Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

The key impact of a Biden presidency will be an initial sell-off in US equities, given that Biden has pledged to raise the corporate tax to 28% (from 21%) and tighten regulation. It will also mean lower oil prices (good for India, Thailand, Korea, Japan), and a medium-term strengthening of global trade with a return to multilateralism, albeit amid a continued shift of global supply chains away from China. Big Oil, Big Pharma, and US insurance will be the losers in a Biden presidency, and global democracies (EU, Japan, India, South Korea) will benefit from his foreign policy. After an initial 5% sell-off in November 2020, and sectoral rebalancing, we expect the liquidity-driven equities rally to resume. <ul>
<li dir="ltr">With just over 3 months to go for the 3rd November presidential election, former Vice President Joe Biden leads President Trump in key national polls by 8-12 percentage points; the two latest nationwide polls (CBS News/YouGov, and Harvard-Harris) both give Biden a massive 10 percentage point lead. Biden also leads in key battleground states like Michigan (+12 CNN, +6 YouGov), Pennsylvania (+11), Florida (+5), North Carolina (+6) and Arizona (+5) -- all of which Trump won in 2016. Biden's coat-tails are bolstering Democrats across the country, with US Senate races in North Carolina and Arizona (two reliably Republican states over the past 4 decades) leaning strongly Democratic.   </li>
<li dir="ltr">The bigger the Biden win, the likelier it is that his coat-tails will flip the Senate to a Democratic majority (there are 23 Republican seats and 12 Democratic ones that are being contested this year; the Democrats need a net gain of 3 seats to have a simple majority in the Senate, 13 seats to have an unlikely filibuster-free majority needed for non-money bills). We expect the polls to tighten after the 3 presidential debates, and in the wake of more well-directed campaign advertisements against Biden (on Hunter/Burisma, the economy, etc.). However, the likelihood is that Biden will win the presidency, and the Democrats will retain the House.  </li>
<li dir="ltr"> With Biden likely to raise the corporate tax rate to 28% (from 21% currently) and tighten environmental regulation, equities will sell-off 5% in November 2020. The likely revival of the Iran nuclear deal, tighter regulation of fossil fuels (but no ban on fracking) will be negative for crude-oil prices (and hence for <a href="https://www.smartkarma.com/entities/exxon-mobil-corp" target="_blank" data-smartkarma-citation="entities:811:1" rel="noopener">Exxon Mobil (XOM US)</a> , <a href="https://www.smartkarma.com/entities/chevron-corp" target="_blank" data-smartkarma-citation="entities:11091:1" rel="noopener">Chevron Corp (CVX US)</a> <a href="https://www.smartkarma.com/entities/bp-plc-1317fdd3-d03a-435f-85b8-c8d67125bc3a" target="_blank" data-smartkarma-citation="entities:27921:1" rel="noopener">BP PLC (BP US)</a> and <a href="https://www.smartkarma.com/entities/royal-dutch-shell-plc" target="_blank" data-smartkarma-citation="entities:22108:1" rel="noopener">Royal Dutch Shell (RDSA LN)</a> ) -- and good news for Asian oil importers like India, Thailand, South Korea and Japan. The return to a more multilateral approach to trade negotiations will help a medium-term revival in global trade volume, but should be particularly positive to Asian economies benefiting from the relocation of exporters from China (Vietnam, Taiwan, India, South Korea). The extension of Obamacare with the addition of a public option and expanded Medicare will be negative for pharmaceutical and US insurance companies. Tobacco and fast-food companies too will suffer. Strengthening alliances and creating a new "Summit of Democracies" will prove a boon to the EU, and to Asian democracies like Japan, India and South Korea. After the initial sell-off and rebalancing (away from Big Oil, pharmaceuticals, insurance, tobacco and fast-food), the liquidity-driven equities rally will resume. </li>
</ul>

