In today’s briefing:
- HK Merger Arb: Opportunities Amidst the Market Selloff
- CSI 300 Index Outlook After Trump’s Threat of 50% Tariff on China
- Chagee (霸王茶姬) Pre-IPO: Very Few Exact Competitors – A Viewpoint on the Ground
- Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- Hengrui (恒瑞医药) A/H Listing: An Updated Comparison with Hansoh
- FWD: An Ideal Acquisition Target for Korean Insurers?
- Jiangsu Zenergy Battery Technologies IPO – PHIP Updates & Quick Thoughts on Peer Comp and Valuation
HK Merger Arb: Opportunities Amidst the Market Selloff
- The gross spreads of large HK merger arb situations have increased due to the unfortunate fallout from Trump’s trade war. The HSI closed down 13.2%.
- We assess the widening spreads of HK’s merger arb situations based on offer structure, preconditions, conditions, and other factors.
- The deals, ranked in terms of increasing deal risk, are Tam Jai, Soundwill, Vesync, Goldlion, Canvest, ESR, OneConnect, HKBN, and ENN Energy.
CSI 300 Index Outlook After Trump’s Threat of 50% Tariff on China
- The Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) was less impacted than other indices by the global sell-off: on Monday it was down only -10% from the recent top.
- On Monday Donald Trump posted that if China does not withdraw immediately its +34% tariffs increase, the United States will impose ADDITIONAL Tariffs on China of +50%, effective April 9th!
- Although the CSI 300 Index is more insulated than other indices from global market volatility, it is not completely immune and remains vulnerable to the impact of US’s tariff threats.
Chagee (霸王茶姬) Pre-IPO: Very Few Exact Competitors – A Viewpoint on the Ground
- Chagee is the No. 6 largest teahouse chain in China according to store number.
- Very few teahouses have a per customer transaction higher than Chagee.
- We believe Chagee has advantages in the high price market.
Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- In Aussie Arbs: Trump Tariffs And MACs, I ran a ruler over the fifteen live deals Down Under, and how they may be affected by the Trump Tariffs.
- This insight canvasses the ongoing Hong Kong arbs and wording surrounding material adverse changes (MACs). Hong Kong MACs are typically less onerous, and lack specificity, versus Aussie arbs.
- Although the framework exists for an Offeror to enforce a MAC, I’m not aware of any evidence of this occurring under Hong Kong’s Takeovers Code.
Hengrui (恒瑞医药) A/H Listing: An Updated Comparison with Hansoh
- Jiangsu Hengrui Medicine (600276 CH) a China-based pharmaceutical company, aims to raise around US$2bn in its H-share listing.
- Given its similarity to Hong Kong-listed Hansoh Pharma, had done a comparison between the two.
- In this note, we looked at the latest results releases from both companies and highlighted granular differences. It is also interesting to compare the relative valuation from a historical perspective.
FWD: An Ideal Acquisition Target for Korean Insurers?
- The saga of CK Hutchison’s Panama Canal Ports sale might also impact FWD due to tensions between China and the Li family.
- Despite minimal mainland China presence, FWD faces exposure through its significant HK and Macau operations; HK and Macau contributed 40% – 50% of the group’s VNB and operating profits.
- After FWD’s failed IPO attempts, PCG might consider a strategic sale for liquidity; FWD might offer a good strategic fit to Korean insurers looking to expand to Southeast Asia.
Jiangsu Zenergy Battery Technologies IPO – PHIP Updates & Quick Thoughts on Peer Comp and Valuation
- Jiangsu Zenergy Battery Technologies (JSZENERGY CH) is looking to raise US$130m in its Hong Kong IPO.
- Zenergy is an EV and energy storage system battery manufacturer providing integrated battery solutions, encompassing battery cells, modules, packs and battery management systems dedicated to large-scale applications of electrochemical products.
- In our previous note, we looked at the firm’s past performance. In this note, we talk about the IPO valuations.
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