ChinaDaily Briefs

China: Dragon Crown Group, Wynn Macau Ltd, Linmon Media, Chinese Estates Holdings and more

In today’s briefing:

  • Dragon Crown (935 HK)’s VGO Is A Done Deal
  • Wynn Macau (1128 HK) – Gaming Law Revisions and Impact on Financial Covenants
  • Linmon Media Pre-IPO Tearsheet
  • Asia-Pac Weekly Risk Arb Summary: Chinese Estates, Pipedo, Intega, Dragon Crown

Dragon Crown (935 HK)’s VGO Is A Done Deal

By David Blennerhassett

Liquid chemical storage and handling outfit Dragon Crown Group (935 HK) (DCG) has announced a pre-conditional Offer from Guangdong Great River Smarter (002930 CH) (GGRS).

The Offer price is HK$1.28/share, a 8.47% premium to last close, and a 20.75% premium to the average closing price over the previous 60 trading days. The Offer price will NOT be increased. No dividends are expected to be declared. 

The pre-conditions, which cannot be waived, include approvals from NDRC, MoC, SAFE, the Shenzhen Stock Exchange, plus shareholder approval from GGRS.

The key condition to the Offer is valid acceptances of not less than 90% of shares out. Irrevocables totalling 86.91% (primarily from Ng Wai Man, the founder, chairman & CEO) have been received, therefore this requires a further 3.09% to get over the line.

This appears a relatively clean deal. The Long Stop date for the pre-cons is the 9 February 2022.

More below the fold.

Wynn Macau (1128 HK) – Gaming Law Revisions and Impact on Financial Covenants

By Jason Yap, CFA

Macau’s top gaming stocks lost a record USD18 billion in combined market value on 15 September 2021 after the Macau administration announced a 45 day public consultation period to discuss revisions to Gaming Laws, which comes as the June 2022 expiration deadline for existing gaming concessions loomed. 

Amongst others, the abolishment of the sub-concession framework (which could reduce current 6 operators to 3 operators), restriction on distribution of dividend, and Macau government’s direct supervision of casino operations drew the most consternation from investors and analysts. 

The sweeping revisions compound the woes of Macau’s casino operators, such as Wynn Macau Ltd (1128 HK)  and Sands China Ltd (SCHYY US), which had already been badly affected by pandemic driven travel restrictions, and which obliterated their gaming revenues.

While there were some improvements due to easing of travel restrictions for Mainland travelers in September 2020, gross gaming revenues (GGR) remain a shadow of its past.  The daily average of visitors to Macau during October’s Golden Week was down 93.7% on daily average in 2020. The decline coincided with new COVID-19 cases confirmed in Macau around the same period. 

Amongst its peers, Wynn Macau Ltd (1128 HK)  is the most highly levered and had already dodged a bullet by securing covenant waivers in April 2020 at the peak of the pandemic.

In this Insight, we discuss the impact of the proposed revisions and subdued GGR recovery on Wynn Macau Ltd (1128 HK)‘s cash reserves, debt servicing ability, and whether there may be potential breaches of its financial covenants.

Linmon Media Pre-IPO Tearsheet

By Clarence Chu

Linmon Media (LM HK) is looking to raise up to US$300m in its Hong Kong IPO. The deal will be run by Morgan Stanley and CICC. 

Linmon Media is a content production firm that operates the full value chain of investment, production, distribution, promotion and derivatives licensing of drama series. As per Frost & Sullivan (F&S), the firm ranked fourth among all Chinese drama series companies in terms of revenue for 2020. As of the latest practicable date (24 September 2021), the firm had produced and distributed 13 drama series, of which the firm was lead investor and executive producer for 11 of them, where it owns proprietary rights.

Asia-Pac Weekly Risk Arb Summary: Chinese Estates, Pipedo, Intega, Dragon Crown

By David Blennerhassett

This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.

I number 39, mostly firm, deals around the region.

More below the fold.

Before it’s here, it’s on Smartkarma