Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>Late last month, following a lull in corporate activity announcements subsequent to nonbinding Offers from both PEP/Carlyle and <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">SS&amp;C Technologies (SSNC US)</a>, <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Group (LNK AU)</a> said it was fielding interest for its 44.18% stake in PEXA, a digital property settlements group.</p>
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<p>Bids were speculated to top A$2.5bn-A$3bn, or at least A$1.1bn A$2.05/share) for Link's stake. This compares to A$1.60/share under PEP/Carlyle's non-binding proposal.</p>
<p>Link has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02379094-2A1300378?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received an Offer from KKR, in partnership with <a href="https://www.smartkarma.com/entities/domain-holdings-australia-ltd" target="_blank" data-smartkarma-citation="entities:26033:1" rel="noopener">Domain Holdings Australia (DHG AU)</a>, representing an EV of $3bn for 100% of PEXA, or A$1.38bn for Link's equity stake. </p>
<p>The offer is subject to a number of conditions including FIRB and Link abandoning PEXA's IPO.</p>
<p>The proposal remains "<em>open and capable of acceptance</em>" until 5 pm on the 30 May. </p>
<p>More below the fold.</p>


Late last month, following a lull in corporate activity announcements subsequent to nonbinding Offers from both PEP/Carlyle and SS&amp;C Technologies (SSNC US), Link Group (LNK AU) said it was fielding interest for its 44.18% stake in PEXA, a digital property settlements group.

Bids were speculated to top A$2.5bn-A$3bn, or at least A$1.1bn A$2.05/share) for Link's stake. This compares to A$1.60/share under PEP/Carlyle's non-binding proposal.
Link has now announced it has received an Offer from KKR, in partnership with Domain Holdings Australia (DHG AU), representing an EV of $3bn for 100% of PEXA, or A$1.38bn for Link's equity stake. 
The offer is subject to a number of conditions including FIRB and Link abandoning PEXA's IPO.
The proposal remains "open and capable of acceptance" until 5 pm on the 30 May. 
More below the fold.

Link Group (LNK AU): KKR Opens The Bidding For PEXA

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

Equity Bottom-Up

<p><strong><em>*Glittering Quarter: </em></strong>Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 1Q21 earnings of HKD 3.8 bn, improving HKD 915 mn (31.3%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 363 mn or 43.8% linked quarter) – increasing HKD 1.3 bn (61.0%) to HKD 3.4 bn. Results were highlighted by HKEX’ positive operating jaws, as recurring revenue increased HKD 1.2 bn (28.6%) while operating expenses declined HKD 194 mn (14.5%) over the period;  and</p><p><strong><em>*Risks Are Increasing: </em></strong>In addition to an extended valuation when ADT has begun to turn and having a new CEO with no exchange experiences, HKEX needs to contend with the government’s examination of a stamp duty increase and mainland China’s contemplation of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center.</p>

*Glittering Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 1Q21 earnings of HKD 3.8 bn, improving HKD 915 mn (31.3%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 363 mn or 43.8% linked quarter) – increasing HKD 1.3 bn (61.0%) to HKD 3.4 bn. Results were highlighted by HKEX’ positive operating jaws, as recurring revenue increased HKD 1.2 bn (28.6%) while operating expenses declined HKD 194 mn (14.5%) over the period;  and*Risks Are Increasing: In addition to an extended valuation when ADT has begun to turn and having a new CEO with no exchange experiences, HKEX needs to contend with the government’s examination of a stamp duty increase and mainland China’s contemplation of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center.

Hong Kong Exchanges & Clearing – Golden Quarter, But Risks Are High

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<p>Back on the 12 October,  <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a>  <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02292481-2A1255763?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a conditional, non-binding indicative proposal from a consortium comprising Pacific Equity Partners (PEP) and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.</p>
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<div>After Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297758-2A1258281?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> the proposal "<em>materially undervalued the company</em>", PEP/Carlyle <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298663-2A1258716?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">tabled</a> a A$5.40/share non-binding indicative Offer, in cash. The proposal included an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share. Shareholders with <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298654-2A1258715?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">14.62%</a> of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal. Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02300645-2A1259592?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">responded</a> that the proposal was not compelling - but gave the consortium due diligence access nonetheless.</div>
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<div>Shortly after, software provider <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">Ss&amp;C Technologies (SSNC US)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298663-2A1258716?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">pitched</a> a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal. Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02320482-2A1269370?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">granted</a> SSNC due diligence, despite the Offer "not being compelling". But on the 3 January, SS&amp;C <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02327774-2A1273133?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">withdrew</a> its proposal.</div>
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<div>Then crickets. In its 1H21 results (25 Feb), Link simply <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02346108-2A1282955?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a>: "<em>PEP/Carlyle engagement remains active.</em>"</div>
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<h3>The NEW News</h3>
<div>After months of Link saying to investors it has received various interest in its PEXA stake, indicative bids are now coming in for Link's 44% stake in the digital property settlements group.</div>
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<div>Bids are expected to top A$1bn+ for Link's stake, or $1.86/share - vs. A$1.60/share under PEP/Carlyle's non-binding proposal.</div>
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<p>More below the fold.</p>
</div>


Back on the 12 October,  Link Administration Holdings (LNK AU)  announced a conditional, non-binding indicative proposal from a consortium comprising Pacific Equity Partners (PEP) and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.