The key impact of a Biden presidency will be an initial sell-off in US equities, given that Biden has pledged to raise the corporate tax to 28% (from 21%) and tighten regulation. It will also mean lower oil prices (good for India, Thailand, Korea, Japan), and a medium-term strengthening of global trade with a return to multilateralism, albeit amid a continued shift of global supply chains away from China. Big Oil, Big Pharma, and US insurance will be the losers in a Biden presidency, and global democracies (EU, Japan, India, South Korea) will benefit from his foreign policy. After an initial 5% sell-off in November 2020, and sectoral rebalancing, we expect the liquidity-driven equities rally to resume. 
With just over 3 months to go for the 3rd November presidential election, former Vice President Joe Biden leads President Trump in key national polls by 8-12 percentage points; the two latest nationwide polls (CBS News/YouGov, and Harvard-Harris) both give Biden a massive 10 percentage point lead. Biden also leads in key battleground states like Michigan (+12 CNN, +6 YouGov), Pennsylvania (+11), Florida (+5), North Carolina (+6) and Arizona (+5) -- all of which Trump won in 2016. Biden's coat-tails are bolstering Democrats across the country, with US Senate races in North Carolina and Arizona (two reliably Republican states over the past 4 decades) leaning strongly Democratic.   
The bigger the Biden win, the likelier it is that his coat-tails will flip the Senate to a Democratic majority (there are 23 Republican seats and 12 Democratic ones that are being contested this year; the Democrats need a net gain of 3 seats to have a simple majority in the Senate, 13 seats to have an unlikely filibuster-free majority needed for non-money bills). We expect the polls to tighten after the 3 presidential debates, and in the wake of more well-directed campaign advertisements against Biden (on Hunter/Burisma, the economy, etc.). However, the likelihood is that Biden will win the presidency, and the Democrats will retain the House.  
 With Biden likely to raise the corporate tax rate to 28% (from 21% currently) and tighten environmental regulation, equities will sell-off 5% in November 2020. The likely revival of the Iran nuclear deal, tighter regulation of fossil fuels (but no ban on fracking) will be negative for crude-oil prices (and hence for Exxon Mobil (XOM US) , Chevron Corp (CVX US) BP PLC (BP US) and Royal Dutch Shell (RDSA LN) ) -- and good news for Asian oil importers like India, Thailand, South Korea and Japan. The return to a more multilateral approach to trade negotiations will help a medium-term revival in global trade volume, but should be particularly positive to Asian economies benefiting from the relocation of exporters from China (Vietnam, Taiwan, India, South Korea). The extension of Obamacare with the addition of a public option and expanded Medicare will be negative for pharmaceutical and US insurance companies. Tobacco and fast-food companies too will suffer. Strengthening alliances and creating a new "Summit of Democracies" will prove a boon to the EU, and to Asian democracies like Japan, India and South Korea. After the initial sell-off and rebalancing (away from Big Oil, pharmaceuticals, insurance, tobacco and fast-food), the liquidity-driven equities rally will resume. 


What a Biden Presidency Will Mean for Markets, the Economy and Asia

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-03/CSE%20Global%20CEO.png' alt='CSE Global Ceo' />
 </figure>
 <div class='content-caption'>CSE Global Ceo</div>
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Systematic and detail-oriented by nature, Lim Boon Kheng appears to have found his calling in building enterprises. 
"My passion has always been to take a home-grown business and develop it into a multi-national company of decent size, with diversified revenues and good cashflows - one that can be sustained for many years," the Chief Executive Officer of SGX-listed IT systems integrator CSE Global Ltd said with a smile. 
"CSE started as a Singapore company. Our goal is to continue growing as a global organisation with predominantly non-Singapore revenue streams," Lim added. 
"I'm the third CEO of this organisation, and after me, there will be a fourth, fifth, or sixth. What's important is to lay the right foundation during my time so that my successors can take the business to the next stage." 
Lim, a Bachelor of Accountancy graduate from the National University of Singapore, joined CSE in 1999 as Group Financial Controller, after holding accounting positions with two other organisations. He was promoted to CSE's Group Managing Director and CEO in 2014. 
CSE began operations in 1985 as the engineering projects division of Chartered Electronics Industries, the electronics arm of the Singapore Technologies (ST) Group. It started building a regional footprint between 1992 and 1995, before undergoing a management buy-out in 1997, and was renamed CSE Systems &amp; Engineering Pte Ltd. 
In 1999, CSE Global made its trading debut on the then-Sesdaq second board. A year later, the Group embarked on its international expansion, acquiring companies in US, UK, Australia and Singapore, before transferring to SGX Mainboard. 
Today, the Group has more than 1,500 employees worldwide, with a network of 41 offices spanning the globe, and generates over 85% of its revenues outside the domestic market. 
It focuses on providing and installing a variety of control systems, as well as turnkey telecommunication network and security solutions, for the Oil &amp; Gas, Infrastructure and Mining industries.

