals
  5. Vocus Group’s Tilt from AGL Energy Is Attractive but Not a Sure Thing

1. China Power’s Scheme Document Dispatched

Capture2

On the 28 March, SOE State Power Investment Corporation (SPIC) announced an intention to privatise China Power New Energy Development Co (735 HK) by way of a Scheme at $5.45/share, a 41.9% premium to last close and a 78.1% premium to the 30-day average.

A scrip alternative (6 New shares for one Scheme shares) into an unlisted vehicle under SPIC is also available.

The Scheme Document has now been dispatched. The Scheme Meeting is to be held on 12 July with payment expected on 28 August. The IFA has given a “fair and reasonable” opinion and recommends independent shareholders take the cash option.

China Three Gorges (CTG), CPNED’s largest shareholder with 27.10%, had given an irrevocable undertaking to vote for the Scheme in the initial announcement and to elect the share alternative. The SFC has now concluded CTG is deemed not to be acting in concert and is therefore permitted to vote at the Scheme Meeting.

As the effective date for the Scheme is expected to be the 19 August, shareholders will be entitled to the 2018 dividend of RMB0.0546/share. The record date is the 27 June – the 21 June is the latest date for lodging the transfer of shares to become entitled.

This looks like a pretty clean deal. The stock is currently trading tight at a gross/annualised spread of 1.5%/8.1%. I recommend shareholders vote For the Scheme.

2. GPSC Announces Delisting Offer Intent for GLOW

Screenshot%202019 06 20%20at%201.37.28%20am

Late on on 19 June 2019, Glow Energy Pcl (GLOW TB) released a statement[NB: link downloads PDF] on the Stock Exchange of Thailand website (GLOW website link for the same doc) noting it had received a letter from Global Power Synergy Company Ltd (GPSC TB) which recently completed a Tender Offer on GLOW, obtaining 95.25% of the shares, that it intended to support the board of GLOW if it decided to conduct a Delisting Offer (as is expected). The letter from GPSC to the SET and the public is here. It provides a little additional information.

The Delisting Offer, if accepted (and there is every reason to expect it would be) would take place at THB 90.8136/share less any dividends paid out by GLOW in between now and the close of the Offer. 

GLOW’s statement said that it would conduct a Board Meeting on 20 June 2019 to consider the Delisting of Securities and GPSC’s Offer, and would disclose the results promptly. 

You had the warning from David Blennerhassett‘s Glow Energy: An Imminent Delisting Offer? on 30 May and my GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics) a day later. The stock traded low 82s for a week after that.

Now (or later today) it should become more official.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong KongJapanAustraliaSingapore and Malaysia. Watch for more soon!

3. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs

Hh%20gas%20price

In the current environment of very low Asian LNG and European gas prices it is worth looking at whether US LNG economics still justify production or if there is the chance of shut-ins. We have analysed the various factors that influence the US LNG delivered price both on a full cycle cost basis and a variable cost basis.  

4. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals

  • Neoenergia registered its IPO on June 6th; Banco Do Brasil Sa (BBAS3 BZ) is expected to raise between BRL1.64bn and BRL1.92bn from its 9.35% stake
  • We estimate that the Banco do Brasil capital contribution from the Neoenergia stake disposal should be small, but it should serve to add to positive sentiment for non-core disposals
  • More importantly, its 49.9% stake in Banco Votorantim is also up for sale and its returns are improving; we estimate that BVoto’s disposal would be the biggest capital relief contribution of its non-core sales 
  • Banco Patagonia Sa (BPAT AR), in which Banco do Brasil has an 80.4% stake, is more of a challenge for disposal given the approaching Argentinian presidential election – and the uncertain outcome – in October 2019, but could be slated for sale in early 2020
  • Banco do Brasil management has added the 10.1% stake in reinsurance company IRB Brasil Resseguros S/A (IRBR3 BZ) to its list of non-core disposals
  • Overall, we see that these key disposals in total, through capital gains and RWA reduction in the case of the banks, should bring between 93bps to 100bps of capital relief to Banco do Brasil’s CET1 ratio; even if we exclude the BPAT disposal, we estimate capital build from the other disposals could reach 75bps of CET1

