Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Investment administrator <a href="https://www.smartkarma.com/entities/praemium-ltd" target="_blank" data-smartkarma-citation="entities:9360:1" rel="noopener">Praemium Ltd (PPS AU)</a> has rejected a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02446233-3A580069?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">non-binding proposal</a> from key competitor <a href="https://www.smartkarma.com/entities/netwealth-group-ltd" target="_blank" data-smartkarma-citation="entities:25951:1" rel="noopener">Netwealth (NWL AU)</a>.</p>
<p>By way of a Scheme, Netwealth was offering 1 new NWL share for every 11.96 PPS shares, or an indicative Offer consideration of A$1.50, a 29% premium to last close, and a lifetime high.</p>
<p>PPS' board said the Proposal did not appropriately value Praemium’s current performance, near-term trajectory, growth momentum, and was not representative of recent transaction premia in the Australian platform and funds administration space.</p>
<p>This space is indeed hot. When PPS peer <a href="https://www.smartkarma.com/entities/onevue-holdings-ltd" target="_blank" data-smartkarma-citation="entities:24327:1" rel="noopener">Onevue Holdings (OVH AU)</a> was taken private in the middle of last year (as discussed by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar</a> in<em><a href="https://skr.ma/rGK8k" target="_blank" rel="noopener"> OneVue-Iress: Australian Deal Trading Wide</a></em>), the independent expert flagged (<a href="https://onevue.com.au/wp-content/uploads/2020/09/Scheme-Booklet_final.pdf" target="_blank" rel="noopener">page 132</a>) 12 peers (including PPS and NWL). Of the remaining 10:</p>
<ul>
<li>
<a href="https://www.smartkarma.com/entities/powerwrap-ltd" target="_blank" data-smartkarma-citation="entities:30664:1" rel="noopener">Powerwrap Ltd (PWL AU)</a> was taken private (by PPS) last October;</li>
<li>
<a href="https://www.smartkarma.com/entities/xplore-wealth-ltd" target="_blank" data-smartkarma-citation="entities:12161:1" rel="noopener">xplore (XPL AU)</a> was taken private by <a href="https://www.smartkarma.com/entities/hub24-ltd" target="_blank" data-smartkarma-citation="entities:12336:1" rel="noopener">Hub24 Ltd (HUB AU)</a> in <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02349028-2A1284538?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">March</a>;</li>
<li>
<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> was subject to Offers from SS&amp;C and Carlyle, but in May this year opted to go the IPO route for PEXA, the digital property settlement platform - <em><a href="https://skr.ma/CrBHo" target="_blank" rel="noopener">Link Admin (LNK AU) Goes IPO Route For PEXA Afterall</a>;</em>
</li>
<li>
<a href="https://www.smartkarma.com/entities/iress-ltd" target="_blank" data-smartkarma-citation="entities:15342:1" rel="noopener">Iress Ltd (IRE AU)</a> backed an Offer from EQT but the two were <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422609-3A576043?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">unable to agree</a> to a transaction in September - <em><a href="https://skr.ma/Rm5oC" target="_blank" rel="noopener">Iress (IRE AU) Accepts EQT's Latest Proposal</a></em>;</li>
<li>
<a href="https://www.smartkarma.com/entities/mainstream-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:30611:1" rel="noopener">Mainstream Group Holdings Ltd (MAI AU)</a> was taken private by Apex last month  - <em><a href="https://skr.ma/fu9ej" target="_blank" rel="noopener">Mainstream (MAI AU): Apex on Top Again as Bidding War Continues....</a></em>; and</li>
<li>
<a href="https://www.smartkarma.com/entities/hub24-ltd" target="_blank" data-smartkarma-citation="entities:12336:1" rel="noopener">Hub24 Ltd (HUB AU)</a> and <a href="https://www.smartkarma.com/entities/class-ltd" target="_blank" data-smartkarma-citation="entities:24287:1" rel="noopener">Class Ltd (CL1 AU)</a> entered into a Scheme Implementation Deed last month - <em><a href="https://skr.ma/odCXE" target="_blank" rel="noopener">Class - Hub24: Scheme Trading Wide</a></em>.</li>
</ul>
<p>Given the above, you can build an understanding why PPS would hold out for a superior Offer.</p>
<p>More below the fold.</p>

