Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>Notwithstanding bright spots and positive long-term outlook, the ESG gold rush has created an acute state of chaos. Regulatory flux. Rampant greenwashing. ESG litigation. Elon and S&amp;P.</li>
<li>The silver lining? New ESG-related investing opportunities emerging from all the chaos; stocks poised to benefit, regardless of who else wins or losses. The new shovel-sellers, as it were.</li>
<li>One large opportunity is driven by new greenhouse gas (GHG) reporting regulations, specifcally leading GHG emissions software-as-a-service (SaaS) and platform-as-a-service (PaaS) stocks.</li>
</ul>


Notwithstanding bright spots and positive long-term outlook, the ESG gold rush has created an acute state of chaos. Regulatory flux. Rampant greenwashing. ESG litigation. Elon and S&amp;P.
The silver lining? New ESG-related investing opportunities emerging from all the chaos; stocks poised to benefit, regardless of who else wins or losses. The new shovel-sellers, as it were.
One large opportunity is driven by new greenhouse gas (GHG) reporting regulations, specifcally leading GHG emissions software-as-a-service (SaaS) and platform-as-a-service (PaaS) stocks.


Selling Shovels in a Gold Rush: SaaS Stocks Cashing in on Emissions Reporting Rules

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
On the 5 July 2021, <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a>, at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> on the 25 August with an expected completion on the 30 August. 
</div>
<div>
CPN <a href="https://www.set.or.th/set/newsdetails.do?newsId=16302807319920&amp;language=en&amp;country=US" target="_blank" rel="noopener">completed</a> the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 
</div>
<div>
The Tender Offer doc (247-4) for Siam Future was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">tabled</a> on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16326998697600&amp;sequence=2021104947" target="_blank" rel="noopener">fair</a>. At the close of the Offer, CPN held <a href="https://www.set.or.th/set/pdfnews.do?newsId=16346869712030&amp;sequence=2021112797" target="_blank" rel="noopener">96.24%</a>. 
</div>
There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">PDF</a>), it states:
<blockquote>
After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.
</blockquote>
With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price.


On the 5 July 2021, Major Cineplex Group (MAJOR TB)'s board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in shopping mall operator Siam Future Development (SF TB), at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was entered into on the 25 August with an expected completion on the 30 August. 


CPN completed the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 


The Tender Offer doc (247-4) for Siam Future was tabled on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was fair. At the close of the Offer, CPN held 96.24%. 

There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's PDF), it states:

After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.

With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price. 

Buy Siam Future Development (SF TB). Then Buy Some More

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

Equity Bottom-Up

One of the many reasons why drivers were lured to join <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> and <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> is that the app provides content that leads to a higher daily order. Grab went on to become a super App, offering a wide range of services from transport, food delivery to finance including insurance. <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> , a listed peer for <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> and <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> is currently trading at 8.69x PBR, 500% higher than <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> at 1.5x PBR. The taxi business contribution to the group's revenue has been reduced to 13-14% to the group's revenue due to the stiff competition from Grab and Gojek as well as from the pandemic.Long being dubbed as the proxy to  Singapore's tourism and residents' transport provider stock, the foray into the EV charging station and Smart and Intelligent Mobility Technologies could shift the market's opinion to Autonomous and Electric Vehicle and the stock may trade at a higher multiple.

One of the many reasons why drivers were lured to join Grab (0967655D SP) and Gojek (1379371D IJ) is that the app provides content that leads to a higher daily order. Grab went on to become a super App, offering a wide range of services from transport, food delivery to finance including insurance. Uber (UBER US) , a listed peer for Grab (0967655D SP) and Gojek (1379371D IJ) is currently trading at 8.69x PBR, 500% higher than Comfortdelgro Corp (CD SP) at 1.5x PBR. The taxi business contribution to the group's revenue has been reduced to 13-14% to the group's revenue due to the stiff competition from Grab and Gojek as well as from the pandemic.Long being dubbed as the proxy to  Singapore's tourism and residents' transport provider stock, the foray into the EV charging station and Smart and Intelligent Mobility Technologies could shift the market's opinion to Autonomous and Electric Vehicle and the stock may trade at a higher multiple. 