5. Vocus Group’s Tilt from AGL Energy Is Attractive but Not a Sure Thing

Vocus Communications (VOC AU) is Australia’s fourth largest telecom operator which is in the midst of a three-year turnaround plan. Today, Vocus announced a non-binding proposal from AGL Energy Ltd (AGL AU) for A$4.85 cash per share. AGL’s proposal values Vocus at a market cap of A$3.0 billion and FY19 EV/EBITDA of 11.4x (CY2019 EV/EBITDA of 10.9x).

The takeover bid sent Vocus shares up 7.7% to A$4.12, which is still 15% below AGL’s bid. The shares closed materially below AGL’s offer as the market is understandably cautious on the prospect of a binding offer after KKR & Co Inc (KKR US), Affinity Equity Partners and most recently, EQT, dropped their bids during the due diligence process. Overall, we believe that AGL’s bid is attractive with a limited chance of a superior proposal.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Utlilities: ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust
  2. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy
  3. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing
  4. U.S. Equity Strategy: Neutral Outlook; Opportunities Within Staples and Utilities

1. ECM Weekly (25 May 2019) – ESR Cayman, Hansoh Pharma, Tai Hing, China East Edu, Haitong UniTrust

2019 total deals 2019 accuracy rate  chartbuilder%20%283%29

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.

This will be the third week in a row we are saying: there are more IPOs coming in Hong Kong!Momentum seems to be holding up as we head into the end of Q2. First off, there will be 4 IPOs starting to trade throughout next week. Mulsanne Group Holding Ltd (1817 HK) will debut first on Monday.

This would be interesting to watch because the IPO utilized the new pricing mechanism in Hong Kong to price its IPO below the bottom end of its indicated price range rather than withdraw and refile. This mechanism reminds us of the pricing flexibility of US IPOs wherein companies could price below its indicative price range to ensure that it performs well on its debut despite poor demand during bookbuild. Xinyi Energy Holdings Ltd (3868 HK), Frontage Holdings (1521 HK), and MabPharm (2181 HK) will trade on Tuesday, Thursday, and Friday respectively.

For upcoming bookbuilds, Tai Hing (1719303D HK) and China Tobacco International (GHALPZ CH) have filed their PHIP this week and will be likely be opening their books next week. We are also hearing that CSSC Hong Kong Shipping Co Ltd (0931049D CH) and China East Education (EASTEDU HK) will open books on Monday while Hansoh Pharmaceutical (HANSOH HK) will be on Tuesday.

IPO activity in other countries have been fairly muted. Eagle Hospitality Trust (EAGLEHT SP)  finally started trading in Singapore. Its share price closed 6% down as the IPO was undersubscribed. We will leave the updates on the IPO to Sumeet Singh on Monday.

In the U.S, GSX Techedu (GSX US) will launch its book next week while Meten (MEDU US) which just filed its US$100m IPO with the SEC will be premarketing next week.

Accuracy Rate:

Our overall accuracy rate is 72.4% for IPOs and 63.9% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings

  • Sinic Holdings (Hong Kong, >US$100m)
  • Meten International Edu (the U.S, US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

Source: Aequitas Research, Smartkarma

News on Upcoming IPOs

Analysis on Upcoming IPOs

NameInsight
Hong Kong
AB InbevAb InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
AB InbevAb InBev Asia Pre-IPO – Quick Note – More like CR Beer Rather than Tsingtao
AB InbevAb InBev Asia Pre-IPO – On Its Way to Potentially Being the Biggest HK IPO This Year
AB Inbev

Budweiser Brewing APAC Pre-IPO – It Will Be a US$5bn+ Raise Owing to Its Clean Balance Sheet

