Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ebos-group-ltd" target="_blank" data-smartkarma-citation="entities:18336:1" rel="noopener">Ebos Group Ltd (EBO NZ)'s</a> proposed acquisition of LifeHealthcare has been cleared by Australian Competition Commission, paving the timely closure of the transaction by the end of FY22.</li>
<li>EBOS has achieved another record result in H1FY22, headlined by double digit revenue and earnings growth, due to continued strong growth trajectory of both healthcare and animal care segments.</li>
<li>EBOS shares gained 5% since I published bullish insight on December 16. I am still optimistic on the long-term growth prospect of the company.</li>
</ul>



Ebos Group Ltd (EBO NZ)'s proposed acquisition of LifeHealthcare has been cleared by Australian Competition Commission, paving the timely closure of the transaction by the end of FY22.
EBOS has achieved another record result in H1FY22, headlined by double digit revenue and earnings growth, due to continued strong growth trajectory of both healthcare and animal care segments.
EBOS shares gained 5% since I published bullish insight on December 16. I am still optimistic on the long-term growth prospect of the company.


EBOS Group (EBO NZ): Strong Industry Positioning and Acquisitions to Drive Growth

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.</li>
<li>Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.</li>
<li>It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.</li>
</ul>


The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.
Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.
It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.


Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

<ul>
<li>
<strong><a href="https://www.smartkarma.com/entities/australian-pharmaceutical-industries-limited" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a></strong>'s Scheme Booklet is now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02486907-3A587316?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">out</a>. The Scheme Meeting will be held on the 17 March with possible implementation on the 31 March.  </li>
<li>The Independent Expert has concluded this US$600mn Offer is fair and reasonable and in the best interest of Senex shareholders.</li>
<li>The Offer price is full. And trading very tight to terms.</li>
</ul>



Australian Pharmaceutical Industries (API AU)'s Scheme Booklet is now out. The Scheme Meeting will be held on the 17 March with possible implementation on the 31 March.  
The Independent Expert has concluded this US$600mn Offer is fair and reasonable and in the best interest of Senex shareholders.
The Offer price is full. And trading very tight to terms.


Aussie Pharma (API AU): Scheme Booklet Out. Meeting On The 17 March

Equity Capital Markets

<ul>
<li>Ebos Group aims to raise A$ 100 million through a retail offer to partly fund the acquisition of LifeHealthcare. The acquisition creates an exciting platform to drive future growth.</li>
<li>Defensive product mix enabled EBOS to successfully navigate pandemic driven uncertainty and post record high ROCE of 18% in FY21. Balance Sheet remains healthy, with net debt/EBITDA of 0.85x.</li>
<li>FY22 starts on a strong note, with revenue and NPAT growing at over 10% and 14%, y/y, respectively. Dividend is expected at 60–80% of NPAT in FY22.</li>
</ul>


Ebos Group aims to raise A$ 100 million through a retail offer to partly fund the acquisition of LifeHealthcare. The acquisition creates an exciting platform to drive future growth.
Defensive product mix enabled EBOS to successfully navigate pandemic driven uncertainty and post record high ROCE of 18% in FY21. Balance Sheet remains healthy, with net debt/EBITDA of 0.85x.
FY22 starts on a strong note, with revenue and NPAT growing at over 10% and 14%, y/y, respectively. Dividend is expected at 60–80% of NPAT in FY22.


EBOS Group (EBO NZ): Raising Capital to Fund Acquisition; Attractive Bet on Australasian Healthcare

<div>
<p>Back on the 12 July, wholesale and retail pharmacy operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.</p>
</div>
<div>
<p>The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
</div>
<p>Wesfarmers and API subsequently entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.</p>
<div>
<p>API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.</p>
<h3>The New News</h3>
<p>API has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. </p>
<p>This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.</p>
<p>Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. </p>
<p>Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


Back on the 12 July, wholesale and retail pharmacy operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.


The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 

Wesfarmers and API subsequently entered into a process deed on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.

API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.
The New News
API has now announced it has received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. 
This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.
Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. 
Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.


More below the fold.


Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

New Zealand

EBOS Group Limited supplies and distributes medical consumable products and equipment to the hospital and primary care sectors of the New Zealand and Australian healthcare markets. The Company's products include diagnostic instruments, surgical instruments and prosthesis, feminine protection, anesthetic equipment, and other consumer products.

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Ebos Group Ltd (EBO NZ)

EBOS Group (EBO NZ): Strong Industry Positioning and Acquisitions to Drive Growth

EBOS is an attractive bet on Australasian healthcare space, due to enhanced visibility of its accretive acquisition of LifeHealthcare and continued...

Tina Banerjee

Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

Sticking With Cyclical Value & Defensives; Adding Large-Cap Japan Technology. 2-3 week bounce has likely run its course with $TOPIX $Nikkei 225,...

Vermilion Research

Aussie Pharma (API AU): Scheme Booklet Out. Meeting On The 17 March

Trading super at a gross/annualised spread of 0.3%/2.8%. However, if you are a low-rate payer, who can reclaim the franking credits, there's may...

David Blennerhassett

EBOS Group (EBO NZ): Raising Capital to Fund Acquisition; Attractive Bet on Australasian Healthcare

EBOS aims to raise A$ 100 million via retail placement to partly fund the acquisition of LifeHealthcare, which should accelerate EBOS' medical...

Tina Banerjee

Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

Trading slightly below Wesfarmer's cash proposal. That looks like a reasonable place to enter. Wesfarmers can easily trump any tilt from Sigma.

David Blennerhassett

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