Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<ul>
<li>
<strong>Our</strong> <strong>Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%</strong>.</li>
<li>
<strong>Out of the 34 stocks that appeared in our Q3-2021 screen, </strong>15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.</li>
<li><strong>Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, </strong></li>
<li>
<strong>As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: </strong>Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.</li>
</ul>



Our Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%.

Out of the 34 stocks that appeared in our Q3-2021 screen, 15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.
Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, 

As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.


Screening the Silk Road: Q4 2021 High-Risk Names to Avoid

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Bottom-Up

Rex International Holding / Equity Bottom-Up

<p>For our next Webinar, we have the pleasure of welcoming Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a>, who will talk to us about some of his favourite Singapore-based small- and mid-cap investment ideas and his view on them going forward.</p><div><div><h3>The webinar will be hosted on Wednesday, 11 August 2021, 17:00 SGT/HKT.</h3></div></div><div><div>
<div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=86724910057" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div>
<p>Nicolas Van Broekhoven is a generalist investor with a preference for small and mid-cap companies and special situations. He grew up in Europe, went to university in the US, and lives in Singapore, which has given him a broad scope on the world and investing in general.</p>
</div></div>

For our next Webinar, we have the pleasure of welcoming Insight Provider Nicolas Van Broekhoven, who will talk to us about some of his favourite Singapore-based small- and mid-cap investment ideas and his view on them going forward.The webinar will be hosted on Wednesday, 11 August 2021, 17:00 SGT/HKT.
Register for the Webinar here
Nicolas Van Broekhoven is a generalist investor with a preference for small and mid-cap companies and special situations. He grew up in Europe, went to university in the US, and lives in Singapore, which has given him a broad scope on the world and investing in general.


Smartkarma Webinar | Singapore Investment Ideas

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p><a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a> has <a href="https://links.sgx.com/FileOpen/202108_01%20Major%20and%20Connected%20Transaction%20in%20Relation%20to%20the%20Proposed%20Acquisition%20of%20ARA%20Asset%20Managament%20Limited.ashx?App=Announcement&amp;FileID=677405" target="_blank" rel="noopener">announced</a> it is acquiring unlisted ARA Asset Management for US$5.2bn, the completion of which will result in the world's third-largest real estate management company with total assets under management of ~US$129bn.</p>
<p>Under the terms of the US$5,192mn transaction, ESR will issue US$4.7bn via new ESR shares (US$4.286mn) and vendor loan notes (US$387mn); and US$519mn in cash, to be funded by a US$250mn placement to SMBC, and the remainder (US$269mn) in debt. The scrip/cash split is 90/10.</p>
<p>All of the ARA shareholders are rolling over their shares  - and will mostly be subject to a six-month lock-up - and will hold ~28% of the enlarged entity at completion.</p>
<p>The transaction requires the approval from ESR shareholders by way of an ordinary resolution. Irrevocables totaling 4.6%, to vote in favour of the deal, have been received from ESR's founders, together with OMERS and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>.</p>
<p>There are various pre-conditions attached to the deal, with an EGM expected to be convened before 31 October. The deal may be wrapped up late 4Q21, early 1Q22.</p>
<p>Much more below the fold. </p>
</div>


ESR Cayman (1821 HK) has announced it is acquiring unlisted ARA Asset Management for US$5.2bn, the completion of which will result in the world's third-largest real estate management company with total assets under management of ~US$129bn.
Under the terms of the US$5,192mn transaction, ESR will issue US$4.7bn via new ESR shares (US$4.286mn) and vendor loan notes (US$387mn); and US$519mn in cash, to be funded by a US$250mn placement to SMBC, and the remainder (US$269mn) in debt. The scrip/cash split is 90/10.
All of the ARA shareholders are rolling over their shares  - and will mostly be subject to a six-month lock-up - and will hold ~28% of the enlarged entity at completion.
The transaction requires the approval from ESR shareholders by way of an ordinary resolution. Irrevocables totaling 4.6%, to vote in favour of the deal, have been received from ESR's founders, together with OMERS and JD.com Inc. (9618 HK).
There are various pre-conditions attached to the deal, with an EGM expected to be convened before 31 October. The deal may be wrapped up late 4Q21, early 1Q22.
Much more below the fold. 


ESR Cayman (1821 HK) Takes Out ARA Asset Management

<div>
<p>Back on the 6 January 2010, the SGX issued a <a href="https://api2.sgx.com/sites/default/files/2018-09/Consultation%2BPaper%2Bon%2BProposed%2BRevisions%2Bto%2BMainboard%2BAdmission%2BCriteria%2Band%2Bthe%2BIntroduction%2Bof%2BSPAC.pdf" target="_blank" rel="noopener">consultation paper</a> on the "<em>Proposed Revisions to Mainboard Admission Criteria and the Introduction of SPAC</em>", and following the feedback at that time, SGX determined the timing was not ideal to introduce special purpose acquisition company (SPACs).</p>
</div>
<div>
<p>Following a flurry of SPAC listings in the US in 2020, my discussion with the SGX late last year indicated a white paper on SPACs was expected to be issued in the first half of this year. This was discussed in <em><a href="https://skr.ma/5UGLq" target="_blank" rel="noopener">Virtual IPOs/Direct Listings: Uninhibited Price Discovery</a>.</em></p>
</div>
<div>
<p>The SGX <a href="https://api2.sgx.com/sites/default/files/2021-03/Consultation%20Paper%20on%20Proposed%20Listing%20Framework%20for%20Special%20Purpose%20Acquisition%20Companies.pdf" target="_blank" rel="noopener">announced</a> on the 31 March a regulatory framework for SPACs to list on the SGX and subsequent to the feedback phase ending on the 28 April, the framework may be finalised by the middle of this year. </p>
</div>
<div>
<p>Media reports are now emerging that Temasek-backed Vertex Holdings is set to be Singapore's first SPAC.</p>
<p>With US$5bn of assets under management, 30-year old Vertex has the necessary pedigree to establish the country's first (successful) listing.</p>
<p>More below the fold.</p>
<p></p>
<p></p>
</div>
<div>
<p></p>
</div>