Reaping the Rewards 
The Group services large, independent oil majors like BP, Shell, Exxon and Chevron, as well as national oil corporations such as Indonesia's Pertamina and Malaysia's Petronas. It derives more than 65% of revenues from the O&amp;G segment, with more than 90% of customers coming from the US. On the infrastructure side, clients include government agencies, utilities, ports, railways and airports. 
Over the last few years, CSE Global has extensively restructured its O&amp;G operations to focus on the Americas, jettisoning projects in the Middle East, Africa and Southeast Asia, which were plagued by severe price competition. 
"Although we're a small player, we were able to build good relationships with our O&amp;G customers over the years," Lim noted. 
"Previously, when oil prices were depressed and the industry was facing mounting challenges, any supplier that was prepared to invest time and effort to service clients - like we did - reaped the benefits," he added. "As a result, we were able to pick up market share." 
The industry's downturn and subsequent consolidation then also provided CSE with opportunities. "Through selective acquisitions, and by bringing in new talent from established operators and suppliers that downsized, our skillsets are much wider now than before," he noted. 
Those strategies are still relevant now, with crude prices hovering at four-year lows below US$30 a barrel. Global fuel demand has been hammered as many governments lock down their economies in a bid to curb the COVID-19 pandemic. 
"With the current decline in oil price, we now expect a lower order intake in the coming months as compared to the start of the year. Nonetheless, we intend to expand our market share over the next two to three years - especially in the US," Lim said. 
"Yes, there's gloom and doom in the O&amp;G sector, but we remain pretty optimistic about the medium-term outlook." 
CSE Global's infrastructure division - which accounts for more than 25% of overall sales - is witnessing a steady flow of orders for the next three to five years in Australia and Singapore. 
"There are constant requirements by these two governments to improve their infrastructure, whether for ports, railways, airports, power grids, or in Singapore's case - Smart Nation digital transformation initiatives," Lim said. 
"As a result, our infrastructure division will help to diversify the Group's revenue sources." 
Its Mining division, however, continues to face slower sales, as the sector remains in the doldrums amidst a protracted recovery. 
"Cyclical upgrades still need to be done - after all, systems do wear out and break down, while technologies and software have to be upgraded," he noted. 
"For some mining companies, capex and opex have been delayed for the past 24 to 36 months to the point where these upgrades are now inevitable. Hence, we expect some return to normalcy in terms of spending by clients in this sector." 
Order book-wise, CSE Global now has the highest order backlog in five years - standing at S$307.3 million as at 31 December 2019, up 70.5% year-on-year, supplemented in part by recent earnings-accretive acquisitions.