Investment administrator Praemium Ltd (PPS AU) has rejected a non-binding proposal from key competitor Netwealth (NWL AU).
By way of a Scheme, Netwealth was offering 1 new NWL share for every 11.96 PPS shares, or an indicative Offer consideration of A$1.50, a 29% premium to last close, and a lifetime high.
PPS' board said the Proposal did not appropriately value Praemium’s current performance, near-term trajectory, growth momentum, and was not representative of recent transaction premia in the Australian platform and funds administration space.
This space is indeed hot. When PPS peer Onevue Holdings (OVH AU) was taken private in the middle of last year (as discussed by Janaghan Jeyakumar in OneVue-Iress: Australian Deal Trading Wide), the independent expert flagged (page 132) 12 peers (including PPS and NWL). Of the remaining 10:


Powerwrap Ltd (PWL AU) was taken private (by PPS) last October;

xplore (XPL AU) was taken private by Hub24 Ltd (HUB AU) in March;

Link Administration Holdings (LNK AU) was subject to Offers from SS&amp;C and Carlyle, but in May this year opted to go the IPO route for PEXA, the digital property settlement platform - Link Admin (LNK AU) Goes IPO Route For PEXA Afterall;


Iress Ltd (IRE AU) backed an Offer from EQT but the two were unable to agree to a transaction in September - Iress (IRE AU) Accepts EQT's Latest Proposal;

Mainstream Group Holdings Ltd (MAI AU) was taken private by Apex last month  - Mainstream (MAI AU): Apex on Top Again as Bidding War Continues....; and

Hub24 Ltd (HUB AU) and Class Ltd (CL1 AU) entered into a Scheme Implementation Deed last month - Class - Hub24: Scheme Trading Wide.

Given the above, you can build an understanding why PPS would hold out for a superior Offer.
More below the fold.

Praemium (PPS AU) Spurns Netwealth's (NWL AU) Proposal

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<div><p>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.</p></div><div>We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - <a href="https://www.smartkarma.com/entities/centuria-capital-group" target="_blank" data-smartkarma-citation="entities:15546:1" rel="noopener">Centuria Capital (CNI AU)</a>, <a href="https://www.smartkarma.com/entities/pinnacle-investment-manageme" target="_blank" data-smartkarma-citation="entities:20624:1" rel="noopener">Wilson (PNI AU)</a> and <a href="https://www.smartkarma.com/entities/sealink-travel-group-ltd" target="_blank" data-smartkarma-citation="entities:6400:1" rel="noopener">Sealink Travel (SLK AU)</a> while the potential deletions are <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/nrw-holdings-ltd" target="_blank" data-smartkarma-citation="entities:9271:1" rel="noopener">NRW Holdings (NWH AU)</a> and <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/galaxy-resources-ltd" target="_blank" data-smartkarma-citation="entities:13914:1" rel="noopener">Galaxy Resources (GXY AU)</a> is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" data-smartkarma-citation="entities:3572:1" rel="noopener">Orocobre Ltd (ORE AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> is a close add and the corresponding deletion is <a href="https://www.smartkarma.com/entities/westgold-resources-ltd" target="_blank" data-smartkarma-citation="entities:24269:1" rel="noopener">Westgold Resources (WGX AU)</a>.</div><div></div><div>There is a large impact expected on the inclusions while the impact on the deletions is lower.</div><div></div><div>For <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>, the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.</div>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - Centuria Capital (CNI AU), Wilson (PNI AU) and Sealink Travel (SLK AU) while the potential deletions are Nuix Limited (NXL AU), NRW Holdings (NWH AU) and G8 Education (GEM AU).
Galaxy Resources (GXY AU) is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with Orocobre Ltd (ORE AU).
De Grey Mining (DEG AU) is a close add and the corresponding deletion is Westgold Resources (WGX AU).There is a large impact expected on the inclusions while the impact on the deletions is lower.For G8 Education (GEM AU), the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<p>Australian Financial stocks are a lightly held.  Just 17% of the global funds in our analysis hold a position, with managers running a net underweight for the last decade.  They remain the 5th largest country/sector underweight globally.</p><p>However the decline has started to reverse.  Buying in stocks such as <a href="https://www.smartkarma.com/entities/australia-and-new-zealand-banking-group-anz" target="_blank" data-smartkarma-citation="entities:443:1" rel="noopener">Australia and New Zealand Banking Group (ANZ) (ANZ AU)</a> and <a href="https://www.smartkarma.com/entities/zip-co-ltd-3708706d-4978-4e29-acbc-d9702b971da9" target="_blank" data-smartkarma-citation="entities:29126:1" rel="noopener">Zip Co Ltd (Z1P AU)</a> has placed active fund ownership on an upward trajectory for the first time in 5-years.</p><p>Compared to Financials positioning in other countries, Australian Financials are lightly held, especially compared to US and India Financials which saw a strong resurgence post COVID.  If we add in to the mix the relatively large underweight and the fact that there is a Value rotation underway, it wouldn't be out of the question to expect Australian Financials to capture further inflows.</p>