After Link said the proposal "materially undervalued the company", PEP/Carlyle tabled a A$5.40/share non-binding indicative Offer, in cash. The proposal included an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share. Shareholders with 14.62% of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal. Link responded that the proposal was not compelling - but gave the consortium due diligence access nonetheless.


Shortly after, software provider Ss&amp;C Technologies (SSNC US) pitched a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal. Link granted SSNC due diligence, despite the Offer "not being compelling". But on the 3 January, SS&amp;C withdrew its proposal.

Then crickets. In its 1H21 results (25 Feb), Link simply said: "PEP/Carlyle engagement remains active."



  
The NEW News
After months of Link saying to investors it has received various interest in its PEXA stake, indicative bids are now coming in for Link's 44% stake in the digital property settlements group.


Bids are expected to top A$1bn+ for Link's stake, or $1.86/share - vs. A$1.60/share under PEP/Carlyle's non-binding proposal.




More below the fold.


<p><strong><em>*Trying SPACs On For Size: </em></strong>On March 31, 2021, the Singapore Exchange (SGX.SP) [SGX] issued a Consultation Paper on the Proposed Listing Framework for Special Purpose Acquisition Companies<em> </em>(SPACs). The Consultation Paper is seeking comments on policy/rule proposals to allow SPAC listings on SGX;  </p><p><em><strong>*Blank Check Companies:</strong></em> Special Purpose Acquisition Companies (SPACs) are not new and have historically focused on the Over the Counter (OTC) pink sheet companies. SPACs are essentially known as blank check companies, essentially a shell company which raises a significant amount cash in an IPO; and</p><p><strong><em>*Not A Panacea: </em></strong>SPACs are not the panacea which will resolve SGX’s weakened revenue stream. Keep in mind that the majority of the US-listed SPACs remain below their USD 10 per share offering price and only seven have actually returned capital to investors. As the world heads toward a zero interest rate environment coupled with the giant vortex of skittish liquidity backstopped by central banks, the SPAC frenzy looks to be just the latest in a long line of unintended consequences of risk taking.</p>

*Trying SPACs On For Size: On March 31, 2021, the Singapore Exchange (SGX.SP) [SGX] issued a Consultation Paper on the Proposed Listing Framework for Special Purpose Acquisition Companies (SPACs). The Consultation Paper is seeking comments on policy/rule proposals to allow SPAC listings on SGX;  *Blank Check Companies: Special Purpose Acquisition Companies (SPACs) are not new and have historically focused on the Over the Counter (OTC) pink sheet companies. SPACs are essentially known as blank check companies, essentially a shell company which raises a significant amount cash in an IPO; and*Not A Panacea: SPACs are not the panacea which will resolve SGX’s weakened revenue stream. Keep in mind that the majority of the US-listed SPACs remain below their USD 10 per share offering price and only seven have actually returned capital to investors. As the world heads toward a zero interest rate environment coupled with the giant vortex of skittish liquidity backstopped by central banks, the SPAC frenzy looks to be just the latest in a long line of unintended consequences of risk taking.

Singapore Exchange – Into Merlion’s Mouth

<p><strong><em>*Poor Quarter:</em></strong> Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and</p><p><strong><em>*Stamp Dutied: </em></strong>Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.</p>

*Poor Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and*Stamp Dutied: Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.

Hong Kong Exchanges & Clearing – Hitting The Wall

Australia

Iress Limited provides real-time information services to businesses that specialize in the equity, equity options and future information markets in Australia and New Zealand. The Group supplies a range of pricing data, charting, news and equity and equity derivatives and also offers real-time trading tools, including a domestic order routing product and financial

Link Administration Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides fund administration, corporate markets, information, and digital and data services. Link Administration Holdings serves customers worldwide.

Data#3 Limited provides Information Technology (IT) solutions to business and government markets in Australia.  These solutions integrate equipment and software from leading suppliers with Data#3's own design, management, installation and support services including procurement, recruitment and application services.

NEXTDC Ltd. develops data centers. The Company develops and operates carrier and systems integrator neutral data centers in Australia. NEXTDC's customers will also be able to use the data centers as connectivity and content hubs.