Strategy U-Turn 
So far, the coronavirus outbreak has not dealt a huge blow to the Group's operations, Lim said. 
"As more travel bans come into play and business continuity plans are activated on a large scale, it may affect our productivity and ability to service projects across jurisdictions," he added. 
"But the Group's business model of maintaining local teams in our markets will mitigate this issue to a large extent." 
Meanwhile, CSE Global will continue to beef up its geographical presence and technology offerings through acquisitions. In 2019, the Group spent more than S$60 million to buy four companies that boosted its service capabilities in the energy and mining industries. 
"We want to acquire companies with complementary solutions and services that will extend our range of offerings in the value chain and strengthen our local presence in those markets," Lim noted. 
"The target business usually needs to be earnings-accretive and generate good cashflows. Each year, we're looking to close between two and three acquisitions, depending on opportunities." 
Looking back, Lim attributes CSE Global's stronger fundamentals to a reversal of direction he implemented five years ago after taking the helm. 
"When the O&amp;G and mining industries were in their boom years, CSE Global became very focused on large projects at the expense of smaller ones. But I wanted a combination of both, and when I took over, we changed course and started to take on more small projects," Lim recalled. 
That decision delivered handsome rewards - 2019 revenue hit an all-time high of S$451.8 million, up 21% year-on-year, while full-year net profit jumped 19.6% to S$24.1 million. "If we had concentrated only on large projects, it might have had disastrous results," he admitted. 
"It was our small projects that saved the day - they boosted our cashflows, were faster to turn around and easier to manage. That's why it's critical that we do not just depend on any single engine of growth." 
Cash is always king, and even more so now with prevailing challenges in the industry. The Group ended 2019 with cash and bank balances of S$58.6 million. 
"Cashflows are the lifeblood of our organisation, which is why our strategies are focused on cash-generation and cost controls," he added. 
And when the 54-year-old is not strategising for the Group, he is spending time with his two sons and two daughters, aged five to 18. Family activities include eating, discussions over homework, and playing chauffeur to the kids. 
"I always impress upon my children the value of discipline and hard work," Lim noted. 
"In this life, nothing is given to you - you must work for what you want. Although that doesn't necessarily guarantee success, you still need to work hard, and then leave the rest to God."

CSE Global Ltd

Listed on Singapore Exchange since 1999, CSE Global is a global technologies company with an international presence spanning the Americas, Asia Pacific, Europe, Middle East and Africa. The Group has now more than 1,500 employees worldwide, and operates a network of 41 offices across the globe, generating more than 85% of its revenues outside its home market. The CSE Group of companies has been very successful in offering cost-effective, totally integrated solutions to industries in the Oil &amp; Gas, Infrastructure and Mining sectors. 
The company website is: <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link7">www.cse-global.com</a>.

Click <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link8">here</a> for the company's StockFacts page.

For the three months ended 31 December 2019 financial results, click <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link9">here</a>
</body></html>


      
    
    CSE Global Ceo


Systematic and detail-oriented by nature, Lim Boon Kheng appears to have found his calling in building enterprises.  
"My passion has always been to take a home-grown business and develop it into a multi-national company of decent size, with diversified revenues and good cashflows - one that can be sustained for many years," the Chief Executive Officer of SGX-listed IT systems integrator CSE Global Ltd said with a smile.  
"CSE started as a Singapore company. Our goal is to continue growing as a global organisation with predominantly non-Singapore revenue streams," Lim added.  
"I'm the third CEO of this organisation, and after me, there will be a fourth, fifth, or sixth. What's important is to lay the right foundation during my time so that my successors can take the business to the next stage."  
Lim, a Bachelor of Accountancy graduate from the National University of Singapore, joined CSE in 1999 as Group Financial Controller, after holding accounting positions with two other organisations. He was promoted to CSE's Group Managing Director and CEO in 2014.  
CSE began operations in 1985 as the engineering projects division of Chartered Electronics Industries, the electronics arm of the Singapore Technologies (ST) Group. It started building a regional footprint between 1992 and 1995, before undergoing a management buy-out in 1997, and was renamed CSE Systems &amp; Engineering Pte Ltd.  
In 1999, CSE Global made its trading debut on the then-Sesdaq second board. A year later, the Group embarked on its international expansion, acquiring companies in US, UK, Australia and Singapore, before transferring to SGX Mainboard.  
Today, the Group has more than 1,500 employees worldwide, with a network of 41 offices spanning the globe, and generates over 85% of its revenues outside the domestic market.  
It focuses on providing and installing a variety of control systems, as well as turnkey telecommunication network and security solutions, for the Oil &amp; Gas, Infrastructure and Mining industries.

