Australia

Sigma Healthcare (SIG AU) has announced a potential merger with Chemist Warehouse Group (CWG) to create a leading healthcare wholesaler, distributor and retail pharmacy franchisor.
With a market cap of ~A$8.5bn and a free float market cap of ~A$4bn, the merged company will make the cut for inclusion in the S&P/ASX 200 (AS51 INDEX).
Inclusion in the S&P/ASX 100 Index looks just out of reach at the moment as does inclusion in some large global indices.

Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor Sigma Healthcare (SIG AU) will result in CWG’s shareholders holding 85.75% of the merged company.
CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.
Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval.

Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote

By Arun George

The Costa Group Holdings (CGC AU) IE considers Paine Schwartz Partners’ A$3.20 offer fair and reasonable as it is towards the upper end of its A$2.62-3.28 valuation range.
The scheme requires China SAMR and European Commission approvals. SAMR approval poses a timing risk but the scheduling of the scheme meeting reflects PSP’s confidence in securing the approvals.
While not a knockout bid, the profit warning should help sway the retail vote in favour of the scheme. At the last close, the gross spread was 8.1%.

Costa Group’s Shareholder Vote Set. Get Involved

On the 22 September, Costa Group Holdings (CGC AU) backed Paine Schwartz Partners’ (PSP) revised (and reduced) A$3.20/share best and final Offer.
Costa’s Scheme Meeting has now been tabled for the 30 December, with implementation expected on the 26 February. The IE is supportive and Costa’s board unanimously recommends the transaction.
This appears done. Key conditions are Costa’s shareholder vote and SAMR approval. I can’t see SAMR getting into a bind over berries.

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Dec 11

Daily Brief Australia: A2 Milk Co Ltd, Abacus Storage King, Pact Group Holdings, Pioneer Credit and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes
MVIS Australia A-REITs Index Rebalance: ASKing for a Reversal
Geminder Bumps. Pact Group Accepts
Pioneer Credit Limited – Growth Step-Up and Additional Finance

MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes

A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

MVIS Australia A-REITs Index Rebalance: ASKing for a Reversal

There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

Geminder Bumps. Pact Group Accepts

Back in September, plastic products manufacturer Pact Group Holdings (PGH AU) announced – and subsequently rejected – an unconditional off-market takeover of A$0.68/share from its major shareholder, Raphael Geminder.
After a couple of Offer extensions, Geminder has now bumped its bid to A$0.84/share (a 24.4% premium to undisturbed), and declared terms final. Pacts is supportive of the revised offer.
This is done and will trade at terms through to the Offer completion.

Pioneer Credit Limited – Growth Step-Up and Additional Finance

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 18 different Australian vendor partners with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
The company’s AGM updates highlighted the strong position PNC occupies in the marketplace and the expected improvement in NPAT following debt refinancing currently in progress.

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Dec 08

Daily Brief Australia: Perpetual Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer

Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer

Yesterday, Washington H. Soul Pattinson and Co. Ltd (SOL AU) made a $3bn scrip offer Aussie-listed equities manager Perpetual Ltd (PPT AU).
Under the indicative terms, PPT shareholders receive one-third of the Offer in SOL shares, and two-thirds in PPT’s asset management arm via an in-specie spin-off.
PPT rejected the proposal as it undervalues PPT, its corporate trust and wealth management businesses; and it offers SOL shares as consideration. But the Offer is not without merit.

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Dec 07

Daily Brief Australia: Perpetual Ltd, Boss Energy, Empire Energy and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down
Boss Energy Placement – Heavy Dilution and Doesn’t Appear Well Flagged
Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected.

Boss Energy Placement – Heavy Dilution and Doesn’t Appear Well Flagged

By Ethan Aw

Boss Energy (BOE AU) is looking to raise up to A$205m (US$135m) through its primary placement. The proceeds will be used to fund an acquisition and replenish working capital.
The deal will be a large one to digest, at 19.7 days of three month ADV and 14% dilution.
In this note, we will talk about the placement and run the deal through our ECM framework.

Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity

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.

