Australia

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: APM Human Services Internation (APM AU), Chilled & Frozen Logistics Holdings (9099 JP), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Probiotec Ltd (PBP AU).
• Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Vinda International (3331 HK), Snow Peak Inc (7816 JP).

• Back on the 18 December 2023, superannuation service provider Link Administration (LNK AU) entered into a Scheme with Mitsubishi UFJ Financial Group.
• MUFJ offered Link shareholders A$2.10/share (in cash) plus a A$0.16/share dividend (25% franked), or a 32.9% premium, all-in. 
• The Scheme Meeting will now take place on the 24th April, with expected implementation on the 16 May. This looks done – and trading accordingly. 

Edison Investment Research is terminating coverage on Respiri (RSH). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website.

• The Link Administration (LNK AU) IE considers Mitsubishi UFJ Financial (MUFG) (8306 JP)’s A$2.26 offer fair and reasonable as it is within its A$2.11-2.70 per share valuation range.
• The scheme remains conditional on several regulatory approvals – FIRB, Central Bank of Ireland, Isle of Man Financial Services Authority, India SEBI, and Financial Services Agency of Japan.
• Several substantial shareholders have sold or exited, lowering the scheme’s risk. At the last close and for the 16 May payment, the gross/annualised spread was 1.3%/9.7%.

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
• Prior to the June 2024 review, there could be one intra-review change triggered by the completion of the Silver Lake Resources (SLR AU) / Red 5 Ltd (RED AU) deal.
• Separately, I see one ASX 20 change and two ASX 100 changes for the regular rebalance in June 2024.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Nickel Industries

• Back on the 19 Feb, Seven Group Holdings (SVW AU) made a cash/scrip Offer for Boral Ltd (BLD AU) shares not owned, with certain tendering thresholds triggering more cash. 
• Boral has now recommended shareholders to reject the Offer after the independent expert (Grant Samuel) concluded the Offer is neither fair nor reasonable, supporting the view of Boral’s board.
• Grant Samuel backed out a price range of $6.50-$7.13/share, versus SGH’s Offer of $5.96-$6.19/share; and up to $6.39/share including the conditional payments. SGH’s terms were best & final.

• After Perseus (PRU AU) announced it had secured Tanzanian Fair Competition Commission  approval, Orecorp (ORR AU) continued to sit on its hands as, technically, Silvercorp (SVM CN) terms were superior. 
• PRU added 2% overnight bringing its stake to 22% vs SVM’s 21%. SVM said they won’t extend beyond the 22nd March. Something had to give. 
• This morning, PRU bumped its all-cash Offer to A$0.575/share (from A$0.55/share), with 15.6% of shares out intending to accept. SVM have five business days to counter. 

• Cash Converters International (ASX:CCV) is a consumer finance company operating as a service provider, owner and franchisor of second-hand goods and financial services stores in Australia and internationally.
• It derives its revenue from personal loans, vehicle finance, sale of goods and store services.
• In recent years, the business has faced both company specific and industry headwinds involving litigation and regulatory scrutiny, but it has worked through those and evolved into a highly regulated, well-run profitable business with a clear strategic direction and multi-layered growth opportunities.

• Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) and US oil/gas production assets.
• EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
• The investment case is building further with the acquisition of the Rosalind Park Gas Plant to provide an immediate, low-capital and operating-cost processing option with nameplate capacity above the Carpentaria Stage I development model.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People’ regtech company providing workforce compliance monitoring and management technology and services.
• KYP has reported a 6% year-on-year increase in Q2 FY24 revenue to $7.1m, and a 145% year-on-year increase in SaaS revenue to $2.4m.
• SaaS revenue accounted for 33% of total revenue for the quarter, compared to 14% in Q2 FY23.

• Human services company Millennium Services Group Ltd (ASX:MIL) has entered a Scheme of Arrangement with an entity associated with Softbank Robotics Singapore for the acquisition of 100% of shares at $1.15/share cash.
• Shareholders also have the option to accept a mix of cash and scrip in the new unlisted entity, with certain management committing not less than a total of 30% for this option.
• The bid price represents an 89% premium to the last RaaS update note (October 23) and 360% premium from July 1, 2023.