Comfort Delgro (CD): Zig and EV Charging Station

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement SA (VIE FP)</a> rejects <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a>'s proposal to sell assets to Ardian and GIP.
<ul class="">
<li>Ardian and GIP have now offered to buy a new entity that would encompass Suez's water and waste units, as well as the international water and technology businesses (with c. €9.1 bn turnover, or 53% of Suez’s 2020 turnover), for €12.9 bn, roughly equivalent to Suez's current market value.</li>
<li>
On 20 March, the offer price for of all the relevant activities was increased to €20 per share (cum dividend).
<ul>
<li>
For an implied total equity value of €12,623.2 mn and a total implied EV of €25,093.6 mn.
</li>
<li>
This represents 1.5x EV/Fwd Revenue, 8.1x EV/Fwd EBITDA and 27.5x Fwd P/E.
</li>
<li>
As of 21 March, the transaction was unanimously approved by the Board of Suez. The offer is contingent on Veolia withdrawing its hostile bid across Suez and agreeing to divest some assets as part of a negotiated deal.
</li>
<li>Even so, the Ardian-GIP proposal "is not a counter offer" and is conditional on an agreement between Suez and Veolia.</li>
</ul>
</li>
<li>Suez is "offering" Veolia two solutions to deactivate some of the obstacles it has put in place to make the takeover more difficult:
<ul>
<li>let Ardian and GIP acquire the bits they are interested in (over half of Suez) and increase (Veolia's) offer from €18 to €20 per share, or</li>
<li>increase the offer to €22.5 per share.</li>
</ul>
</li>
<li>
Alternatively, the funds said that if Veolia withdraws its offer within six months, the consortium could consider the filing of a €20 per share (cum dividend) tender offer for the whole of Suez, subject to support of the Suez's Board, the Intersyndicale, and the public authorities; due diligence; and the consortium’s capacity to finance such an offer.
</li>
<li>
Suez has also threatened that if no agreement is reached by 20 April, it would go ahead with a plan that could potentially involve selling some assets in which Veolia is interested.
</li>
<li>
Veolia immediately rejected the proposal, saying it was sticking to its original plan. "The takeover offer made by Veolia remains irrevocable".
</li>
</ul>
<ul>
<li>
Suez's proposal is the last move in a bitter battle between both companies that is being deployed in courts and involves a lot of PR. The French government has so far failed to promote an amicable agreement.
</li>
<li>
Both Suez and Veolia seem ready to lock horns at the AGM, to be held in May or June, unless Veolia gets cold feet and decides Suez is not worth all the hassle. It is probably still soon for that, but if Veolia withdraws, it would still obtain an extraordinary profit of c. €382 mn (before taxes).
</li>
<li>
The share price of Suez has surpassed the €18 per share level of Veolia's bid and seems to be heading towards €20 per share of Ardian's proposal, which would materialize if Veolia withdraws its offer. Recommendation is LONG Suez, TP €20.
</li>
</ul>

Veolia Environnement SA (VIE FP) rejects Suez (SEV FP)'s proposal to sell assets to Ardian and GIP.

Ardian and GIP have now offered to buy a new entity that would encompass Suez's water and waste units, as well as the international water and technology businesses (with c. €9.1 bn turnover, or 53% of Suez’s 2020 turnover), for €12.9 bn, roughly equivalent to Suez's current market value.

On 20 March, the offer price for of all the relevant activities was increased to €20 per share (cum dividend).


For an implied total equity value of €12,623.2 mn and a total implied EV of €25,093.6 mn.


This represents 1.5x EV/Fwd Revenue, 8.1x EV/Fwd EBITDA and 27.5x Fwd P/E.


