Hong Kong Financial News

Peace Mark made a public announcement (http://www.hkexnews.hk/listedco/listconews/sehk/20090225/LTN20090225334.pdf) yesterday night, stating the required conditions imposed by the Hong Kong Exchange before shares of Peace Mark can resume trading again.

Does it mean that Peace Mark will resume trading soon? A few possible reasons came to my mind:

(i) The liquidator of Peace Mark may want to sell Peace Mark listed shell to recover more money?

(ii) Will Sincere Watch be listed under the Peace Mark shell? Currently, Sincere Watch is ring-fenced in the liquidation and is still operating as a business.

It seems like Peace Mark shares, although it is not tradable at the moment, may be worth something in the future, but probably it will not be worth a lot.

February 26th, 2009 | Tags: 304, Peace Mark, resumption of trading, Sincere Watch | Category: Companies, Peace Mark | Leave a comment

A well known local clothes retailer - Crocodile Garments Limited (0122) - has announced that the major shareholder (the Lam family in Lai Sun Group) will buy back all existing shares from independent shareholders at a price of HKD 0.40. Because of this news, Crocodile jumped 87% today to HKD 0.38.

The total amount for the buyback should be around HKD 119 million, and the offeror will finance the cash consideration through bank borrowings.

Personally, I believe the buy back makes sense for the major shareholder as the offered price, although it is already 90% more than the traded price before the announcement, is still 50% below the net asset value per share of Crocodile (even if there is significant writedown of their assets and real estate at the end of this financial year, the offered price should still be below the net asset value per share).

This buyback plan is scheduled to complete by 31 August 2009. What are the risks of this deal not getting completed?

1. Risk of independent shareholders not approving this buyback - I would think the chance of this is slim. (Even the PCCW privatisation got approved in their EGM!)

2. The major shareholders unable to procure enough funding - highly unlikely since the major shareholders are the people behind Lai Sun Group

3. Political risk - personally I believe since this is a relatively small company in terms of capitalization and is less high profile than PCCW, I would believe the chance of it getting criticized in the public is very less.

4. Delay in completing the transaction - To me it seems to be a quite straightforward deal without a lot of counterparties involved. So I believe the risk of this happening is minimal.

Please let me know if I have left out any major risk that needs to be addressed.

I would recommend buying this stock now below or at HKD 0.38. Then by the time this buyout is completed, you will earn a decent 5% return in less than one year.

February 18th, 2009 | Tags: 0122, Crocodile, Crocodile Garments Limited, Lai Sun, privatisation | Category: Companies | Leave a comment

After asserting that the blackout rule would not change because of the sudden protest by a group of listed company directors three days before the rule was supposed to be implemented, the Hong Kong Stock Exchange has finally succumbed to the pressure of the ultra-wealthy company directors and politicians, and has backed down to make the new blackout plan more palatable to the wealthy company directors.

Under the new rule that will come effect on 1 April 2009, the black out period for insider dealing will be 60 days for annual report, and 30 days for quarterly or other interim reports.

This is just another blatant example of the government catering for the rich people. What’s going on with the SFC and the HKEx staying so firmly on their position and then bowing down to political pressure a few months later?

February 16th, 2009 | Tags: blackout, Hong Kong Stock Exchange, insider trading, Securities and Futures Commission | Category: General Trends | Leave a comment

The privatisation has been delayed for one week as the Directions Hearing – a procedural hearing according to the announcement made by PCCW – has been postponed from 17 Feb 2009 to 24 Feb 2009. The most important court hearing – the High Court hearing to sanction the privatisation – scheduled originally for 24 Feb 2009, would now need to move further down the timetable. The chance of the privatisation being successfully completed seems to be lower as time progresses. Also, following Friday’s drop, the share price has dropped 17 cents today to HK$ 3.85.
There are just too many uncertainties to this privatisation: SFC’s investigation on the manipulation of the vote result in the shareholder meeting, the uproar of some minority shareholders, and the negative impression surrounding PCCW in most newspapers and magazines over the years since the dot-com bust: all have made Richard Li’s plan to privatise the company a harder feat than it originally seemed to be.

February 16th, 2009 | Tags: 0008, PCCW, privatisation, Richard Li | Category: Companies | Leave a comment

Below are the uncertainties surrounding the PCCW buyout / privatisation:

1) the High Court will need to approve the buyout. This is scheduled for 24 February 2009.

2) On whether the High Court will approve or not, this depends on whether the regulator, the SFC, has finished investigating the vote-rigging issue or not. The SFC can petition to the High Cour to veto the buyout if it discovers any evidence of vote-rigging in the shareholder meeting.

3) Will the SFC finish its investigation before 24 February? If not, will the High Court delay its ruling until the full SFC investigation is complete?

4) In an open forum last Sunday, some minority shareholders protested that the management has largely ignored the minority shareholders in the shareholder meeting. This theme of “majority shareholders bullying minority shareholders” has been a popular topic in the mass media lately. The voice of the minority shareholders is further amplified by some Legislative Council members who have decided to step up and try to stop this privatisation. There probably will be uproar if government approves the privatisation as originally planned on 24 February 2009.

For these 4 reasons, I believe that this privatisation will not get approved by end of February. It will take some time before the share price will rise near HKD 4.5 (the offer price). So my stock recommendation is Hold.

February 10th, 2009 | Tags: 0008, buyout, minority shareholders, PCCW, privatisation, Protest | Category: Companies | Leave a comment