Reaping the Rewards  
The Group services large, independent oil majors like BP, Shell, Exxon and Chevron, as well as national oil corporations such as Indonesia's Pertamina and Malaysia's Petronas. It derives more than 65% of revenues from the O&amp;G segment, with more than 90% of customers coming from the US. On the infrastructure side, clients include government agencies, utilities, ports, railways and airports.  
Over the last few years, CSE Global has extensively restructured its O&amp;G operations to focus on the Americas, jettisoning projects in the Middle East, Africa and Southeast Asia, which were plagued by severe price competition.  
"Although we're a small player, we were able to build good relationships with our O&amp;G customers over the years," Lim noted.  
"Previously, when oil prices were depressed and the industry was facing mounting challenges, any supplier that was prepared to invest time and effort to service clients - like we did - reaped the benefits," he added. "As a result, we were able to pick up market share."  
The industry's downturn and subsequent consolidation then also provided CSE with opportunities. "Through selective acquisitions, and by bringing in new talent from established operators and suppliers that downsized, our skillsets are much wider now than before," he noted.  
Those strategies are still relevant now, with crude prices hovering at four-year lows below US$30 a barrel. Global fuel demand has been hammered as many governments lock down their economies in a bid to curb the COVID-19 pandemic.  
"With the current decline in oil price, we now expect a lower order intake in the coming months as compared to the start of the year. Nonetheless, we intend to expand our market share over the next two to three years - especially in the US," Lim said.  
"Yes, there's gloom and doom in the O&amp;G sector, but we remain pretty optimistic about the medium-term outlook."  
CSE Global's infrastructure division - which accounts for more than 25% of overall sales - is witnessing a steady flow of orders for the next three to five years in Australia and Singapore.  
"There are constant requirements by these two governments to improve their infrastructure, whether for ports, railways, airports, power grids, or in Singapore's case - Smart Nation digital transformation initiatives," Lim said.  
"As a result, our infrastructure division will help to diversify the Group's revenue sources."  
Its Mining division, however, continues to face slower sales, as the sector remains in the doldrums amidst a protracted recovery.  
"Cyclical upgrades still need to be done - after all, systems do wear out and break down, while technologies and software have to be upgraded," he noted.  
"For some mining companies, capex and opex have been delayed for the past 24 to 36 months to the point where these upgrades are now inevitable. Hence, we expect some return to normalcy in terms of spending by clients in this sector."  
Order book-wise, CSE Global now has the highest order backlog in five years - standing at S$307.3 million as at 31 December 2019, up 70.5% year-on-year, supplemented in part by recent earnings-accretive acquisitions.

Strategy U-Turn  
So far, the coronavirus outbreak has not dealt a huge blow to the Group's operations, Lim said.  
"As more travel bans come into play and business continuity plans are activated on a large scale, it may affect our productivity and ability to service projects across jurisdictions," he added.  
"But the Group's business model of maintaining local teams in our markets will mitigate this issue to a large extent."  
Meanwhile, CSE Global will continue to beef up its geographical presence and technology offerings through acquisitions. In 2019, the Group spent more than S$60 million to buy four companies that boosted its service capabilities in the energy and mining industries.  
"We want to acquire companies with complementary solutions and services that will extend our range of offerings in the value chain and strengthen our local presence in those markets," Lim noted.  
"The target business usually needs to be earnings-accretive and generate good cashflows. Each year, we're looking to close between two and three acquisitions, depending on opportunities."  
Looking back, Lim attributes CSE Global's stronger fundamentals to a reversal of direction he implemented five years ago after taking the helm.  
"When the O&amp;G and mining industries were in their boom years, CSE Global became very focused on large projects at the expense of smaller ones. But I wanted a combination of both, and when I took over, we changed course and started to take on more small projects," Lim recalled.  
That decision delivered handsome rewards - 2019 revenue hit an all-time high of S$451.8 million, up 21% year-on-year, while full-year net profit jumped 19.6% to S$24.1 million. "If we had concentrated only on large projects, it might have had disastrous results," he admitted.  
"It was our small projects that saved the day - they boosted our cashflows, were faster to turn around and easier to manage. That's why it's critical that we do not just depend on any single engine of growth."  
Cash is always king, and even more so now with prevailing challenges in the industry. The Group ended 2019 with cash and bank balances of S$58.6 million.  
"Cashflows are the lifeblood of our organisation, which is why our strategies are focused on cash-generation and cost controls," he added.  
And when the 54-year-old is not strategising for the Group, he is spending time with his two sons and two daughters, aged five to 18. Family activities include eating, discussions over homework, and playing chauffeur to the kids.  
"I always impress upon my children the value of discipline and hard work," Lim noted.  
"In this life, nothing is given to you - you must work for what you want. Although that doesn't necessarily guarantee success, you still need to work hard, and then leave the rest to God."

