Australia

• Renesas Electronics (6723 JP), a supplier of advanced semiconductors, is offering Altium Ltd (ALU AU) shareholders A$68.50/share, in cash, a lifetime high, by way of a Scheme.
• Back in June 2021, Altium rejected a A$38.50/share NBIO, then a A$40/share verbal Offer, from US engineering software giant Autodesk. This was discussed in Altium Ltd (ALU) Rebuffs Autodesk Offer
• This is compelling Offer for Altium. For Renesas, this transaction is a paradigm shift away from its core semiconductors manufacturing ops.

• Altium Ltd (ALU AU) has entered a scheme implementation deed with Renesas Electronics (6723 JP) at A$68.50 per share, a 33.6% premium to the undisturbed price (14 February).
• The offer will close in 2H, requiring several approvals – FIRB, CFIUS, HSR Act clearance, German Ministry FDI, German Federal Cartel Office clearance, and Turkish Competition Authority.
• The offer price is attractive and 31% above the all-time high, lowering the chance of a competing proposal. At the last close, the gross spread is 3.8%.

• On 13 February, Ansarada Group Ltd (AND AU) entered a scheme implementation deed with Datasite. The offer price is A$2.50 per share, a 19.0% premium to the undisturbed price (12 February).
• The offer requires FIRB approval along with shareholder approval of the inter-conditional scheme and carve-out transaction. 
• The offer price is reasonable and marginally short of the all-time high. At the last close and for an early June close, the gross/annualised spread is 2.5%/8.3%.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors, developing a critical metals alloy powder manufacturing facility in Tennessee, USA.
• The company has released an executive summary outlining the key findings from the market study prepared by Fairmont Consulting Group LLC into the niobium C103 alloy and other high-value specialty alloys used in mission-critical defence and space applications.
• The executive summary together with key assumptions and financial drivers released by Amaero have formed the basis of our revised earnings estimates for Amaero’s operation. 

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors, developing a critical metals alloy powder manufacturing facility in Tennessee, USA. The company has released an executive summary outlining the key findings from the market study prepared by Fairmont Consulting Group LLC into the niobium C103 alloy and other high-value specialty alloys used in mission-critical defence and space applications.
• The executive summary together with key assumptions and financial drivers released by Amaero have formed the basis of our revised earnings estimates for Amaero’s operation.
• Key assumption changes include the addition of a fourth gas atomiser, positioning for an estimated 40% of the C103 niobium powder market longer term, higher C103 prices than previously modelled, but a 50% yield on powder bed fusion powder production.

• Renesas Electronics (6723 JP) has entered a Scheme Implementation Agreement to acquire Altium Ltd (ALU AU) at A$68.5/share implying an equity value of A$9.1bn and an Enterprise Value of A$8.8bn.
• The offer price is a 33.6% premium to the last close and a larger premium to VWAPs ranging from 30 days to 180 days.
• There will be ad hoc inclusions to the S&P/ASX 100 Index and the S&P/ASX 200 (AS51 INDEX) on Altium Ltd (ALU AU)‘s last trading day (expected second half of 2024).

• CSL Ltd (CSL AU) has reported strong financial performance in H1FY24, with revenue and net profit growing 11% and 20%, YoY, respectively. Growth was mainly driven by immunoglobulins franchise.
• CSL reaffirmed FY24 guidance. Revenue growth is anticipated to be 9–11% YoY at constant currency. NPATA is anticipated to be $2.9–3.0B at constant currency, up 13–17% YoY.
• The company is confident to deliver double-digit earnings growth over the medium term, citing strong demand for immunoglobulins and successful initiatives in plasma collections that are enhancing efficiencies.

• The review period for the March rebalance of the MVIS Australia Equal Weight Index ends on 29 February with results announced on 8 March and implemented on 15 March.
• Lendlease Group (LLC AU), IDP Education (IEL AU) and IGO Ltd (IGO AU) are very close to deletion zone and price moves over the next couple of weeks are important.
• IGO Ltd (IGO AU) is also a deletion from a global index in February and a lower stock price could lead to deletion from this index too.

• Virtual room provider Ansarada Group Ltd (AND AU) has entered into a Scheme with Datasite, a leading global SaaS provider acquired by UK-based PE outfit CapVest Partners in 2020. 
• Datasite is offering A$2.50/share, in cash, a 19% premium to undisturbed and a lifetime high. 
• Apart from requiring Ansarada shareholder approval, the Scheme is conditional on FIRB and the carving out of certain assets to Ansarada’s CEO. This transaction should complete in early June.

• The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
• The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
• With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.

• In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
• I expect one change for ASX 20, one change for ASX 100, and five changes for ASX 200 including a surprise deletion due to long term suspension of a stock.
• The official index changes will be announced after the close on Friday 1st March 2024.

• For 1H24 we model EBITDAR of A$2,396m, ahead of Visible Alpha consensus of A$2,273m, which represents an EBITDAR/ASK 35% higher than 1H19.
• 1H24 will be important to help us better understand “normalised” unit cost levels, with inflation high to date, in part due to a 17% capacity deficit in 2H23.
• Qantas has seen comparable inflation to the US majors but considerably higher profitability. This should enable it to invest in product, operational and customer service improvements while protecting margins.