• Ricegrowers Limited, trading as SunRice (ASX:SGLLV), has released its H1 FY24 results, delivering RaaS adjusted EBITDA of $69m (+68%) and adjusted NPAT of $33.3m (+107%), both well above RaaS estimates of $57.6m and $25m respectively.
• Divisionally the key surprise was International, delivering adjusted EBITDA of $33m, 125% above the PCP and 57% above RaaS estimates on the back of increases scale and reach, price increases and lower freight costs.
• Operating cash flow was the strongest since H2 FY18 despite a high tax payment as working capital improved from lower receivables and inventory reductions.

• Ricegrowers Limited, trading as SunRice (ASX:SGLLV), has released its H1 FY24 results, delivering RaaS adjusted EBITDA of $69m (+68%) and adjusted NPAT of $33.3m (+107%), both well above RaaS estimates of $57.6m and $25m respectively.
• Divisionally the key surprise was International, delivering adjusted EBITDA of $33m, 125% above the PCP and 57% above RaaS estimates on the back of increases scale and reach, price increases and lower freight costs.
• Operating cash flow was the strongest since H2 FY18 despite a high tax payment as working capital improved from lower receivables and inventory reductions.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors.
• The company is developing a 1,000+-tonne-a-year critical metals alloy powder manufacturing facility in Tennessee, USA with its initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry.
• On December 19, the company provided an update to investors on its progress to date this month with several milestones tracking ahead of schedule.

• State Gas Limited (ASX:GAS) is a junior energy producer and explorer with assets concentrated in the Bowen Basin, Queensland.
• The Rolleston West CNG Project in the Bowen Basin is now in the final stage with mechanical completion and tie-in of the Rougemont-2/3 well anticipated within the next week to be followed by pre-commissioning activities.
• Importantly, first production and shipments are tantalisingly close and whilst the rate will initially be modest, up to 0.75TJd, the project has intrinsic growth potential (up to 1.7TJd) which could fund modest appraisal and evaluation works, particularly converting contingent gas to bankable reserves.

• Back in August, Silvercorp  (SVM CN) bid A$0.15/share and 0.967 scrip for Orecorp (ORR AU); and secured board support after bumping the cash portion to A$0.19/share via an Off-market Offer.
• Perseus Mining (PRU AU) countered on the 22 January with a A$0.55/share Offer, which was rejected by Orecorp, ostensibly over concerns Perseus had not secured Tanzanian Fair Competition Commission approval.
• That regulatory approval has now been satisfied. The Offers for both Perseus and Silvercorp are conditional on 50.1% acceptance hurdles. I think Perseus’ all-cash Offer is superior.

• Southern Cross Media (SXL AU) is re-engaging with ARN Media (A1N AU)/Anchorage at A$0.296 cash per share and 0.870 A1N shares per SXL share. Eligible shareholders get franking credits worth A$0.127.
• SXL’s re-engagement was driven by major shareholders, who are also supporting a motion to remove Mr Rob Murray as chairman due to the glacial pace of negotiation.
• While the offer is light compared to long-term adjusted exchange ratios and historical prices, large shareholders are supportive. Shares are trading through terms due to the large franking credits.  

• The Welchau well (ADX WI: 75%) encountered 115 m of liquids-rich gas shows in the primary target formation (Steinalm Formation) between 1452 m and 1567 m.
• The deepest gas shows were encountered at a depth of 1645 m.
• The well has reached TD at 1733 m.

EML Payments has agreed to sell Sentenial to GoCardless for an enterprise value of €32.75m/A$54.1m. As Sentenial is currently loss-making, the disposal will be earnings and cashflow accretive to EML in year one. Proceeds from the sale will be used to reduce debt and strengthen EML’s balance sheet. This disposal combined with the liquidation of PFS Card Services Ireland (PCSIL) leaves EML as a more focused group specialising in prepaid cards, with all remaining businesses profitable and cash generating.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Vanke
• Nickel Industries

• Monash Ivf (MVF AU) delivered a strong result in H1FY24, with revenue growth of 22% YoY to A$126M and underlying NPAT growth of 19% YoY to A$15M.
• The company has guided for FY24 underlying NPAT of A$29–30M compared to A$25.5M in the prior comparative period (excluding contribution from the Fertility North acquisition).
• Secular industry tailwinds, consistent market share gain, and strong new patient registrations provide a sustainable growth trajectory for Monash IVF.  