CSE Global Ltd

Listed on Singapore Exchange since 1999, CSE Global is a global technologies company with an international presence spanning the Americas, Asia Pacific, Europe, Middle East and Africa. The Group has now more than 1,500 employees worldwide, and operates a network of 41 offices across the globe, generating more than 85% of its revenues outside its home market. The CSE Group of companies has been very successful in offering cost-effective, totally integrated solutions to industries in the Oil &amp; Gas, Infrastructure and Mining sectors. 
The company website is: www.cse-global.com.

Click here for the company's StockFacts page.

For the three months ended 31 December 2019 financial results, click here



Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

<ul>
<li>
Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.</li>
<li> Global Recession Already Underway: A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  </li>
<li>Financial Stability Called Into Question:The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   </li>
</ul>



Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.
 Global Recession Already Underway: A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  
Financial Stability Called Into Question:The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Immediately after <a href="https://www.smartkarma.com/entities/caltex-australia-ltd" target="_blank" data-smartkarma-citation="entities:345:1" rel="noopener">Caltex Australia (CTX AU)</a> <a href="https://www.asx.com.au/asxpdf/20191125/pdf/44bwq8x7xg0cdh.pdf" target="_blank" rel="noopener">announced</a> plans for a property IPO involving 250 freehold sites of 500 core sites previously flagged, Caltex <a href="https://www.asx.com.au/asxpdf/20191126/pdf/44bylc73fnjmbn.pdf" target="_blank" rel="noopener">announced</a> on the 26 November the receipt of a US$5.8bn non-binding, indicative, conditional proposal from Quebec-based convenience-store operator <a href="https://www.smartkarma.com/entities/alimentation-couche-tard-inc" target="_blank" data-smartkarma-citation="entities:25103:1" rel="noopener">Alimentation Couche-Tard (ATD/A CN)</a> at A$34.50/share, in cash, by way of a Scheme, less any dividends declared by Caltex. This proposal followed an earlier indicative bid from Couche-Tard at A$32, which was rejected on the basis the price was inadequate.
The Offer provided for the payment of a fully franked special dividend, which could add up to ~A$3.30/share to the Offer.
After Caltex again rejected this Offer, ATD returned with a <a href="https://www.asx.com.au/asxpdf/20200213/pdf/44f1wrtbhkf1w4.pdf" target="_blank" rel="noopener">A$35.25 bid</a> (less any dividend declared), a 27% premium to the undisturbed price and a 2% bump to its previous Offer. Caltex <a href="https://www.asx.com.au/asxpdf/20200217/pdf/44f47lbmjwmsg3.pdf" target="_blank" rel="noopener">said</a> it was in its shareholder's interest to engage further with ATD.
Often "best and final" Offers flush out competitive bidders. And so it did with Britain's EG Group <a href="https://www.asx.com.au/asxpdf/20200219/pdf/44f735693ts55k.pdf" target="_blank" rel="noopener">announcing</a> a somewhat overwrought cash/scrip Offer by way of a Scheme, such that Caltex shareholders receive $15.62/share in cash (tied to the convenience retail business) and a security in Ampol, a newly listed company on the ASX, holding (&amp; rebranding) the existing fuel &amp; infrastructure biz.
EG indicated it was prepared to acquire up to 10% in Ampol.
The issue is that EG does not offer an overall bid price for the break-up of Caltex, leaving the scrip portion open to interpretation. That plays into ATD's hand. 
As always, more below the fold.

