Fri, Oct 9, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hong Kong listed companies rush to Mongolia

Friday, July 23, 2010
Opalesque Industry Update - Hong Kong-listed Companies as Major Acquirers of Resource Assets in Mongolia. Over the last 12 months, Mongolia has become an attractive investment destination for the companies listed on the Hong Kong Stock Exchange (HKEx). Attracted by the country's huge mineral resources, the HKEx-listed companies have become the biggest acquirers of Mongolia resource assets since the second half of 2009 ($966mn worth of M&A deals or over 90% of total).

Asset Injections. All recent Mongolia M&A deals in which Hong Kong companies were involved have been completed through injections of resource assets into the existing publicly listed companies. Before acquisitions, these companies engaged in a diverse range of activities and industries including agriculture, waterworks, IT, clean tech, plastic products and even manufacturing of toys and gifts. Following acquisitions, these below HKEx-listed companies are now primarily Mongolia-focused resource companies:

* Bestway International Holdings (0718:HK), an investment holding company engaged in trading of plastic products, has acquired two tungsten mines in Mongolia for HK$940mn (US$121mn) in July 2009
* North Asia Resources Honldings Ltd (0061:HK), formerly known as Green Global Resources Ltd. acquired 100% of North Asia Resources Group Ltd., a private resource company in Mongolia, for HK$1.76bn (US$227mn) in December 2009
* Kiu Hung Energy Holdings Ltd (0381:HK), an investment holding company with businesses in energy, gift and toy industries, acquired coal assets in Mongolia from First Dean Holdings Ltd for HK$1.4bn (US$180mn) in March 2010
* Solartech International Holdings Ltd (1166:HK), a manufacturer of cables, wires, connectors and terminals, has acquired a 87.9% stake in Sun Progress Ltd which owns copper-gold-silver mine in Mongolia for US$193mn in May 2010
* Ming Hing Waterworks Holdings Ltd (402:HK)< Mongolia Energy Corp (0276:HK), formally New World CyberBase Ltd was the first HKEx-listed company to acquire a resource asset in Mongolia through asset injection. It paid HK$1.2bn (over US$150mn) for a coal mine in January 2007.

Overpaid Deals. In our view, most of these companies have overpaid for these earlier stage resource assets. Poor post-acquisition share price performance only underscores investor concerns (Solartech is down 75% since May 2010 deal announcement). Owners of target companies with Mongolian assets (primarily mainland Chinese and Hong Kong private investors) are clear winners as they have disproportionally benefited from these deals. More asset injections to come amid zeal for "Mongolia resource play". We expect more Hong Kong-listed companies to pursue M&A deals in Mongolia through asset injections in a quest to transform into "resource play". Some small-cap companies may find too tempting to acquire resource assets in Mongolia in order to revive their sagging fortunes and join the growing league of Mongolia-focused resource companies at the HKEx. At the same time, the private owners of resource companies in Mongolia would target small-sized HKEx-listed companies in their effort to seek "back-door listing" through lucrative reverse takeovers.

To read full research note in English and Chinese please visit Source

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - AQR Capital and Renaissance Technologies raise stakes in Southwest Airlines[more]

    From In the previous part of this series, we saw how institutional investors played Southwest Airlines (LUV) in 2Q15. Now let’s move on to the trades executed by key hedge funds in Southwest Airlines over the same period. … Most of the hedge funds that had significant exposu

  2. Manager Profile - Pimco alternative funds flourish as 30-year bond rally fades[more]

    From Inside Pacific Investment Management Co., the bond behemoth that lost two chief investment officers last year and saw almost $500 billion of client money leave, a hidden profit engine is easing some of the pain. For more than a decade, Newport Beach, California-based Pimco has qu

  3. Niche Investing - Art investment funds: Attracting institutional and other new investors[more]

    From The Deloitte/ArtTactic Art and Finance Report 2014 (the "Art and Finance Report") noted that the "global art investment fund market was estimated to be worth at least $1.26 billion in the first half of 2014." This seems almost inconsequential when juxtaposed with the $54 billion of

  4. Hedge fund Barnegat survives September’s market selloff[more]

    Komfie Manalo, Opalesque Asia: Bob Treue’s $679 million Barnegat Fund proved resilient after another month of market letdown as the hedge fund gained 2.2% last month, bringing its year-to-date gains to 2.8%. Treue said in his monthly report to i

  5. …And Finally - Japanese men want upgrade on their virtual girlfriends[more]

    From Five years after News of the Weird mentioned it, Japan's Love Plus virtual-girlfriend app is more popular than ever, serving a growing segment of the country's lonely males -- those beyond peak marital years and resigned to artificial "relationships." Love Plus models (Rinko