AscentageAscentage Pharma (亚盛医药) IPO: Too Early for an IPO
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
CIMC VehCIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
ClarityClarity Medical (清晰医疗) IPO: Proxy to HK SMILE Surgery Demand
ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

East EduChina East Education (中国东方教育) Pre-IPO – The Company Known for Its Culinary School
China TobacChina Tobacco International (IPO): The Monopolist Will Not Recover
China TobacChina Tobacco Intl (HK) IPO: Proxy For the Chinese Cigarette Consumption
CSSCCSSC (HK) Shipping IPO: A Cyclical Business Masked as an Income Stock
ESRESR Cayman Pre-IPO – A Giant in the Making
ESR

ESR Cayman Pre-IPO – Earnings and Segment Analysis 

ESR

ESR Cayman Pre-IPO- First Stab at Valuation

ESR

ESR Cayman Pre-IPO – Updates from PHIP – Growth Remains on Track 

ESR

ESR Cayman Pre-IPO – Updated Valuation and Key Risks

ESR

ESR Cayman Pre-IPO – Peer Comparison Quick Take – Bigger than Some, Much Smaller than Others 

Hansoh

Hansoh Pharma (翰森制药) IPO: New Numbers, Pre-IPO Dividend and Boyu Investment (Part 3)

Hansoh

Hansoh Pharma (翰森制药) IPO: Thoughts on Valuation

Hansoh

Hansoh Pharma (翰森制药) IPO: Competitive Landscape of HS-10296

Helenbergh

Helenbergh (海伦堡) Early Thoughts – The Usual Red Flag – Related Party Transactions

Hut Chi-Med

Hutchison-China Med (和黄医药) H-Share Listing: MNC Partnerships Endorsed Its R&D Capabilities

Jinxin

Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector

MicuRxMicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
MabPharmMabPharma (迈博医药) IPO: Assembled for a Trade?
MabPharmMabPharm (迈博医药) IPO: Thoughts on Valuation (Part 2)
SH Henlius

Shanghai Henlius (复宏汉霖) IPO: Not an Impressive Biosimilar Portfolio 

TubatuTubatu Group Pre-IPO – Performing Better than Qeeka but Growing Much Slower, US$1bn a Stretch
TubatuTubatu Group Pre-IPO – Online -> Online + Offline -> Online -> ?
South Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 1) – Highly Profitable Operator of Public Golf Courses in Korea
KMH ShillaKMH Shilla Leisure IPO Preview (Part 2) – Valuation Analysis
Plakor

Plakor IPO Preview (Part 1)

ZinusZinus IPO Preview (Part 1) – An Amazing Comeback Story (#1 Mattress Brand on Amazon)
India
Aakash EduAakash Education Pre-IPO – Fast Growth in an Attractive Sector
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotels

Bharat Hotels Pre-IPO – Catching up with Peers 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
IndiaMartIndiaMART Pre-IPO – Getting and Retaining Subscribers Seems to Be Difficult
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S
DouyuDouyu (斗鱼直播) IPO: Leader At a Cost
DouyuDouyu (斗鱼直播) IPO: Comparison with Huya (Part 2)
GSXGSX Techedu (跟谁学) IPO Early Thoughts – Successful Pivot Away from Marketplace Model
MetenMeten International Edu (美联国际教育) Early Thoughts – Unclear Strategies

2. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

Xinyi%20stub

XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

3. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

Haitongspinoff

A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

4. U.S. Equity Strategy: Neutral Outlook; Opportunities Within Staples and Utilities

Untitled

In last week’s Compass (5/14) we laid our case for a more cautious outlook as a result of several negative developments, including breakdowns for EM (EEM) and China (MCHI, FXI), steep price and RS uptrend violations for Technology (XLK, RYT), improving RS for defensive areas of the market, and weakness in copper. Our outlook remains neutral. In today’s report we highlight attractive Groups and stocks within Consumer Staples and Utilities.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Utlilities: GPSC Announces Delisting Offer Intent for GLOW and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. GPSC Announces Delisting Offer Intent for GLOW
  2. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs
  3. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals
  4. Vocus Group’s Tilt from AGL Energy Is Attractive but Not a Sure Thing
  5. AGL Takes A Turn At Vocus

