Daily Brief China: Giordano International, 21Vianet Group, CALB, 111 Inc, Netdragon Websoft, Genscript Biotech, Tencent, Kwg Property Holding and more

• The offeror and acceptances reached 46.04%, just short of the 50% minimum acceptance condition. The offeror has decided to let the Giordano International (709 HK) offer lapse.
• The offer fell short of the 50% threshold as the Cheng family mistakenly assumed that shareholders behind Halycon’s stake were friendly shares, which would support the offer.
• The downside will be muted as the shares are trading in line with the 1-year average forward P/E, minorities thought the offer was low, and David Webb is a buyer.

• 21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
• The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET. 
• The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products. 
• In this note, we talk about the updates from the company’s recent PHIP filings.

• Utter carnage in arb-world this week, as Frasers Hospitality Trust (FHT SP) fails, Link Administration (LNK AU) and Ramsay Health (RHC AU) are potentially next, and now Giordano (709 HK).
• 46.04%. That’s the only number that matters, which represents the total shares owned by the Cheng family plus shares tendered. 
• The Chengs are restricted from launching another Offer for 12 months. Giordano will be sold off today, however, this is a buy if it retraces to around the undisturbed levels.

• 111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu – both co-founders and co-chairmans.
• Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price. 
• Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.

• NetDragon Websoft announced that it has appointed Ms. Tang Wu (a virtual humanoid robot powered by AI) as its new CEO which would be the first ever in the world. 
• The company’s education revenue increased by 71.2% YoY to reach 2.4 billion RMB in 1H 2022. Profitability of the edtech business is also improving.
• Despite the company’s lower valuation multiples than its peers combined with catalysts including improving edtech business, we are cautious on its shares mainly due to the overall market related risks. 

• Genscript’s four business segments are the horizontal and vertical extension based on gene synthesis technology. There is also synergy between Genscript and its subsidiaries, which can promote each other’s development.
• If only from the business level, GenScript is a worthy target for investment. It has the exponential growth potential in valuation and could reach a new high in the future.
• However, our biggest worry lies in the “black swans events” . We don’t know what “new surprises” GenScript will bring us in the future. 

• China’s gaming regulator granted publishing licenses to 73 online games on Tuesday, including one for NetEase Inc (NTES US) . However, Tencent (700 HK) was excluded for the fifth time.
• Though the 9-month long new game approval freeze was lifted in April, it has been more than a year since Tencent received approval for a new title.
• Tencent’s online game revenue declined YoY for two consecutive quarters and we expect online game revenue to decline further in 3Q2022E.

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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