The announcement
According to HKEX disclosure of Li Ruigang, Charles Chan (Chairman of TVB)and Tencent became the major shareholders of Meike (0953.HK NR) at theprice of HK$0.2 per share, a discount of 77% when compared to its price ofHK$0.88 before suspension of trading on 7 July, 2015. There are no otherannouncements regarding shareholding changes and how this is structured (itis likely to be in the form of CB, as free float will be less than 25%).
About Meike
Listed in 2010, Meike operates 306 outlets that are concentrated in easternChina (Shanghai, Jiangsu and Fujian), as well as an export business. Meikegenerated revenue of RMB163m in 2014 (roughly 2% of Anta & Li Ning’sscale), down 29.3% YoY. It has been a loss-making company since 2012.
Deutsche Bank’s comment
While we do not know Mr. Li and Mr. Chan’s plan, we believe that the recentactions suggest that both are exploring different market potentials, whichmight be related to the media and/or retail space. At this stage, we do notbelieve that there is any implication on TVB, although we believe that themedia market in China is becoming active, with new channels being offered viainternet. In our view, the risk on this development is the Chinese government’spotential restrictions on content and the number of channels via internet. Thatsaid, at this stage, it provides more opportunities to content providers like TVB.To recap, TVB announced a strategic partnership with Alibaba to co-produceTV series and movies in mid-June this year. Management will have moreinformation on the partnership in two to three months time.