1. GPSC Announces Delisting Offer Intent for GLOW

Screenshot%202019 06 20%20at%202.52.42%20am

Late on on 19 June 2019, Glow Energy Pcl (GLOW TB) released a statement[NB: link downloads PDF] on the Stock Exchange of Thailand website (GLOW website link for the same doc) noting it had received a letter from Global Power Synergy Company Ltd (GPSC TB) which recently completed a Tender Offer on GLOW, obtaining 95.25% of the shares, that it intended to support the board of GLOW if it decided to conduct a Delisting Offer (as is expected). The letter from GPSC to the SET and the public is here. It provides a little additional information.

The Delisting Offer, if accepted (and there is every reason to expect it would be) would take place at THB 90.8136/share less any dividends paid out by GLOW in between now and the close of the Offer. 

GLOW’s statement said that it would conduct a Board Meeting on 20 June 2019 to consider the Delisting of Securities and GPSC’s Offer, and would disclose the results promptly. 

You had the warning from David Blennerhassett‘s Glow Energy: An Imminent Delisting Offer? on 30 May and my GLOW For It! Be GLOWful… And Full of GLOW… (Trading Tactics) a day later. The stock traded low 82s for a week after that.

Now (or later today) it should become more official.


The Quiddity Thailand M&A Guide 2019 is now published with guidelines to pointers and the relevant rules, regulations, and documentation regarding the Thailand M&A landscape. Others in the series to date are Hong KongJapanAustraliaSingapore and Malaysia. Watch for more soon!

2. US LNG Price Economic Drivers in the Context of Low LNG and Tariffs

Hh%20gas%20price

In the current environment of very low Asian LNG and European gas prices it is worth looking at whether US LNG economics still justify production or if there is the chance of shut-ins. We have analysed the various factors that influence the US LNG delivered price both on a full cycle cost basis and a variable cost basis.  

3. Banco Do Brasil (BBAS3 BZ): Neoenergia IPO Kicks off Non-Core Disposals

  • Neoenergia registered its IPO on June 6th; Banco Do Brasil Sa (BBAS3 BZ) is expected to raise between BRL1.64bn and BRL1.92bn from its 9.35% stake
  • We estimate that the Banco do Brasil capital contribution from the Neoenergia stake disposal should be small, but it should serve to add to positive sentiment for non-core disposals
  • More importantly, its 49.9% stake in Banco Votorantim is also up for sale and its returns are improving; we estimate that BVoto’s disposal would be the biggest capital relief contribution of its non-core sales 
  • Banco Patagonia Sa (BPAT AR), in which Banco do Brasil has an 80.4% stake, is more of a challenge for disposal given the approaching Argentinian presidential election – and the uncertain outcome – in October 2019, but could be slated for sale in early 2020
  • Banco do Brasil management has added the 10.1% stake in reinsurance company IRB Brasil Resseguros S/A (IRBR3 BZ) to its list of non-core disposals
  • Overall, we see that these key disposals in total, through capital gains and RWA reduction in the case of the banks, should bring between 93bps to 100bps of capital relief to Banco do Brasil’s CET1 ratio; even if we exclude the BPAT disposal, we estimate capital build from the other disposals could reach 75bps of CET1

4. Vocus Group’s Tilt from AGL Energy Is Attractive but Not a Sure Thing

Vocus Communications (VOC AU) is Australia’s fourth largest telecom operator which is in the midst of a three-year turnaround plan. Today, Vocus announced a non-binding proposal from AGL Energy Ltd (AGL AU) for A$4.85 cash per share. AGL’s proposal values Vocus at a market cap of A$3.0 billion and FY19 EV/EBITDA of 11.4x (CY2019 EV/EBITDA of 10.9x).

