Hankore (update)

Hankore: China corruption probe hits China Everbright; RTO deal drawn into question Earlier this week, the Oriental Daily flagged that the management of China Everbright Int’l (CEI, 257 HK) and four other state-owned enterprises (SOE) were allegedly being investigated for corruption. This follows several recent high-profile cases involving high ranking officials and businessmen potentially facing serious disciplinary action, as China carries out its anti-corruption drive. CEI shares have plunged 10% over the course of this week. The investigations raise questions whether HanKore’s proposed acquisition of CEI’s water assets via a reverse-takeover deal, may face further obstacles. Last week, both parties extended the transaction deadline by a month till end May, possibly due to pricing issues. The deal has been hailed as a potential “game-changer” for HanKore, and a key catalyst for the latter’s share price re-rating. With the deal dynamics looking increasingly shaky, sentiment in HanKore may be negatively impacted. Accordingly, Market Insight removes HanKore from its Growth model portfolio. The exit price of $0.09 yields a 36% return over a six-month holding period.