• Back on the 31 Jan, WAM Leaders Ltd (WLE AU), said it intended to make an off-market Offer after QV Equities Ltd (QVE AU) rejected its all-scrip NBIO.
• WAM and QVE have now entered into a Scheme. The current scrip terms are 0.7609 new WAM shares per QVE share; OR A$1.02/share cash. Terms will be adjusted …
• … in accordance with the most recently released NTA/shares of WAM and QVE. QVE shareholders are also expected to receive the quarterly dividend of A$0.013/share. 

• On the 14 December, Volpara Health (VHT AU), which makes software enabling the early detection of breast cancer, announced an Offer by way of a Scheme with Lunit (328130 KS)
• NZ’s OIO approval was satisfied on the 31 January. The  Scheme Booklet is now out, with a Scheme Meeting to be held on the 12th April.
• Lunit is offering Volpara shareholders A$1.15/share, in cash, a 47.4% premium to last close. Cornerstone investors with 25.92% of shares out are supportive. The IE says terms are fair.

• The Volpara Health Technologies (VHT AU) IE considers Lunit (328130 KS)‘s A$1.15 offer fair and reasonable as it is above its A$0.67-0.82 per share valuation range. 
• NZ OIO approval has been received. The scheme is conditional on shareholders’ approval by more than 75% of votes cast and more than 50% of shareholders.
• The scheme vote will get up as the offer is attractive vs. historical trading ranges. At the last close and for the 21 May payment, the gross/annualised spread was 2.2%/13.0%.

• On the 27th Feb, Qantm Intellectual Property (QIP AU) announced a NBIO from UK-based Rouse International; but opted not to disclose price, DD, or even if this was a cash/scrip Offer.
• Then on the 12th March, Qantm announced a NBIO from Adamantem Capital, by way of a Scheme, of $1.817/share in cash or with a scrip election of up to 50%
• Qantm secured a trading halt yesterday morning, presumably to flesh out the best Offer for shareholders. Will IPH Ltd (IPH AU) throw its hat into the ring, again?

• Alumina Ltd (AWC AU) has entered a scheme implementation deed with Alcoa (AA US) at 0.02854 Alcoa shares per Alumina share. The scheme meeting is targeted for 3Q.
• While the offer is not a knockout bid, the 15% increase in Alcoa shares lowers the headcount risk from retail opposition and lowers the bump potential. 
• Regulatory approvals are a formality, and Citic Resources Holdings (1205 HK) lack of support reflects HKEx listing requirements. At the last close, the gross spread was 3.4%.

• QV Equities Ltd (QVE AU) has disclosed a binding scheme proposal from WAM Leaders Ltd (WLE AU) consisting of a cash and scrip consideration pegged to pre-tax NTA per share.
• The indicative value of the cash proposal is A$1.02, and the scrip is A$1.058 (0.7609 WLE shares per QVE share). Shareholders are entitled to an A$0.013 March quarter dividend. 
• The offer is attractive, and the shareholder structure facilitates the vote. At the last close, the gross spread of the scrip + dividend offer is 8.1%.

• Metarock Group Ltd (ASX:MYE) is a specialist underground mining contractor across both metallurgical coal and metalliferous hard rock mining, working with most tier-1 operators in the respective spaces.
• Following a difficult 18 months dealing with legacy contracts that required an equity injection, asset sales and ATO payment plan, MYE appears to be coming out the other side, posting an adjusted $49.1m EBITDA over the 12 months to December 31, and reducing net debt to $62.8m which includes $30m of invoice financing.
• Applying H1 FY24 annualised depreciation and interest charges we calculate EBITA of $22.8m for the last 12 months, implying CY23 EV/EBITA of ~4.9x.