As of 21 March, the transaction was unanimously approved by the Board of Suez. The offer is contingent on Veolia withdrawing its hostile bid across Suez and agreeing to divest some assets as part of a negotiated deal.

Even so, the Ardian-GIP proposal "is not a counter offer" and is conditional on an agreement between Suez and Veolia.


Suez is "offering" Veolia two solutions to deactivate some of the obstacles it has put in place to make the takeover more difficult:

let Ardian and GIP acquire the bits they are interested in (over half of Suez) and increase (Veolia's) offer from €18 to €20 per share, or
increase the offer to €22.5 per share.



Alternatively, the funds said that if Veolia withdraws its offer within six months, the consortium could consider the filing of a €20 per share (cum dividend) tender offer for the whole of Suez, subject to support of the Suez's Board, the Intersyndicale, and the public authorities; due diligence; and the consortium’s capacity to finance such an offer.


Suez has also threatened that if no agreement is reached by 20 April, it would go ahead with a plan that could potentially involve selling some assets in which Veolia is interested.


Veolia immediately rejected the proposal, saying it was sticking to its original plan. "The takeover offer made by Veolia remains irrevocable".




Suez's proposal is the last move in a bitter battle between both companies that is being deployed in courts and involves a lot of PR. The French government has so far failed to promote an amicable agreement.


Both Suez and Veolia seem ready to lock horns at the AGM, to be held in May or June, unless Veolia gets cold feet and decides Suez is not worth all the hassle. It is probably still soon for that, but if Veolia withdraws, it would still obtain an extraordinary profit of c. €382 mn (before taxes).


The share price of Suez has surpassed the €18 per share level of Veolia's bid and seems to be heading towards €20 per share of Ardian's proposal, which would materialize if Veolia withdraws its offer. Recommendation is LONG Suez, TP €20.



Suez - Veolia Tussle: Ardian and GIP Enter the Fray

After months of repeated attempts to secure a friendly buyout, on the evening of Sunday 7 February, <a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement SA (VIE FP)</a> continued its 80's style public offensive and <a href="https://www.veolia.com/sites/g/files/dvc2491/files/document/2021/02/PR-Veolia-announces-filing-of-public-tender-offer-for-the-entire-share-capital-of-Suez-070221-ENG.pdf" target="_blank" rel="noopener">decided to formally launch a takeover offer to minority shareholders</a>,  for the 70.1% it does not own in <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a>.
<ul>
<li>at a price of € 18.00 cum dividend per share, for a total of €7.9 bn.</li>
<li>Following the presentation of the offer, Suez has reacted immediately saying that legally, Veolia could not present a takeover bid, as it would mean a break in the amicable commitment between both parties. Suez's chairman has said the offer is hostile and undervalues Suez.</li>
<li>First thing this morning, a French court has decided to stop Veolia's offer for the moment.</li>
<li>The French state, which was initially in favor of the Veolia project, seems to put some distance from the tussle in recent weeks and urges dialogue between both parties. “French capitalism can’t be a war of everyone against everyone,” French Finance Minister Bruno Le Maire said in an interview with Europe 1 radio. “Everyone has to be reasonable, wise and have an idea of general public interest because it is a question of thousands of jobs.”</li>
</ul>
If the tender offer is opened, it will require the merger control approval by the European Commission. Veolia reserves the right to waive the said condition.
Going hostile may have been the only way to proceed given the delaying maneuvers by Suez. As the chances to finding a friendly deal were increasingly dim, Veolia should sooner rather than later exercise the power of its majority.
<ul class="">
<li>In this case, the French government cannot act in the same fashion as in CoucheTard bid for Carrefour, because the companies involved are French. </li>
<li>A combined Suez-Veolia would have cost-advantage (economies of scale) and could greatly benefit from the energy transition programs to a low-carbon economy.</li>
<li>Nevertheless until that point, there is a long and winding road: getting rid of the poison pill (transfer of assets to a Dutch foundation), forbidding the disposal of the French water assets in the next four years, and Suez’s planned sale of key assets. Last but not least, softening the stance of French union who have so far sided with Suez's management in this trench war.</li>
<li>The clock is ticking for Suez and Veolia could potentially use its majority holding to unseat Suez's management at Suez’s AGM.</li>
</ul>
Veolia’s CEO said its offer will be open once it gets antitrust clearance, which should take 8 to 14 months (finalized in Q1 2022).
Gross spread is 5%. Reiterate long SZE FP, TP €18 per share.