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Dec 06

Daily Brief Australia: Evolution Mining and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Evolution Mining Placement – Back to Equity Markets Again to Fund Another M&A Deal

Evolution Mining Placement – Back to Equity Markets Again to Fund Another M&A Deal

By Clarence Chu

Evolution Mining (EVN AU) is looking to raise around US$350m to partially fund its acquisition of an 80% stake in the Northparkes copper and gold mines.
While the acquisition wasn’t explicitly flagged, the firm has guided that it had been eyeing acquisitions into gold/copper pathways. Thus, we would argue that the deal is somewhat well flagged.
That being said, at 14 days of three month ADV, the deal isn’t a particularly small one for the firm to digest.

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Dec 05

Daily Brief Australia: AMP Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

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Dec 04

Daily Brief Australia: Helia Group , Origin Energy and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

By Arun George

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 – Eoflow (294090 KS), 111 Inc (YI US), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Healius (HLS AU), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Tietto Minerals Ltd (TIE AU), Toyo Construction (1890 JP), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Taisho.

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Dec 03

Daily Brief Australia: Boss Resources and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

By Janaghan Jeyakumar, CFA

The December 2023 review results for ASX indices were announced after the close on Friday 1st December 2023.
There will be three ADDs and thee DELs for the ASX 200 index. There are no changes for ASX 20, 50, and 100.
In this insight, we take a look at our index flow expectations, trends in short interest, and the recent trading performance of the names involved in the ASX 200 changes.

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Dec 02

Daily Brief Australia: Bendigo And Adelaide Bank and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

2024 High Conviction – BEN – Almost All Mortgages | NPLs in Decline | Credit Costs Can Move Lower

2024 High Conviction – BEN – Almost All Mortgages | NPLs in Decline | Credit Costs Can Move Lower

By Daniel Tabbush

In any economy with persistently high interest rates, high living costs and decelerating loan growth, the risk is generally greater for bad corporate loans, not mortgage loans.
BEN is nearly only residential mortgage loans, highly different to CBA, NAB, WBC, ANZ and MQG. This is also clear in long-term low levels of credit costs.
NIM has moved up for BEN in FY23. There is limited risk of maturing debt to hurt its NIM in FY24, very much unlike large peer banks, especially NAB, MQG.

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Dec 01

Daily Brief Australia: ADX Energy Ltd, Bell Financial, Pointerra Ltd, Rent.com.au Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

ADX Energy (ASX: ADX): Equity raise to fund increased WI in Anshof
Bell Financial Group Ltd – ECM Markets Bouncing Back
Pointerra Ltd – A Second Half Story
Rent.com.au Ltd – Cash Burn Slowing, Annuity Revenue Growing

ADX Energy (ASX: ADX): Equity raise to fund increased WI in Anshof

By Auctus Advisors

• ADX is raising A$4.2 mm of new equity plus up to A$1 mm through an offer to shareholders at a price of A$0.10 per share. • We re-iterate our target price of A$0.80 per share as we factor (1) the dilution associated with the equity raise and (2) the increased interest in Anshof.
De-risking the 3P/3C resources at Anshof would add ~A$0.50/sh (~5x the current share price).

Bell Financial Group Ltd – ECM Markets Bouncing Back

Bell Financial Group Ltd (ASX:BFG) is a diversified provider of financial products and software solutions within, and increasingly outside, its traditional full-service stockbroking business.
Since our initiation in October 2023 there have been some positive developments across a number of divisions.
Against our forecast of $550m in equity raisings over H2 FY23 we now estimate $800m with a spike in activity over October and November.

Pointerra Ltd – A Second Half Story

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.
In an in-depth interview with RaaS and at the company’s AGM, the company’s CEO Ian Olson highlighted that the company expected to return to positive cashflows and EBITDA in H2 FY24 as a result of both the resumption of capex spending by US energy utility clients and Pointerra’s expanded customer base across the architecture, engineering and construction (AEC) sector, mining and oil and gas sectors and infrastructure clients.

Rent.com.au Ltd – Cash Burn Slowing, Annuity Revenue Growing