• The AFR reports that Adamantem Capital had submitted a non-binding indicative offer for Qantm Intellectual Property (QIP AU) at A$1.817 per share, a 30.7% premium to the last close. 
• In response to a previous AFR article, Qantm disclosed a non-binding indicative offer from Rouse but declined to reveal a price or the structure (cash or scrip). 
• AFR reports that other potential interested parties, such as Quadrant Private Equity and IPH, are also in the running. Adamantem’s attractive offer sets a high bar for other potential bidders. 

• On the 26 February, via an NBIO, Alcoa (AA US) offered 0.02854 of its own shares for each Alumina Ltd (AWC AU) share, a 13% premium to last close.
• Alcoa/Alumina control 60%/40% of the AWAC JV, an owner and operator of global bauxite mines and alumina refineries. Both companies have now entered into a Scheme on the same terms. 
• Alcoa holds 19.9% in AWC after reaching an agreement with Allan Gray Australia. The key risks to the deal are FIRB approval and how CITIC, holding 18.9%, will respond.

• Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging existing operations, strategic relationships and technology.
• Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
• Continued fleet growth in the December half year drove strong subscription growth which accelerated further in January 2024 with a 12% increase in subscribers from December.

• Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging existing operations, strategic relationships and technology.
• Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
• Continued fleet growth in the December half year drove strong subscription growth which accelerated further in January 2024 with a 12% increase in subscribers from December. 

• Pioneer Credit Limited (ASX:PNC) is one of the leading acquirers and managers of impaired credit in Australia and has gained its status by maintaining positive customer engagement, an unblemished compliance record with ASIC, and strong relationships with Australia’s largest bank and non-bank lenders.
• PNC purchases debt from numerous Australian vendor partners (18 different vendors in the past 12 months) with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• Pioneer’s success in purchasing large debt portfolios at attractive IRRs since October highlights the strong position the company occupies in the marketplace. 

• Emerald Resources Nl (EMR AU) will be added to the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in March while there are 3 deletions for the index.
• The constituent changes along with float and capping changes result in an estimated one-way turnover of 6.4% and a one-way trade of US$263m.
• There are 9 stocks with more than US$10m to trade and 9 stocks with over 2x ADV to trade.

• There are no constituent changes for the MVIS Australia Equal Weight Index at the March rebalance. 
• Float and capping changes will result in a one-way turnover of 4.4% and in a round-trip trade of A$195m.
• We had Lendlease Group (LLC AU), IDP Education (IEL AU) and nib holdings (NHF AU) as close deletes and they will now have inflows due to capping.

• Pioneer Credit Limited (ASX:PNC) is one of the leading acquirers and managers of impaired credit in Australia and has gained its status by maintaining positive customer engagement, an unblemished compliance record with ASIC, and strong relationships with Australia’s largest bank and non-bank lenders.
• PNC purchases debt from numerous Australian vendor partners (18 different vendors in the past 12 months) with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• Pioneer’s success in purchasing large debt portfolios at attractive IRRs since October highlights the strong position the company occupies in the marketplace.

• Pro Medicus Ltd (PME AU) reported record high revenue and net profit in H1FY24. The result was largely driven by a 37% YoY increase in revenue from North America.
• In H1FY24, PME won four key contracts. These contracts have a total contract value of A$200M (at committed minimum exam volumes) with contract terms ranging from 7 to 10 years.
• PME believes H2FY24 will be stronger than H1FY24. Assuming key contracts up for renewal are renewed at same rate, PME sees forward revenue of >A$608M over the next five years.   

• On the 23 January, Aspen (APZ AU) improved its scrip terms to 0.26 Aspen shares per Eureka (EGH AU) share, up from 0.225 Aspen shares on the 2 March 2023.
• Two weeks later, Eureka said they still had not received a formal Offer. Aspen has now released its Bidder’s Statement. Its Offer has a 50.1% acceptance condition.
• Complicating the Offer was the recent disclosures from FDC Group that it held a 12.89% stake, preventing Aspen compulsory acquiring shares.