<div>

</div>
<div>

</div>

Immediately after Caltex Australia (CTX AU) announced plans for a property IPO involving 250 freehold sites of 500 core sites previously flagged, Caltex announced on the 26 November the receipt of a US$5.8bn non-binding, indicative, conditional proposal from Quebec-based convenience-store operator Alimentation Couche-Tard (ATD/A CN) at A$34.50/share, in cash, by way of a Scheme, less any dividends declared by Caltex. This proposal followed an earlier indicative bid from Couche-Tard at A$32, which was rejected on the basis the price was inadequate.
The Offer provided for the payment of a fully franked special dividend, which could add up to ~A$3.30/share to the Offer.
After Caltex again rejected this Offer, ATD returned with a A$35.25 bid (less any dividend declared), a 27% premium to the undisturbed price and a 2% bump to its previous Offer. Caltex said it was in its shareholder's interest to engage further with ATD.
Often "best and final" Offers flush out competitive bidders. And so it did with Britain's EG Group announcing a somewhat overwrought cash/scrip Offer by way of a Scheme, such that Caltex shareholders receive $15.62/share in cash (tied to the convenience retail business) and a security in Ampol, a newly listed company on the ASX, holding (&amp; rebranding) the existing fuel &amp; infrastructure biz.
EG indicated it was prepared to acquire up to 10% in Ampol.
The issue is that EG does not offer an overall bid price for the break-up of Caltex, leaving the scrip portion open to interpretation. That plays into ATD's hand. 
As always, more below the fold.








Alpha-Centric ESG Research

Kyle Rudden

To date, my Smartkarma research has focused on big-picture ESG themes. Previous Insights covered specific stocks in a thematic context, but I figured it's about time I start publishing stock-specific ESG reports. What better place to start than the planet's largest fossil fuel company. Go big, or go home.<a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a>.Most profitable company in the world. Bigger than Apple and Amazon combined. The two trillion-dollar IPO. Like an asset class all its own. Oil so cheap it'll pump the last drop. Climate change?Swallow the bull hype with an ESG pill, however, and something else comes out the other end.It's not you Aramco, it's ESG. In any traditional oil stock analysis, Aramco absolutely shines. But as soon as you start looking at Aramco through an ESG lens, that shine comes off in a hurry.Aramco's ESG case is one of cruel irony. Its greatest assets become massive liabilities in the face of climate change, environmental activism, and the global transition away from fossil fuels.No big deal, Aramco would say. It is reinventing (or at the least, re-branding) itself, and expects to come out on top of the climate mess. Time will tell, but it isn't yet enough to away ESG opinions.Despite all that, my Aramco ESG analysis is quite balanced, and some of it might even surprise you.For most ESG investors, the party line opinion is that Aramco is a carbon belching monster making piles of money for a select few, and at the profound expense of the planet and the rest of us.<s>People</s>, <s>Planet</s>, <s>and</s> Profit.To me, that naïve knee-jerk consensus view is shortsighted. Yes, there is truth to it, and Aramco is a highly-contentious ESG story for good reason. But it's also a complex ESG story, and not all bad.Ultimately my bearish ESG-driven imperative is based on: 1) a balanced and objective assessment of Aramco's ESG profile, and 2) the fact that for most ESG investors Aramco is a resounding "no."For Aramco, that imperative – a foregone conclusion, really – matters less than its underlying ESG analysis since Aramco exemplifies two related points (slightly contrarian) that I make about ESG:<ol>
<li>
Directionality: Improvements (or deterioration) in ESG performance are important, and often get overlooked. While trends won't necessarily offset a company's current ESG status, they're a valuable "signal" and should be considered in any ESG analysis. This is very relevant to Aramco.</li>
<li>
Controllability: Also important is differentiating between what is and isn't under the control of management (e.g., a common challenge in ESG is dealing with "legacy" issues). That notion applies to ESG concerns directly related to Saudi Arabia, but only indirectly related to Aramco.</li>
</ol><div class="content-highlight">I have said this before, but it's worth repeating. Smartkarma cultivates a wonderful diversity of expertise and perspectives. Multiple analysts can cover a company or topic from different yet complementary angles. Sector analysts, regional experts, vertical specialists. It's a value-add that is hard to achieve with the sell-side's guarded fiefdoms. So this ESG take on Aramco should be considered alongside coverage by <a href="https://www.smartkarma.com/profiles/mark-artherton-cfa" target="_blank" data-smartkarma-citation="accounts:7528" rel="noopener">Mark Artherton, CFA</a>, <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a>, and others.</div>