Back on the 6 January 2010, the SGX issued a consultation paper on the "Proposed Revisions to Mainboard Admission Criteria and the Introduction of SPAC", and following the feedback at that time, SGX determined the timing was not ideal to introduce special purpose acquisition company (SPACs).


Following a flurry of SPAC listings in the US in 2020, my discussion with the SGX late last year indicated a white paper on SPACs was expected to be issued in the first half of this year. This was discussed in Virtual IPOs/Direct Listings: Uninhibited Price Discovery.


The SGX announced on the 31 March a regulatory framework for SPACs to list on the SGX and subsequent to the feedback phase ending on the 28 April, the framework may be finalised by the middle of this year. 


Media reports are now emerging that Temasek-backed Vertex Holdings is set to be Singapore's first SPAC.
With US$5bn of assets under management, 30-year old Vertex has the necessary pedigree to establish the country's first (successful) listing.
More below the fold.







Vertex Holdings: Singapore's Showcasing SPAC

<div>
<p><a href="https://www.smartkarma.com/entities/straits-trading-co-ltd" target="_blank" data-smartkarma-citation="entities:15745:1" rel="noopener">Straits Trading (STRTR SP)</a> (STR) has a 22.06% stake in ARA Asset Management, after adding 1.1% in <a href="https://links.sgx.com/FileOpen/R706A%20Announcement.ashx?App=Announcement&amp;FileID=627835" target="_blank" rel="noopener">May</a> of last year for S$30.2mn. There is talk of IPO'ing ARA, some four years after it was taken private.  STR's stake in ARA, based on that stake increase, is worth ~60% of its current market cap. Yet that figure is likely conservative based on the increase in ARA's AUM. </p>
<p>Yesterday ARA <a href="https://ara.listedcompany.com/newsroom/ARAPress_Release_SMBC0Joins-ARAasStrategicShareholder_17052021.pdf" target="_blank" rel="noopener">announced</a> a $500mn round of equity financing from SMBC. With SMBC joining as a strategic shareholder, this has all the hallmarks of an imminent IPO.</p>
</div>
<div>
<p>STR is cheap. Either major shareholder Tecity takes the company private; or you buy the company as an indirect investment into an expected listing of ARA. </p>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


Straits Trading (STRTR SP) (STR) has a 22.06% stake in ARA Asset Management, after adding 1.1% in May of last year for S$30.2mn. There is talk of IPO'ing ARA, some four years after it was taken private.  STR's stake in ARA, based on that stake increase, is worth ~60% of its current market cap. Yet that figure is likely conservative based on the increase in ARA's AUM. 
Yesterday ARA announced a $500mn round of equity financing from SMBC. With SMBC joining as a strategic shareholder, this has all the hallmarks of an imminent IPO.


STR is cheap. Either major shareholder Tecity takes the company private; or you buy the company as an indirect investment into an expected listing of ARA. 


As always, more below the fold.


Straits Trading: ARA's Pre-IPO Funding From SMBC

Singapore

Straits Trading Company Limited operates as an investment holding company that positions its investments in real estate, hospitality, resources and other investments in the Asia Pacific region. The Company is also engaged in tin mining and smelting through its subsidiary.

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Straits Trading (STRTR SP)

Screening the Silk Road: Q4 2021 High-Risk Names to Avoid

As we move through into Q1 2022, we expect to see volatility around highly priced & leveraged names. This screen is a key starting point towards...

David Lepper

Smartkarma Webinar | Singapore Investment Ideas

Join us on 11 August, 5pm SGT, when we talk to Nicolas Van Broekhoven about some of his favourite Singapore-based small- and mid-cap investment...

Smartkarma Research

ESR Cayman (1821 HK) Takes Out ARA Asset Management

This looks like a great deal for ESR. But the company looks full here compared to historical metrics. Plus there is an indication of further...

David Blennerhassett

Vertex Holdings: Singapore's Showcasing SPAC

Vertex, Temasek's venture capital arm, appears to tick all the right boxes towards instilling a modicum of confidence in Singapore's initial foray...

David Blennerhassett

Straits Trading: ARA's Pre-IPO Funding From SMBC

Based on the Scheme value of ARA,, ARA is potentially worth upwards of S$6bn. That backs out a value of S$1.3bn for STR's stake, ~30% above its...

David Blennerhassett

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