Yuanxi Zhang
Long/short equity, value, special situations

The Beaten-Down TCC International Is Financially Attractive With Potential Catalysts

Introduction

In early May, TCC International, a subsidiary of Taiwan Cement (OTC:TGBMF), announced that its second-largest shareholder believed the go-private offer price of HKD 3.90 undervalues the company and did not intend to tender its shares. Because the Hong Kong Stock Exchange requires the parent to hold more than 90% of shares outstanding of the target in order to go private and the second largest shareholder holds 15.84% of total outstanding shares, Taiwan Cement announced that the offer lapsed as of May 12, 2014. After the offer lapsed, the share price has dropped to HKD 3.00, which we think is an attractive entry point.

Industry Overview

The Chinese cement industry is quite fragmented with a few major local...

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