 To date, my Smartkarma research has focused on big-picture ESG themes. Previous Insights covered specific stocks in a thematic context, but I figured it's about time I start publishing stock-specific ESG reports. What better place to start than the planet's largest fossil fuel company. Go big, or go home.Saudi Aramco (ARAMCO AB).Most profitable company in the world. Bigger than Apple and Amazon combined. The two trillion-dollar IPO. Like an asset class all its own. Oil so cheap it'll pump the last drop. Climate change?Swallow the bull hype with an ESG pill, however, and something else comes out the other end.It's not you Aramco, it's ESG. In any traditional oil stock analysis, Aramco absolutely shines. But as soon as you start looking at Aramco through an ESG lens, that shine comes off in a hurry.Aramco's ESG case is one of cruel irony. Its greatest assets become massive liabilities in the face of climate change, environmental activism, and the global transition away from fossil fuels.No big deal, Aramco would say. It is reinventing (or at the least, re-branding) itself, and expects to come out on top of the climate mess. Time will tell, but it isn't yet enough to away ESG opinions.Despite all that, my Aramco ESG analysis is quite balanced, and some of it might even surprise you.For most ESG investors, the party line opinion is that Aramco is a carbon belching monster making piles of money for a select few, and at the profound expense of the planet and the rest of us.People, Planet, and Profit.To me, that naïve knee-jerk consensus view is shortsighted. Yes, there is truth to it, and Aramco is a highly-contentious ESG story for good reason. But it's also a complex ESG story, and not all bad.Ultimately my bearish ESG-driven imperative is based on: 1) a balanced and objective assessment of Aramco's ESG profile, and 2) the fact that for most ESG investors Aramco is a resounding "no."For Aramco, that imperative – a foregone conclusion, really – matters less than its underlying ESG analysis since Aramco exemplifies two related points (slightly contrarian) that I make about ESG:

Directionality: Improvements (or deterioration) in ESG performance are important, and often get overlooked. While trends won't necessarily offset a company's current ESG status, they're a valuable "signal" and should be considered in any ESG analysis. This is very relevant to Aramco.

Controllability: Also important is differentiating between what is and isn't under the control of management (e.g., a common challenge in ESG is dealing with "legacy" issues). That notion applies to ESG concerns directly related to Saudi Arabia, but only indirectly related to Aramco.
I have said this before, but it's worth repeating. Smartkarma cultivates a wonderful diversity of expertise and perspectives. Multiple analysts can cover a company or topic from different yet complementary angles. Sector analysts, regional experts, vertical specialists. It's a value-add that is hard to achieve with the sell-side's guarded fiefdoms. So this ESG take on Aramco should be considered alongside coverage by Mark Artherton, CFA, Travis Lundy, and others.

Saudi Aramco and ESG: When Assets Become Liabilities

United States

Chevron Corporation is an integrated energy company with operations in countries located around the world.  The Company produces and transports crude oil and natural gas.  Chevron also refines, markets, and distributes fuels as well as is involved in chemical operations, mining operations, power generation and energy services.

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Chevron Corp (CVX US)

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Saudi Aramco and ESG: When Assets Become Liabilities

To date, my Smartkarma research has focused on big-picture ESG themes. Previous Insights covered specific stocks in a thematic context, but I...

Kyle Rudden

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