Australian Financial stocks are a lightly held.  Just 17% of the global funds in our analysis hold a position, with managers running a net underweight for the last decade.  They remain the 5th largest country/sector underweight globally.However the decline has started to reverse.  Buying in stocks such as Australia and New Zealand Banking Group (ANZ) (ANZ AU) and Zip Co Ltd (Z1P AU) has placed active fund ownership on an upward trajectory for the first time in 5-years.Compared to Financials positioning in other countries, Australian Financials are lightly held, especially compared to US and India Financials which saw a strong resurgence post COVID.  If we add in to the mix the relatively large underweight and the fact that there is a Value rotation underway, it wouldn't be out of the question to expect Australian Financials to capture further inflows.

Australian Financials:  Big Underweight (Finally) Finding Some Love?

Quantitative Analysis

<p style="text-align: left;">Of the 134 companies that reported annual results in August, 65% missed their targets on the top line and just over half reported a rise in profits over the previous year.</p><p style="text-align: left;">Total short notional in Australian stocks as of August month end was A$32.64bn, down A$1.15bn over the month.</p><p style="text-align: left;">Over the month, the largest short positions were built in <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:147:1">Bhp Billiton (BHP AU)</a>, <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:41:1">Fortescue Metals (FMG AU)</a>, <a href="https://www.smartkarma.com/entities/suncorp-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:4218:1">Suncorp (SUN AU)</a>, <a href="https://www.smartkarma.com/entities/a2-milk-co-ltd-95d4fbed-afa1-41e9-bafb-a5f1ef97622e" target="_blank" rel="noopener" data-smartkarma-citation="entities:22775:1">A2 Milk Co Ltd (A2M AU)</a> and <a href="https://www.smartkarma.com/entities/worleyparsons-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:178:1">WorleyParsons Ltd (WOR AU)</a> and shorts were covered in <a href="https://www.smartkarma.com/entities/woolworths-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:500:1">Woolworths Ltd (WOW AU)</a>, <a href="https://www.smartkarma.com/entities/westpac-banking-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:444:1">Westpac Banking (WBC AU)</a>, <a href="https://www.smartkarma.com/entities/national-australia-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15:1">National Australia Bank (NAB AU)</a>, <a href="https://www.smartkarma.com/entities/transurban-group" target="_blank" rel="noopener" data-smartkarma-citation="entities:593:1">Transurban Group (TCL AU)</a> and <a href="https://www.smartkarma.com/entities/csl-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:917:1">CSL Ltd (CSL AU)</a>.</p><p style="text-align: left;">The largest short positions as a percentage of free float are <a href="https://www.smartkarma.com/entities/netwealth-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:25951:1">Netwealth (NWL AU)</a>, <a href="https://www.smartkarma.com/entities/nufarm-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:1128:1">Nufarm Ltd (NUF AU)</a>, <a href="https://www.smartkarma.com/entities/inghams-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:23640:1">Inghams (ING AU)</a>, <a href="https://www.smartkarma.com/entities/harvey-norman-holdings-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:645:1">Harvey Norman Holdings (HVN AU)</a> and <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:3572:1">Orocobre Ltd (ORE AU)</a> while the large cap stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/apn-news-media-limited" target="_blank" rel="noopener" data-smartkarma-citation="entities:709:1">HT&amp;E Ltd (HT1 AU)</a>, <a href="https://www.smartkarma.com/entities/mesoblast-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:769:1">Mesoblast Ltd (MSB AU)</a>, <a href="https://www.smartkarma.com/entities/australian-agricultural-co" target="_blank" rel="noopener" data-smartkarma-citation="entities:3329:1">Australian Agricultural Co (AAC AU)</a> and <a href="https://www.smartkarma.com/entities/myer-holdings-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:577:1">Myer Holdings (MYR AU)</a>.</p>

