Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.</li>
<li>I currently expect two changes for the F100 index and three changes for the F250 index.</li>
<li>As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.
I currently expect two changes for the F100 index and three changes for the F250 index.
As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.


Quiddity Leaderboard F100/​​250 Sep 23: Two F100 Change and Three F250 Changes Likely

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<ul>
<li>Long expected consolidation is arriving to UK car retailers. Alpha Auto agreed to acquire  <a href="https://www.smartkarma.com/entities/lookers-plc" target="_blank" data-smartkarma-citation="entities:22031:1" rel="noopener">Lookers PLC (LOOK LN)</a> via scheme at 120p/share, c.£465.4 million, 35.3% premium, 8.4x Fwd P/E.</li>
<li>The sector appears materially undervalued, with Lookers before announcement on 6.2x Fwd P/E, 4% FY23e yield (4x cover). My fair value estimate is 143p/share (multiples and DCF), 19% above offer price. </li>
<li>Spread 1.17%/4.32% (gross/annualised, assuming settlement around 1 October). Top shareholders have only signed letters of intent (40% aggregate). I'd be <strong>long</strong> in case of sweetening. VTU LN could be next.</li>
</ul>


Long expected consolidation is arriving to UK car retailers. Alpha Auto agreed to acquire  Lookers PLC (LOOK LN) via scheme at 120p/share, c.£465.4 million, 35.3% premium, 8.4x Fwd P/E.
The sector appears materially undervalued, with Lookers before announcement on 6.2x Fwd P/E, 4% FY23e yield (4x cover). My fair value estimate is 143p/share (multiples and DCF), 19% above offer price. 
Spread 1.17%/4.32% (gross/annualised, assuming settlement around 1 October). Top shareholders have only signed letters of intent (40% aggregate). I'd be long in case of sweetening. VTU LN could be next.


Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

<ul>
<li>On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel granted a PUSU extension till 9 December.</li>
<li>My fair value estimate is 39p (WACC 9%, 2.4% perpetual growth), 34% above the prospective bid, and 5.0x EV/Fwd EBITDA and 11.8x Fwd P/E (vs. Inchcape's 6.0x and 11.8x respectively).</li>
<li>The shares are trading at 2.4% gross spread to the prospective offer. Risk/reward seems favorable as I believe there is the possibility of a higher offer. <strong>Long.</strong>
</li>
</ul>


On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel granted a PUSU extension till 9 December.
My fair value estimate is 39p (WACC 9%, 2.4% perpetual growth), 34% above the prospective bid, and 5.0x EV/Fwd EBITDA and 11.8x Fwd P/E (vs. Inchcape's 6.0x and 11.8x respectively).
The shares are trading at 2.4% gross spread to the prospective offer. Risk/reward seems favorable as I believe there is the possibility of a higher offer. Long.



Hedin Group/​Pendragon: Closer To Clinch a Deal

<ul>
<li>Pendragon has received a 29p/share (28% premium) fresh takeover approach from its main shareholder Hedin Mobility Group, this follows a 28p approach in March. PUSU deadline is 24 October.</li>
<li>The Board is "conducting a review of potential strategic options"and this time will (reluctantly) engage with Hedin, which has signaled it would be seller at 35p.</li>
<li>My stand-alone fair value estimate of Pendragon is 39p (DCF-based), c. 44% upside to the last closing share price and well above of Hedin's prospective bid. Buy.</li>
</ul>


Pendragon has received a 29p/share (28% premium) fresh takeover approach from its main shareholder Hedin Mobility Group, this follows a 28p approach in March. PUSU deadline is 24 October.
The Board is "conducting a review of potential strategic options"and this time will (reluctantly) engage with Hedin, which has signaled it would be seller at 35p.
My stand-alone fair value estimate of Pendragon is 39p (DCF-based), c. 44% upside to the last closing share price and well above of Hedin's prospective bid. Buy.


Hedin Group/Pendragon: Fresh Takeover Approach

United Kingdom

Lookers plc is a motor vehicle distributor. The Company's main activities are the sale, hire and maintenance of autos, light trucks, agricultural machinery, motorcycles and caravans, including the sale of fuel, parts and accessories. Lookers also delivers vehicles, builds coaches and operates caravan parks. The Company operates in the United Kingdom.

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Lookers PLC (LOOK LN)

Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely

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Janaghan Jeyakumar, CFA

Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

The car retail business in the UK is extremely fragmented, with minimal entry barriers, resulting in strong rivalry and poor profitability. Lookers...

Jesus Rodriguez Aguilar

Hedin Group/Pendragon: Closer To Clinch a Deal

On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel...

Jesus Rodriguez Aguilar

Hedin Group/Pendragon: Fresh Takeover Approach

Hedin Mobility Group is trying again to bag Pendragon, one of the main auto retailers in a very fragmented UK market. The statements of both parts...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Leaderboard F100/​​250 Sep 23: Two F100 Change and Three F250 Changes Likely

Newly-listed cross-border payment services provider Cab Payments Holdings Plc (CABP LN) could be added to the F250 index in September 2023 unless...

Janaghan Jeyakumar, CFA

Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

The car retail business in the UK is extremely fragmented, with minimal entry barriers, resulting in strong rivalry and poor profitability. Lookers...

Jesus Rodriguez Aguilar

Hedin Group/​Pendragon: Closer To Clinch a Deal

On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel...

Jesus Rodriguez Aguilar

Hedin Group/Pendragon: Fresh Takeover Approach

Hedin Mobility Group is trying again to bag Pendragon, one of the main auto retailers in a very fragmented UK market. The statements of both parts...

Jesus Rodriguez Aguilar

Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely

Hedin Group/Pendragon: Closer To Clinch a Deal