Australia

• After a brief spell of iron ore prices rising to 108 USD/ton, prices have retraced to 102 USD/ton (-3% WoW) but remain broadly in the 95-130 USD/ton band.
• Investors were disappointed with China’s announced stimulus measures, citing their vagueness and lack of a specific timetable, resulting in the positive sentiment waning over the last two weeks.
• We update investors on Vale’s (VALE US) recent proposal to the government to settle the Mariana Dam disaster.

• This week the S&P/ASX 200 INDEX entered WEEKLY OVERBOUGHT status intra-week, peaking at 8384.50, then pulling back to 8283.20 at Close.
• In this insight we will examine resistance levels the index will have a hard time to clear, without pulling back first at least 1 week.
• According to our quantitative models, a pullback is highly likely to happen this week, or the next.

• Unisuper is looking to raise A$500m (US$333m) via trimming a portion of its stake in APA Group (APA AU).
• The deal will be a large one to digest at 24 days of the stock’s three month ADV. 
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Back on the 9th September, pub play Hotel Property Investments (HPI AU) announced – and summarily rejected – a A$3.65/share cash Offer from Charter Hall Retail Reit (CQR AU).
• Charter Hall has now increased terms to A$3.85/share (best & final), a 17.7% premium to undisturbed. The Offer remains conditional on an 50.1% minimum acceptance condition. Charter Hall holds 14.7%. 
• HPI’s reported response? “While Charter Hall’s improved offer provides an attractive exit for shareholders, we remain committed to evaluating all options that deliver the best long-term value.“

• Pilbara Minerals announced the establishment of a $1 billion debt facility with a banking syndicate.
• The company plans to use the facility to repay existing concessional debt and potentially make acquisitions.
• The new facility offers more flexibility in terms of leverage ratios compared to existing debt agreements.

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• Odyssey is looking to raise A$277m (US$186m) from selling its entire stake in AUB Group Limited (AUB AU).
• The PE has been invested since May 2022 with its stake subjected to a two-year escrow period. There have been media reports surrounding the selldown over the past few months.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

On 14 October, Alkane released its Q125 quarterly activities report, showing almost all of its operating parameters in line with both guidance and our expectations for the full year. The exceptions were its head grade, which exceeded the upper end of the guidance range by 6.1%, and AISC, which improved upon the lower end of the guidance range by 9.1%. Most significant however was confirmation that AISC guidance reflects a one-off cost for decline development that is accounted as sustaining capital (rather than as an operating expense) and as a result we have increased our earnings estimates for FY25 by A$21.2m, or 85.8x (8,479%).

• SGX IO Futures declined by $1.94/ton over the week, closing at $106.21/ton on October 11th, with prices ranging between $103.05 and $115/ton.
• DCE premium over SGX surged to 10% on 8/Oct as DCE reopened after Golden Week, but the spread narrowed to 4.8% by 11/Oct. SGX underperformed DCE early in the week.
• Weekly options volume surged 188%, dominated by puts with a 1.04 put/call ratio, concentrated on November expiries and key strikes at 100 and 105.

Actinogen Medical announced the successful completion of its A$3.0m share purchase plan (SPP), which closed 1.3x oversubscribed. With its previously disclosed A$8.1m share placement, total funds from the combined capital raising reached the targeted A$11.1m in gross proceeds. The company expects that the total proceeds will enable its operating runway to reach the release of top-line results for its XanaMIA Phase IIb/III trial in patients with mild-to-moderate Alzheimer’s disease (AD), expected in mid-CY26. The next major catalyst for Actinogen is the interim results on the first c 100 patients of this study, expected in mid-CY25, which could lead to licensing and/or value realisation opportunities. Our risk-adjusted net present value is A$619.8m (vs A$616.8m previously).

• Iron ore prices dropped below $105/ton on 8 Oct after China’s NDRC failed to announce new stimulus measures, tempering bullish sentiment from earlier liquidity injections.
• Chinese portside inventories grew by 590k tons, reaching 147.84 million tons by 11 Oct, driven by higher arrivals and slower post-holiday consumption.
• While RSI signals bullish momentum, MACD shows a fading rally. Prices approach the critical 200-day moving average at $110/ton, posing a potential resistance point.