• Aussie gold miners Red 5 Ltd (RED AU) and Silver Lake Resources (SLR AU) have announced a “merger of equals” via a Scheme of Arrangement.
• Red is offering 3.434 new shares for every SLR share, and will hold ~51.7% of the merged entity, with SLR shareholders holding the remaining 48.3%.
• This has the unanimous backing of both boards. Yet SLR appears to be given short shrift on the merger ratio. Plus SLR holds ~11.9% of shares out in Red.

• Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through its technology platform and a growing number of aligned transactional services.
• The company has reported a 33% year-on-year increase in Q2 FY24 revenue to $0.808m, in what is seasonally the weakest quarter for the group.
• Search portal revenue grew 11% on the previous corresponding period (pcp) but, not unexpectedly, dropped 7% on Q1 due to seasonal factors. 

• Pointerra Ltd (ASX:3DP) provides a powerful cloud-based solution (Pointerra3D) for managing, visualising, analysing, using, and sharing massive 3D point clouds and datasets.
• Pointerra3D is a proprietary digital twin SaaS platform which delivers predictive digital insights and definitive answers to complex physical asset management questions.
• Pointerra has reported Q2 FY24 cash receipts of $1.33m, down 32% on the previous corresponding period (pcp) and down 35% on Q1 FY24, with the company commenting that delays in customer programmes, invoicing, and receivables collection had deferred an additional $1.5m in potential customer receipts into Q3 and Q4. 

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• (ASX:LNK) has moved from ‘discovery and planning’ payments ($425k in H1 FY24) to a full feature trial with a named super fund (REST).
• We now expect onboarding during Q1 FY25, a quarter behind previous assumptions. Link has announced an MoU to extend its contract with Australian Super out until 2028 (from June 2025). 

• Metcash Ltd (MTS AU) is looking to raise up to A$300m (US$195m) in its primary placement. The proceeds will be used to partially fund the acquisition of three businesses.
• The deal would be a large one to digest at 22.5 days of three month ADV and 8.4% dilution. 
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Silver Lake Resources (SLR AU) and Red 5 Ltd (RED AU) will merge. SLR shareholders receive 3.434 RED shares per SLR share, implying A$1.133, a 10.4% discount to the undisturbed price. 
• The merger is strategically sensible as the combined entity should re-rate due to scale, diversification and better cash flow generation.
• The merger terms are more favourable for RED shareholders than SLR shareholders, posing a risk for the vote. The merger may draw out rival suitors.  

• Singapore-based health sciences VC firm SPRIM Global Investments has led the US$21 million funding round (equity and debt) of Australian biotech firm Prota Therapeutics.
• The fresh funding will be used to advance the development of Prota’s peanut allergy remission oral therapy, PRT120, which is being prepared for the phase 3 clinical investigation.
• The new investment will advance the chemistry, manufacturing, and controls (CMC), accelerate the path to an investigational new drug application (IND), and expand Prota’s executive management team to bring on board critical expertise in late-stage drug development and commercialisation.

As part of its strategy to focus on profitable, cash-generative businesses, the boards of EML Payments and PFS Card Services Ireland Limited (PCSIL) have decided to wind down the PCSIL business. This removes a source of considerable cash burn and management distraction and leaves the group better positioned to support the Gifting and the Australian and UK General Purpose Reloadable (GPR) businesses. The strategic review is ongoing and management noted it had received several expressions of interest for Sentenial. FY24 guidance given in November is maintained despite the PCSIL liquidation. We have revised our forecasts to reflect the November trading update and the PCSIL liquidation, upgrading our underlying EBITDA forecasts by 14.9% in FY24 and 6.0% in FY25.

• Pureprofile Ltd (ASX:PPL) is a data analytics, consumer insights and media company underpinned by proprietary technology, servicing business decision makers in brands and media companies as well as market researchers.
• Pureprofile has reported a 1% increase in Q2 FY24 revenue from continuing businesses and 21% decline in Q2 EBITDA excluding discontinued businesses to $0.9m.
• On a like-for-like basis, EBITDA including cash-based short-term incentives was $1.3m, up 9% on the pcp. 

• Red 5 Ltd (RED AU) and Silver Lake Resources (SLR AU) have announced a Merger of Equals that would create a mid-tier gold company.
• Red 5 will acquire 100% of the shares in Silver Lake Resources and Silver Lake shareholders will receive 3.434 RED5 shares for each Silver Lake share held.
• The swap ratio is near the bottom of the historical price range of the stocks and it is no wonder that Silver Lake Resources (SLR AU) is being sold today.

Vection Technologies’ H124 activity report shows sustained momentum, with the group delivering 37% y-o-y revenue growth to A$11.9m. Total contract value (TCV) of A$16.7m was up 67% y-o-y, providing strong revenue visibility for the rest of FY24. As with Q1, we believe growth has been driven by the expansion of existing low-margin, one-off transactions into large multi-year deals. Expanding deals, rather than relying on new wins, underpin the opportunity for operationally geared growth, with management expecting to see the benefits of recent cost reduction measures in H2.

Edison Investment Research is terminating coverage on Atlantis Japan Growth Fund (AJG), Paradigm Biopharma (PAR), The European Smaller Companies Trust (ESCT), The Brunner Investment Trust (BUT), Channel Islands Property Fund (CIPF), Sequana Medical (SEQUA), RTW Biotech Opportunities (RTW), Itaconix (ITX), Endeavour Mining (EDV), Riverstone Credit Opportunities Income (RCOI) and Molecure (MOC). 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.