Altium Limited develops electronic design automation (EDA) software for the Microsoft Windows operating system.  Altium's products facilitate and aid in the design of electronic products such as printed circuit boards.  The Group's products are utilized by telecommunications, automotive, defense, science and consumer electronics industries.

Technology One Limited is an Australian-based company that is engaged in the development, marketing, sales, implementation, support, and distribution of financial management and enterprise software solutions. The Company has operations in New Zealand, the United Kingdom, the South Pacific, and Malaysia.

Appen Ltd is a language, search, and social technology company. The Company provides solutions to improve internalization of products, management of data, and project management for companies.

Megaport Limited operates as a software-based elastic connectivity provider. The Company develops an elastic connectivity platform that provides customers interconnectivity and flexibility between other networks and cloud providers connected to the platform. Megaport serves customers worldwide.

Objective Corporation Limited manufactures knowledge management application software.  The Company's products allow users to access and manage word processing documents, spreadsheets, web page content and e-mails.  Objective also develops branded software which provides template-based conversion of documents to HTML.

Hansen Technologies Limited develops, supports and integrates billing systems software for the telecommunications and utilities sectors in Australia.  The Company also provides IT outsourcing services such as facilities management and develops software and services for workforce management.

Samsung SDS Co., Ltd. provides information technology services, such as consulting and technical services. The Company also offers outsourcing services including application outsourcing, IT infrastructure outsourcing, and cloud computing.

OBIC Co., Ltd. provides computer system integration, office automation, consultation, and system support services primarily for small and medium size companies.  The Company sells, leases, and maintains computers, peripherals, and related systems.  OBIC also develops and sells customized software and network systems.

Genpact Limited designs and manages business operations to manage risk and compliance. The Company focuses on the areas of finance and procurement, financial services account servicing, claims management, regulatory affairs, and industrial asset optimization. Genpact operates worldwide.

ITOCHU Techno-Solutions Corporation develops and constructs computer network systems and software.  The Company also provides system maintenance services. Itochu Techno-Solutions also offers solution consulting services.

MAXIMUS, Inc. provides program management and consulting services to state and local governments throughout the United States.  The Company's services are designed to make government operations more efficient and cost effective while improving the quality of the services provided to program beneficiaries.

CACI International Inc. provides information technology products and services. The Company delivers client solutions for systems integration, information assurance and security, reengineering, logistics and engineering support, electronic commerce, and other solutions.  CACI serves government and commercial markets primarily in North America and Western Europe.

OTSUKA Corporation designs, constructs, and develops computer information system and software.  The Company also sells computer peripherals, facsimiles, copy machines, and telecommunication equipment.  Otsuka offers computer training classes for its customers.

Mphasis Limited is a global IT and BPO service provider to G2000 companies around the globe, assists its clients in innovating and streamlining their business processes by offering custom solutions for technology and operations outsourcing. The Company focuses on financial services, logistics and technology verticals.

Persistent Systems Limited offers outsourced software product development. The Company offer services that include testing, support, and professional services.

WEX Inc. provides payment processing and information management services to the United States commercial and government vehicle fleet industry. The Company markets services directly to businesses and government agencies with vehicle fleets, automotive manufacturers, fuel retailers.

Computershare Limited operates share registries and computer bureaus which includes the administration of employee share and option plans and the provision of software that specializes in share registry, financial and stock markets. The Company also provides corporate trust services and acts as a trustee for clients' debt offerings in certain markets.

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Computershare Ltd (CPU AU)

Link Group (LNK AU): KKR Opens The Bidding For PEXA

Shares should pop tomorrow. There remain other interested parties in PEXA. Plus you still have PEP/Carlyle's non-binding Offer behind the scenes. I...

David Blennerhassett

Hong Kong Exchanges & Clearing – Golden Quarter, But Risks Are High

HONG KONG EXCHANGES & CLEARING: HKEX 1Q21 operating earnings increased 61.0% QOQ, highlighted by positive operating jaws. HKEX needs to contend a...

Thomas J. Monaco

Link Admin (LNK AU): PEXA Bidding

You have multiple competing players for PEXA, the outcome could potentially surprise to the the upside. Plus you still have PEP/Carlyle's non...

David Blennerhassett

Singapore Exchange – Into Merlion’s Mouth

SINGAPORE EXCHANGE: SGX issued a Consultation Paper on SPACs seeking comments on policy proposals to allow SPAC IPOs. SPACs are not the panacea...

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Hitting The Wall

HONG KONG EXCHANGES & CLEARING: HKEX reported a 15.6% QOQ decline in 4Q20 earnings, given the period's negative operating jaws. The story is the...

Thomas J. Monaco

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