Republished from Ernest Lim's blog with permission.
Re chart above, Ying Li surged to an intraday high of $0.164 on 28 Nov 2017 immediately after the divestment announcement (see elaboration and announcement link below), before profit taking set in. Since then, Ying Li seems to be consolidating around $0.14+.
Do note that chart reading is extremely subjective. Furthermore, as small caps are usually less liquid, chart reading may not be that accurate.
Some noteworthy developments, or points for your attention
Proposed sale of International Commercial Centre for a total cash consideration of RMB3.29b
On 28 Nov 2017, Ying Li announced that it was going to divest its International Commercial Centre (“ICC”) project and to transfer a piece of land (“Land Parcel”) to the Purchaser.
The total consideration amount is approximately RMB3.29b, split over six tranches. The SGD equivalent is approximately S$672m. (Click HERE for the announcement).
If this is successful, Ying Li will be able to
- Recycle its capital and pursue new ventures and investment opportunities in Tier 1 and fast-growing Tier 2 cities in the PRC;
- Strengthen its balance sheet by paring down its debt and for general working capital;
- Recognise an approximate gain of RMB343m (equivalent to S$70m);
- Subject to approval, Ying Li can get the first two tranches of the divestment amount fairly quickly. Based on the total cash consideration of RMB3.29b, Ying Li can get 49.3% of the sales consideration (5 days + 30 days after completion of the proposed divestment), equivalent to RMB1,622m = S$332m.
Ying Li's current market capitalization is around S$373m.
For the deal above, it is noteworthy that
- Ying Li has written to SGX for a waiver of the need to obtain shareholders' approval so that the transaction can be completed in an expedient manner. As of now, Ying Li has not obtained SGX's waiver yet. If it cannot get SGX's approval and needs to hold an EGM, it may take a longer period for the deal to be completed;
- As with any proposed deal, there is no 100% certainty that it will go through. Even if it goes through, there may be some changes to the deal;
- On 7 Dec 2017, Ying Li announced that it has maintained close communication with the relevant PRC authority throughout the tender and acquisition process and has received favourable response. In the remote event that the acquisition of the Land Parcel is unsuccessful, there will be changes to the amount of the consideration and the terms of payment.
Please click HERE for the details.
It is noteworthy that Ying Li's market cap is only S$373m. Thus, this proposed divestment with a total consideration amount of approximately RMB3.29b (S$672m equivalent) is substantial and I deem it to be likely positive in the short term, should it materialise. Coupled with its chart development, it seems to be an interesting trading idea.
Do take note that this is not a fundamental write-up. Ying Li catches my attention due primarily to the above proposed divestment and its chart development. Readers should do their own research and be cognisant that there are many risks, or questions to consider such as (but not limited to) the following:
P.S: I am vested.
Please refer to the disclaimer HERE