ConsumerDaily Briefs

Consumer: Crown Resorts, China Meidong Auto, Cloud Village, Xpeng, Varun Beverages Ltd, Tunas Baru Lampung and more

In today’s briefing:

  • Crown Resorts (CWN AU): Oaktree’s Intriguing Proposal
  • FTSE GEIS Sep Index Rebalance Preview: China To See A Lot of Change
  • Cloud Village (NetEase Music) Pre-IPO – Was in the Slow Stream, Playing Catch-Up
  • Xpeng: P5 Gets Ready for Sale, Potential New Versions Widen Target Market
  • Company Update:Varun Beverages
  • Morning Views Asia: China Aoyuan Property, Tunas Baru Lampung

Crown Resorts (CWN AU): Oaktree’s Intriguing Proposal

By David Blennerhassett

On the 19 April, Oaktree made an $3bn unsolicited proposal to CWN’s board via a then-undetermined debt/equity structure.

The transaction was geared to buy James Packer 37% stake in CWN via “a structured instrument with the proceeds to be used by Crown to buy back some or all of the Crown shares” held by his Packer’s private company, Consolidated Press Holdings (CPH).

It was hardly a clean counter to Blackstone’s cash Offer of $11.85/share. And questions remained as to size of the equity stake and the facility’s interest rate. 

Blackstone subsequently increased its non-binding proposal for CWN by 4% on the 4 May to $12.35. Shortly after, Crown’s domestic rival Star Entertainment Grp (SGR AU) lobbed a non-binding proposal, by way of a Scheme, either via the issuance of 2.68 new Star shares for every Crown share, or a possible cash alternative of A$12.50/share, subject to clawback.

Crown summarily concluded  Blackstone’s Offer undervalued the company, but it required more information from Star to finalise its decisions. There was no comment on Oaktree’s offer.

The New News

This morning Oaktree bumped its proposal/facility to $3.1bn, incorporating a 2bn private term loan and a $1.1bn loan convertible into new shares. 

The facility would be used to selectively buyback CPH’s shares in CWN.

The convertible would be convertible into new shares of CWN at A$13/share, with such conversion capped at 9.99% of Crown’s outstanding shares.

It’s an interesting proposition. Plus it sticks a $13/share handle out there.

More below the fold.

FTSE GEIS Sep Index Rebalance Preview: China To See A Lot of Change

By Brian Freitas

FTSE Russell will announce the changes to the Global Equity Index Series (GEIS) as a part of the September 2021 semi-annual index review (SAIR) on 20 August and the changes will be effective after the close of trading on 17 September.

The SAIR uses price data from the close of trading on 30 June to calculate the market cap to be used in determining the list of inclusions and exclusions, while liquidity testing covers the period from 1 July 2020 to 30 June 2021.

Expected upward migrations from the All-Cap to the All-World index include Hangzhou Silan Microelectronics Co., (600460 CH), Shimge Pump Industry Group (002532 CH), Hygeia Healthcare Group (6078 HK), Wuxi Shangji Automation Co-A (603185 CH), Akeso Biopharma Inc (9926 HK), Shanxi Taigang Stainless A (000825 CH), 360 Finance, Inc. (QFIN US), Joinn Laboratories China Co-A (603127 CH), China Meidong Auto (1268 HK), Jinke Smart Services (9666 HK) and China Education Group (839 HK).

Expected downward migrations from the All-World to the All-Cap index include Beijing Lanxum Technology A (300010 CH), Hangzhou Century Co Ltd A (300078 CH), Thaihot Group Co Ltd A (000732 CH) and Zhejiang Wanma Co Ltd A (002276 CH).

Evergrande Property Services (6666 HK) is an expected inclusion following the lock-up expiry on 1 June and the share placement.

We expect quite a few STAR Board stocks to be included in the GEIS following their inclusion in the SSE180 and SSE380 indices and consequent inclusion in Stock Connect. Potential inclusions to the All-World index are Beijing Kingsoft Office Software-A (688111 CH), Shenzhen Transsion Holding-A (688036 CH), Beijing Roborock Technology-A (688169 CH), Advanced Micro-Fabrication Equipment-A (688012 CH), National Silicon Industry Group-A (688126 CH), Autel Intelligent Technology-A (688208 CH) and Shanghai Friendess Electronic (688188 CH), while potential inclusions to the All-Cap index are Shanghai Medicilon Inc (688202 CH), Zhejiang Orient Gene Biotech-A (688298 CH), Arcsoft Corp Ltd (688088 CH) and Brightgene Bio-Medical Tec-A (688166 CH).

Following President Biden’s Executive Order, there will be stocks deleted from the FTSE (and MSCI) indices in July to comply with the order.

Cloud Village (NetEase Music) Pre-IPO – Was in the Slow Stream, Playing Catch-Up

By Sumeet Singh

Cloud Village (CLV HK) (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu (BIDU US) and Alibaba Group (BABA US), along with other investors.

As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. 

CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020.

However, it remains a distant second player in the market and has yet to make a profit.

Xpeng: P5 Gets Ready for Sale, Potential New Versions Widen Target Market

By Victoria Li

From latest post on MIIT, we noticed Xpeng has applied for permits to sell P5 and N5 models for sale in the market. P5 has been well anticipated by the market, while N5 has not been mentioned in public before. Based on the posted information, this N5 looks like a reduced autonomous driving function version of P5. It might have lower price and target to potential customers who care less about autonomous driving functions than exterior interior design and price.

We estimate the MSRPs and tech specifications of Xpeng P5 and N5 would be announced for sales in July. By targeting to customers with different preferences, monthly sales of P5 and N5 might reach at least 5,000 units, in our view.

Reiterate BUY.

Company Update:Varun Beverages

By Axis Direct

At CMP, the stock trades at 14.7x EV/EBITDA CY23E which is attractive in our view. Maintain a BUY rating with a revised TP of Rs 900/share. Key Risks to our call are a) Resurgence of covid-19 cases, b) Likelihood of the 3rd wave and consequent lockdowns, and c) Sudden spike in RM prices.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Morning Views Asia: China Aoyuan Property, Tunas Baru Lampung

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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