Of the 134 companies that reported annual results in August, 65% missed their targets on the top line and just over half reported a rise in profits over the previous year.Total short notional in Australian stocks as of August month end was A$32.64bn, down A$1.15bn over the month.Over the month, the largest short positions were built in Bhp Billiton (BHP AU), Fortescue Metals (FMG AU), Suncorp (SUN AU), A2 Milk Co Ltd (A2M AU) and WorleyParsons Ltd (WOR AU) and shorts were covered in Woolworths Ltd (WOW AU), Westpac Banking (WBC AU), National Australia Bank (NAB AU), Transurban Group (TCL AU) and CSL Ltd (CSL AU).The largest short positions as a percentage of free float are Netwealth (NWL AU), Nufarm Ltd (NUF AU), Inghams (ING AU), Harvey Norman Holdings (HVN AU) and Orocobre Ltd (ORE AU) while the large cap stocks with the highest days to cover are HT&amp;E Ltd (HT1 AU), Mesoblast Ltd (MSB AU), Australian Agricultural Co (AAC AU) and Myer Holdings (MYR AU).

Australia Short Interest - August in Review

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<p>Over 2017-18, the Australian Securities &amp; Investments Commission (ASIC) undertook a review of allocation in equity raising transactions. The review involved large and mid-sized licensees (brokers), Issuers, International investors and other international regulators. The results of the review were published by ASIC in Dec 2018. This insight highlights some of the key findings.</p>
<p>It's good to see that some of the standard practices of banks allocating more to existing clients and participants of earlier deals have at least been acknowledged. Even though some institutional investors have outright labelled the allocation process as a "black box", ASIC doesn't seem to want to do much about it.</p>
<p>The area where ASIC is more concerned is the messaging to investors which highlights the different definitions of "well-covered" across banks. Although, the banks seem to have mislead the regulator on interpretation of "real-demand" with ECM bankers saying that all orders are taken at face-value. That raises a whole new level of questions on the messaging around demand for the deal.</p>

Over 2017-18, the Australian Securities &amp; Investments Commission (ASIC) undertook a review of allocation in equity raising transactions. The review involved large and mid-sized licensees (brokers), Issuers, International investors and other international regulators. The results of the review were published by ASIC in Dec 2018. This insight highlights some of the key findings.
It's good to see that some of the standard practices of banks allocating more to existing clients and participants of earlier deals have at least been acknowledged. Even though some institutional investors have outright labelled the allocation process as a "black box", ASIC doesn't seem to want to do much about it.
The area where ASIC is more concerned is the messaging to investors which highlights the different definitions of "well-covered" across banks. Although, the banks seem to have mislead the regulator on interpretation of "real-demand" with ECM bankers saying that all orders are taken at face-value. That raises a whole new level of questions on the messaging around demand for the deal.

ASIC Review of Allocation in Equity Raising - Some Truths, Some Half-Truths - No Improvements

Australia

Netwealth Group Limited provides investment management services. The Company offers portfolio management, insurance, advisory, and investment solutions. Netwealth Group focuses on funds, deposits, accounts, cash, and securities. Netwealth Group serves customers in Australia.

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Netwealth Group (NWL AU)

Praemium (PPS AU) Spurns Netwealth's (NWL AU) Proposal

Currently trading 2.8% through terms. Apart from the premium to last close, the proposal for Praemium appears full. Yet this sector is very much...

David Blennerhassett

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

We see 3 potential changes to the ASX200 at the Sep rebalance with CNI, PNI and SLK being included and NXL, NRW and GEM being deleted. Passive...

Brian Freitas

Australian Financials: Big Underweight (Finally) Finding Some Love?

Australian Financial stocks are the 5th largest country/sector underweight globally. But is their decade long decline starting to reverse?

Steven Holden

Australia Short Interest - August in Review

Of the 134 companies that reported annual results in August, 65% missed their targets on the top line and just over half reported a rise in profits...

Brian Freitas

ASIC Review of Allocation in Equity Raising - Some Truths, Some Half-Truths - No Improvements

Over 2017-18, the Australian Securities & Investments Commission (ASIC) undertook a review of allocation in equity raising transactions. The...

Sumeet Singh

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