• With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December. 
• There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
• Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.

• RaaS has published an update report on diversified financials company Bell Financial Group (ASX:BFG) on the back of supportive September 2024 metrics including ECM league tables, ASX volumes and equity markets performance.
• BFG is sitting fourth on the LSEG ECM league tables for the nine months to September 2024, raising $1.2b and on-track with RaaS forecasts (positive for Retail and Institutional).
• The ASX200 closed 6.3% higher at the end of September 2024 relative to June 2024, above implied RaaS assumptions for the full-year and positive for the Portfolio Administration Services (PAS) business and overall investor confidence.ASX transaction volumes continue to recover from a weak CY23, up 32% for the September quarter and positive for the Retail and Technology & Platforms divisions.

• Rio Tinto recommended a price of $5.85 on the US stock and $8.60 on the CDIs, totaling about AU$10 billion or US$6.7 billion, with a 90% premium to the undisturbed price
• The deal is all cash and is expected to close in mid-2025, pending various approvals including shareholder and board approval
• Rio Tinto’s acquisition of Arcadium is seen as a countercyclical move, paying for optionality and long-term potential rather than immediate returns, reflecting a shift in their M&A strategy.

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• Rio Tinto Ltd (RIO AU) has reached an agreement to buy Arcadium Lithium (LTM AU)/(ALTM US) for US$5.85/share (~A$8.70/share), a ~90% premium to the October 4th closing price of $US3.08/share.
• Terms remain below where Arcadium was trading back in January of this year. But it is perhaps disingenuous to call the Offer Price opportunistic. More a counter-cyclical move.
• The Scheme Offer is subject to a 75% shareholder vote and minimal regulatory approvals. The transaction is expected to close in mid-2025. The long stop is the 9th October 2025.

For our next Corporate Webinar, we are glad to welcome Kina Bank’s executive management to Smartkarma. In the upcoming webinar, they will share a short company presentation after which, they will engage in a fireside chat with Smartkarma Insight Provider, Daniel Tabbush. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 15 October 2024, 17:00 SGT.

About Kina Bank

Kina Securities Limited (Kina Bank) was established in 1985 and is now Papua New Guinea’s second largest bank and financial services company.  It offers customers end-to-end financial solutions – from savings accounts to business loans, investments to mortgages, financial advice and investment management. It is also the largest wealth management business in PNG, with more than PGK8 billion funds under management. As the country’s largest fund administrator, it administers accounts on behalf of more than 850,000 beneficiaries whose funds total almost PGK14 billion. Kina Bank is also the leading stockbroking company in PNG. 

• RaaS has published an update report on Know Your People’ regtech company, Kinatico (ASX:KYP) following its Q1 revenue announcement in which it reported that total revenue had grown 10% on the pcp to a record $8m and SaaS revenue jumped 50% on the pcp to $3m.
• We see the Q1 result as a positive start for FY25.
• On an annualised basis, SaaS revenue is running at $12.1m, with current momentum indicating that it could end the year higher.

• Arcadium Lithium (LTM AU) has disclosed a binding offer from Rio Tinto PLC (RIO LN) at US$5.85 per share, a 90% premium to the undisturbed price of US$3.08 (4 October).
• The offer is attractive compared to analyst price targets and peer multiples but unattractive compared to cyclical low timing and precedent transactions.
• The shareholder structure requires an activist to disrupt the vote. The long-dated offer provides optionality on a bump if lithium prices materially re-rates. 

• Late last evening, Rio Tinto Ltd (RIO AU) and Arcadium Lithium (LTM AU) announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.
• Arcadium Lithium (ALTM US) closed nearly 31% higher at US$5.55/share and Arcadium Lithium (LTM AU) should follow when the stock opens.
• Arcadium Lithium (LTM AU) could move around 40% higher today to catch up with Arcadium Lithium (ALTM US) – that would still leave a 5.4% spread to the offer price.