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 December 2023 Rebalance.</li>
<li>
<a href="https://www.smartkarma.com/entities/dechra-pharmaceuticals-plc" target="_blank" data-smartkarma-citation="entities:21908:1" rel="noopener">Dechra Pharmaceuticals (DPH LN)</a> and <a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" data-smartkarma-citation="entities:28918:1" rel="noopener">Network International Holdings (NETW LN)</a> are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.</li>
<li>Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the December 2023 Rebalance.

Dechra Pharmaceuticals (DPH LN) and Network International Holdings (NETW LN) are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.
Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.


Quiddity Leaderboard F100/​​​250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex (8698 JP)</a> and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won't be egregiously bad.</li>
<li>
<a href="https://www.smartkarma.com/entities/people-s-insurance-co-group-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:362:1" rel="noopener">People's Insurance (PICC) (1339 HK)</a>'s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.</li>
<li>
<a href="https://www.smartkarma.com/entities/jmdc-inc" target="_blank" data-smartkarma-citation="entities:28673:1" rel="noopener">JMDC (4483 JP)</a> is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.</li>
</ul>



Monex (8698 JP) and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won't be egregiously bad.

People's Insurance (PICC) (1339 HK)'s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.

JMDC (4483 JP) is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.


Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<ul>
<li>The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for <a href="https://www.smartkarma.com/entities/lookers-plc" target="_blank" data-smartkarma-citation="entities:22031:1" rel="noopener">Lookers PLC (LOOK LN)</a> by 8%, to 130p/share (46.6% premium).</li>
<li>The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).</li>
<li>Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. </li>
</ul>


The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for Lookers PLC (LOOK LN) by 8%, to 130p/share (46.6% premium).
The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).
Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. 


Alpha Auto Group/​​Lookers: Sharp Turn

<ul>
<li>Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto's offer.</li>
<li>The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.</li>
<li>Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I'd be long, as I consider the risk reward is balanced. </li>
</ul>


Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto's offer.
The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.
Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I'd be long, as I consider the risk reward is balanced. 


Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

<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. Long.
</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

United Kingdom

Pendragon PLC sells new and used vehicles and provides contract hiring and after sales services.  The Company operates approximately 150 franchises that sell vehicles including Aston Martin, BMW, Daihatsu, Ferrari, Ford, Honda,Isuzu, Jaguar, Land Rover, Lexus, Mazda, Mercedes-Benz, Nissan, Rolls-Royce, Porsche, Peugeot, Rover, Saab, Toyota, Volkswagen & Audi and Volvo.

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Pendragon PLC (PDG LN)

Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

The top 7 F250 Potential ADDs currently have ~10 days of volume to buy and up to a couple of these names could be added on an intra-review basis...

Janaghan Jeyakumar, CFA

Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Alpha Auto Group/Lookers: Sharp Turn

After the deal looked dead in the water, the board of Bidco and the board of Lookers announced that they had agreed on an increased recommended...

Jesus Rodriguez Aguilar

Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation

A puzzling situation: on the one hand, Cinch (19.5%) believes the offer undervalues Lookers, while another large shareholder, J O Hambro has...

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Leaderboard F100/​​​250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

The top 7 F250 Potential ADDs currently have ~10 days of volume to buy and up to a couple of these names could be added on an intra-review basis...

Janaghan Jeyakumar, CFA

Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Alpha Auto Group/​​Lookers: Sharp Turn

After the deal looked dead in the water, the board of Bidco and the board of Lookers announced that they had agreed on an increased recommended...

Jesus Rodriguez Aguilar

Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

A puzzling situation: on the one hand, Cinch (19.5%) believes the offer undervalues Lookers, while another large shareholder, J O Hambro has...

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

Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

Alpha Auto Group/Lookers: Sharp Turn

Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation

Hedin Group/Pendragon: Closer To Clinch a Deal