Daily Brief China: Lifestyle International Holdings, Yashili International Holdings, Dongzheng Automotive Finance, Cosco Shipping Energy Transportation Co. Ltd. (H), Shandong Weigao Orthopaedic, Shui On Land and more

• Lifestyle International Holdings (1212 HK) announced a privatisation offer from Mr Lau, the controlling shareholder and Chairman, at HK$5.00 per scheme share, a 62.3% premium to the undisturbed price.
• The offer price is final. Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection). No shareholder holds a blocking stake.
• The offer price is unattractive for long-term shareholders and below average sell-side price targets. Nevertheless, this deal likely goes through as the headcount test is not applicable.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• Highest spreads are Lifestyle International Holdings (1212 HK), 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Infomedia Ltd (IFM AU), Yashili, ResApp.
• Lowest gross spreads are Excelpoint Technology (EXLP SP), Frasers Hospitality Trust (FHT SP),  MyDeal.com.au Ltd (MYD AU), Cocoaland Holdings (COLA MK), True Corp Pcl (TRUE TB), China VAST. 

• SAIC Motor (600104 CH) completed the auction procedures for acquiring a 71.04% stake in Dongzheng Automotive Finance (2718 HK). This will trigger an unconditional MGO at HK$1.2430 per H Share.
• The offeror and Dongzheng are required to issue the composite document on or before 11 August jointly. However, an application has been made to the Executive to extend the deadline. 
• At last close and for an end of September completion, the gross and annualised spread to the MGO price is 3.6% and 20.9%, respectively.

• At 0.71x 12-month forward P/B multiple, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) has overly discounted the earnings recovery for FY22 and FY23.
• VLCC rate has rebounded since end-Jun but are still at unexciting US$10,000/day level only. This is below an estimated cash breakeven level of US$25,000/day for its fleet.
• Tanker demand-supply balance looks to be at equilibrium over the next 12 months, leaving limited potential for significant surge in rate. This opens room for earnings disappointment, in our view. 

• Although Weigao achieved solid growth in 2021 after pandemic was under control,the real test will come in 2022. The implementation of centralized procurement will have a significant impact on performance.
• After spinal implants are included in centralized procurement this year, all of Weigao’s three major businesses (spinal implants/trauma implants/joint implants) are within the scope. Short-term performance pressure is inevitable.
• As a result of the pandemic/lockdown in 2022H1, we lowered our performance forecast on Weigao.   

• Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, is offering to take the company private by way of a Scheme at HK$5/share, a 62.3% premium to last close.  
• Independent shareholders comprise 23.51% of shares out, therefore the blocking stake at the forthcoming Court Meeting is 2.351% of shares out. 
• The Offer price is final. No dividends will be paid during the Offer period.

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.

• ENN Natural Gas
• Lifestyle International Holdings
• Road King Infrastructure
• Shui On Land
• Times China