Since 2020, the pace of privatization of Hong Kong stocks has obviously accelerated, and one after another enterprises have put forward privatization plans.

Jinmao Hotel announced in the morning that trading in Jinmao Hotel and Jinmao (China) Hotel Investment Management Limited would be temporarily suspended from 09:00 on Monday, June 8, 2020, pending the publication of an announcement under the Hong Kong Takeovers and mergers Code, which constitutes inside information about Jinmao Hotel and Jinmao (China) Hotel Investment Management Company Limited. However, according to people familiar with the matter, the reason for the suspension is to privatize the company.

Last week, Kepsson International, Vietnam Manufacturing processing and Huadian Fuxin have announced plans to launch privatization. in addition, a number of Hong Kong listed companies have issued privatization plans one after another this year, as if the privatization of Hong Kong stocks has become a wave.

In the process of the privatization offer, since the offeror's offer is usually much higher than the current price (usually a premium of 30% and 40%), the stock price usually fluctuates by a large margin after the news of privatization. And if there is such a huge return in the short term, it is estimated that it will be a very considerable gain if you can bet the right bet.

But are these treasures really that easy to catch? Next, you can follow the editor to see how to identify those stocks with the characteristics of privatization, and how to dig them out of the vast sea of stocks.

Reasons and characteristics of privatization

First of all, why do companies that have successfully listed after untold hardships take the initiative to privatize and delist? The reasons vary widely, but to sum up, there are probably the following main reasons:

1) low valuation and poor liquidity make it difficult to meet the financing needs: private (private) enterprises, the controlling shareholders feel that it is too cheap, while stocks are slow to reflect the true value due to various factors, and the liquidity is too poor to cash out. For example, Peak; or low valuation makes the company lose its financing function, unable to bring further development to the company.

2) the shareholders plan to exchange land for listing, so as to gain greater recognition and improve the valuation of the company.

3) due to the need for asset restructuring and asset integration, it may not be listed in the near future. For example, Belle International privatized at that time, and then re-listed some of its assets. Now Gao Bo has almost recovered the original cost of privatization; the privatized side has made a lot of money.

4) State-owned enterprises, usually mainly for the need of asset integration.

5) mergers and acquisitions among peer or related industries, as well as mergers and acquisitions dominated by industrial investment funds. Of course, in a specific privatization transaction, the parties to the transaction may initiate the transaction taking into account a variety of factors.

In addition, there is another special kind of privatization, that is, an offer from a third party that is not a controlling shareholder, which usually negotiates terms with major shareholders and important shareholders before privatizing (otherwise major shareholders will vote against it and do everything for nothing. Wishful thinking).

In addition, these Hong Kong listed companies generally have the following characteristics:

1. In terms of shareholding ratio, the largest shareholder usually has a high shareholding ratio, with an average shareholding ratio of nearly 50%, or even nearly 75%. Therefore, for the major shareholders with a higher proportion of shares, their demand for privatization funds is lower, which reduces the difficulty of capital financing for privatization.

2. From the point of view of the industry, there are mainly traditional industries, but there are also a small number of emerging industries such as semiconductors and medical care, and the proportion of state-owned enterprises privatized and delisted has become larger and larger in the past two years.

3. The time from the announcement of privatization to the completion of delisting is usually about 3 to 6 months, and the longest HTF power generation in the above cases only takes more than 7 months, so in terms of time cost, privatization itself does not take long. If properly arranged, it will have little impact on other arrangements after privatization and delisting of listed companies.

4. usually compared with the share price of the listed company when the delisting announcement is issued, the premium rate of the offer price proposed by the offeror is about 30%. In view of the fact that the stock price may have fallen to a low at the time of the offer, compared with the expected value after the return to A shares, privatization is a relatively cost-effective deal.

5. from the perspective of the net profit when issuing the delisting announcement, most of the companies to be privatized have good financial fundamentals and have the basic conditions for listing in A-shares.

According to the above analysis, it is not difficult to see that Hong Kong listed companies with high controlling proportion of major shareholders, undervalued companies and Hong Kong listed companies represented by the background of state-owned assets often have a greater internal motivation to privatize. Hong Kong stock listed companies with the above characteristics are also suitable targets for privatization.

Hong Kong stocks have announced their targets for privatization in 2020

Through the statistics of Fortune Information, it is found that so far in 2020, the number of companies that have chosen to take the initiative to privatize the Hong Kong stock market has reached 28. Talking about the reasons for the frequent privatization of Hong Kong stocks in the past two years, many people in the industry think that the main reason is that the valuation of Hong Kong stocks is too low this year.

Through the above, it is not difficult to find that it is still difficult for these privatized companies to seize some investment opportunities. Although many stocks have brought huge excess returns, we can also see that there are cases of failure.

In addition to guessing which companies are going to be privatized, this process will take a long time to wait before announcing privatization. if there are some changes during this period and finally announce that the privatization has failed, it will be in vain.

Therefore, there are risks in investment, and you need to learn to enter the market. If you want to ambush privatized stocks to achieve excess returns, then you must have a full understanding and understanding of privatization, and play cards that you can understand and have a high winning rate. It's enough.