The takeover bid sent Vocus shares up 7.7% to A$4.12, which is still 15% below AGL’s bid. The shares closed materially below AGL’s offer as the market is understandably cautious on the prospect of a binding offer after KKR & Co Inc (KKR US), Affinity Equity Partners and most recently, EQT, dropped their bids during the due diligence process. Overall, we believe that AGL’s bid is attractive with a limited chance of a superior proposal.

5. AGL Takes A Turn At Vocus

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Vocus Communications (VOC AU) has announced it has received an A$3.02bn (US$2.1bn) non-binding, indicative proposal from Aussie energy outfit AGL Energy Ltd (AGL AU) by way of a Scheme, at A$4.85/share in cash, a 26.63% premium to last close.

This proposal arrives one week after Swedish PE outfit EQT and Vocus terminated takeover talks – and just two weeks since that $5.25/share indicative offer was first announced

Although EQT was viewed to be overpaying (see Morningstar‘s insight EQT Infrastructure’s Proposal for Vocus Seems Expensive), disconcertingly, EQT was the third bidder to walk in the past two years after KKR –  shortly followed by Affinity Partners – lobbed identical $3.50/share indicative proposals in June/July 2017, both of which were terminated on the 21 August 2017 as both bidders were “unable to support a transaction on terms acceptable to the board“.

profit warning four days earlier – the third in the past nine months – doubtless played a role in KKR/Affinity’s decisions.

Vocus implemented a “two-three year turnaround” in August last year, involving a “major reset” of its strategic priorities, cost and leadership, with a primary focus on growth. We aren’t privy to why three potential acquirers walked, but can speculate that forward growth promulgated from this reset falls short of a sustainable run rate for EQT to justify its bid price.

What to do? Shares traded roughly at the halfway point in terms of distance to bid from where the price was before subsequent to the EQT offer. A similar scenario places Vocus at ~$4.30 with respect to AGL’s proposal. Currently trading at $4.17, indicating investors are less sold on this proposal.

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Brief Utlilities: SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy
  2. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing
  3. U.S. Equity Strategy: Neutral Outlook; Opportunities Within Staples and Utilities
  4. M&A LNG Theme Back in the Spotlight with Total’s Entry in Mozambique LNG

1. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

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XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

2. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

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A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

3. U.S. Equity Strategy: Neutral Outlook; Opportunities Within Staples and Utilities

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In last week’s Compass (5/14) we laid our case for a more cautious outlook as a result of several negative developments, including breakdowns for EM (EEM) and China (MCHI, FXI), steep price and RS uptrend violations for Technology (XLK, RYT), improving RS for defensive areas of the market, and weakness in copper. Our outlook remains neutral. In today’s report we highlight attractive Groups and stocks within Consumer Staples and Utilities.

4. M&A LNG Theme Back in the Spotlight with Total’s Entry in Mozambique LNG

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This insight has been produced in collaboration with Anish Kapadia as a joint effort of the Smartkarma Energy and Commodities Team.

With the acquisition of Anadarko Petroleum (APC US) ’s African assets from Occidental Petroleum (OXY US) for $8.8bn, Total Sa (FP FP) is adding a new LNG export position in East Africa to its growing global LNG portfolio. The acquired assets also include high-quality low cost producing fields offshore Ghana.

Total has been one of the most aggressive oil majors pursuing countercyclical upstream M&A during the oil downturn to expand its resource base at low cost. Is the French major paying a reasonable price for Anadarko’s assets?

The ongoing “re-gasification” of the oil majors’ portfolios is underpinning a growing interest among LNG buyers and portfolio players for quality LNG assets. Total’s entry in the prolific East Africa gas play is the latest example highlighting the LNG “theme” as one of the main strategic drivers of recent and likely future M&A activity in the oil and gas industry.

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