After months of repeated attempts to secure a friendly buyout, on the evening of Sunday 7 February, Veolia Environnement SA (VIE FP) continued its 80's style public offensive and decided to formally launch a takeover offer to minority shareholders,  for the 70.1% it does not own in Suez (SEV FP).

at a price of € 18.00 cum dividend per share, for a total of €7.9 bn.
Following the presentation of the offer, Suez has reacted immediately saying that legally, Veolia could not present a takeover bid, as it would mean a break in the amicable commitment between both parties. Suez's chairman has said the offer is hostile and undervalues Suez.
First thing this morning, a French court has decided to stop Veolia's offer for the moment.
The French state, which was initially in favor of the Veolia project, seems to put some distance from the tussle in recent weeks and urges dialogue between both parties. “French capitalism can’t be a war of everyone against everyone,” French Finance Minister Bruno Le Maire said in an interview with Europe 1 radio. “Everyone has to be reasonable, wise and have an idea of general public interest because it is a question of thousands of jobs.”

If the tender offer is opened, it will require the merger control approval by the European Commission. Veolia reserves the right to waive the said condition.
Going hostile may have been the only way to proceed given the delaying maneuvers by Suez. As the chances to finding a friendly deal were increasingly dim, Veolia should sooner rather than later exercise the power of its majority.

In this case, the French government cannot act in the same fashion as in CoucheTard bid for Carrefour, because the companies involved are French. 
A combined Suez-Veolia would have cost-advantage (economies of scale) and could greatly benefit from the energy transition programs to a low-carbon economy.
Nevertheless until that point, there is a long and winding road: getting rid of the poison pill (transfer of assets to a Dutch foundation), forbidding the disposal of the French water assets in the next four years, and Suez’s planned sale of key assets. Last but not least, softening the stance of French union who have so far sided with Suez's management in this trench war.
The clock is ticking for Suez and Veolia could potentially use its majority holding to unseat Suez's management at Suez’s AGM.

Veolia’s CEO said its offer will be open once it gets antitrust clearance, which should take 8 to 14 months (finalized in Q1 2022).
Gross spread is 5%. Reiterate long SZE FP, TP €18 per share.

France

Engie offers a full range of electricity, gas and associated energy and environment services throughout the world. The Company produces, trades, transports, stores and distributes natural gas, and offers energy management and climatic and thermal engineering services.

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Engie SA (ENGI FP)

Selling Shovels in a Gold Rush: SaaS Stocks Cashing in on Emissions Reporting Rules

ESG investing has been complicated by evolving emissions reporting regulations. With the chaos, comes new investment opportunities. Such as in...

Kyle Rudden

Buy Siam Future Development (SF TB). Then Buy Some More

Buy Siam Future. Then buy some more. I think you're looking at a minimum 10% upside from here - if using Big C Supercenter's delisting example -...

David Blennerhassett

Comfort Delgro (CD): Zig and EV Charging Station

Dubbed as the proxy to Singapore's tourism and residents' transport provider stock, the foray into the EV charging station and Smart and...

Henry Soediarko

Suez - Veolia Tussle: Ardian and GIP Enter the Fray

The share price of Suez has surpassed Veolia's offer price and seems to be heading towards the €20 per share of Ardian's proposal, which would...

Jesus Rodriguez Aguilar

Veolia - Suez: Enough Is Enough

Going hostile may have been the only way to proceed, as the chances to sealing a friendly deal were increasingly dim, Veolia should sooner rather...

Jesus Rodriguez Aguilar

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