Australia

• In Tax-Loss Selling in Australia – Brief Historical Analysis And A Trade Basket at the start of June I proposed a basket. 
• We are getting to the end of June. Time to unwind that short basket. The named ticker was -26%. The 70-name basket underperformed ASX200 by 4.4%.
• One can now go long the basket into end-June as historically it outperforms S&P-ASX200 over two months. If one did not short, one can still go long. Basket below.

• Specialty mining driller DDH1 (DDH AU) has announced a merger, by way of a Scheme, with Perenti Global (PRN AU).
• Under the proposed terms, DDH1 shareholders will receive for each DDH1 share held $0.1238 cash plus 0.7111 Perenti shares, for an implied value of A$1.01/share, or a 17.4% premium. 
• Directors and shareholders with a combined 38% of DDH1 shares have indicated an intention to vote in favour of the transaction. Scheme implementation is expected in early October 2023.

• On the 19 April, Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia, announced a $3.15/share NBIO from Wesfarmers Ltd (WES AU)
• Ahead of the expiry of Wesfarmers’ due diligence, EC Healthcare (2138 HK) snuck in a $3.35/share NBIO. Wesfarmers opted out of its matching rights. Although due diligence remained ongoing.
• SLA has now announced a binding implementation agreement with Wesfarmers at A$3.35/share. No word, as yet, from EC Healthcare. Nor is one expected.

• DDH1 (DDH AU) has entered a SID with Perenti Global (PRN AU) at A$0.1238 cash plus 0.7111 PRN shares for each DDH share, a 17.4% premium to DDH’s 5-day VWAP.
• The key conditions are shareholder scheme approval and ACCC clearance. Shareholders representing 38.0% of outstanding shares will vote in favour of the scheme.
• The offer is attractive compared to peer multiples, and the net exchange ratio is fair on a 1-year basis. A critical risk is volatility risk around PRN shares.  

• Silk Laser Australia (SLA AU)‘s binding offer from Wesfarmers Ltd (WES AU) is at A$3.35 per share which is in line with EC Healthcare (2138 HK)’s non-binding proposal.
• While EC Healthcare is a relative minnow, it secured HK$1 billion (A$191 million) financing in May, which suggests a chance of returning with a higher offer. 
• If EC Healthcare deployed the HK$1.0 billion loan for the acquisition, it would imply a price of A$3.60 per share, 7.6% above Wesfarmers’ offer.  

• Ricegrowers Limited, trading as SunRice (ASX:SGLLV), has reported its FY23 results and provided some outlook commentary for FY24.
• The FY23 result delivered adjusted revenue growth of 23%, EBITDA growth of 28%, NPAT growth of 18% and EPS growth of 14%, all above RaaS’ estimates.
• The full-year dividend was raised from $0.40/share to $0.50/share (fully franked yield of 7.3%) and we view this level as sustainable near- term given outlook comments and have increased our assumptions accordingly. 

• Comms Group Ltd (ASX:CCG) has announced an extension of the Vodafone contract term to a minimum five-years together with an expansion in the range of services provided in delivering voice connectivity for Microsoft Teams, including the more advanced Operator Connect.
• The extended agreement also includes a minimum monthly payment to CCG of A$30k beginning October 2023.
• While our Vodafone assumptions are unchanged, and our medium-term expectations for Vodafone well above the minimum monthly payment, the revised agreement improves visibility and demonstrates Vodafone’s commitment to the relationship. 

Lithium Power International (LPI) has entered into a binding agreement to sell its 100%-owned Australian lithium tenements to Albemarle. This is an all-cash transaction that will see LPI receive A$29m on completion, which is expected in early July 2023. The company will use the proceeds to further advance its flagship Maricunga lithium project in Chile. The deal is positive in our view in that it allows LPI to significantly extend its cash runway without further diluting its shareholders.

• 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 September 2023 Rebalance.
• I currently expect one change for the ASX 100 index and five changes (including one intra-review change) for the ASX 200 index.
• There could be 7 ADDs and 5 DELs for the ASX 300 index.

• MQG is seeing far higher NPL growth than traditional bank peers
• Funding costs pressure are far higher and NIM contraction is substantial
• High rates for longer & greater risks of recessionary-conditions can weight more on MQG

• This morning, Abacus Property (ABP AU) units were halted for trading and the Institutional Offer for Abacus Storage King (future ASK AU) units were launched. 
• The Offer is underwritten by Barrenjoey and Morgan Stanley. The Institutional Offer will be completed by Friday, and results announced Monday 19 June, with trading halt lifted. 
• Then the Retail portion of the Offer will be conducted til 27 July. EGM the same day. Delayed settlement trading of ASK and New ABP (ABG AU) will start 1Aug.

• Abacus Property (ABP AU) is looking to de-staple Abacus Storage King (ASK AU) , its self-storage business. The offer will be underwritten by Morgan Stanley and Barrenjoey.
• Offering 1 ASK share for every 5.6 ABP share, the REIT is looking to raise A$225m (US$153m) via offering 159.6m shares at a A$1.41-1.47/share price band.
• The deal is effectively an IPO, and after having been in the making for some time now, it is well flagged as well.

• Austal Ltd (ASB AU) is drawing takeover interest from Cerberus Capital, according to AFR. Cerebus joins Arlington Capital Partners and Bondi Partners as rumoured suitors, increasing the bid odds.
• Takeover interest in Austal is driven by the desire to capitalise on the opportunities presented by the AUKUS defence pact between Australia, the US and the UK. 
• Andrew Forrest’s 19.34% stake can make or break a deal. Peer multiples point to an offer of at least A$2.80, a 22% premium to the last close.  

• CSL Ltd (CSL AU) has reduced its profit projection for FY23 due to higher-than-anticipated adverse impact from Fx. The company now expects a Fx headwind of $230–250M from $175M earlier.
• After considering modest recovery of CSL Behring gross margin and generic competition for Ferinject in Europe, CSL expects FY24 NPATA to grow 13–18% to $2.9–3.0B at constant currency.
• All eyes are now on the U.S. launch of the one-time gene therapy Hemgenix for Hemophilia B. CSL expects the first patient to take Hemgenix within the next few weeks.

• Abacus Property (ABP AU) has proposed the de-stapling of Abacus Storage King (ASK), the self-storage assets, along with the proposed A$225.0 million equity raising in ASK.
• A key logic of the de-stapling is the potential unlocking of the large, implied discount to NTA in the commercial portfolio. The EGM on the de-stapling proposal is in July.
• The equity raise is a key headwind to the rerating. Our SoTP valuation is A$3.10 per unit, which is a 20% upside to the last close price.

• Cybersecurity firm Tesserent Ltd (TNT AU) has announced it has entered into a Scheme with France’s Thales SA (HO FP).
• Thales is offering A$0.13/share, a whopping 165% premium to last close. Although, TNT is down 87% from its January 2021 high. 
• The Offer is conditional on TNT shareholder approval and FIRB/OIO approvals. Those regulatory approvals will not be straightforward.

• Tesserent Ltd (TNT AU) has entered into a scheme implementation deed with Thales SA (HO FP) at A$0.13 per share, a juicy 165.3% premium to the undisturbed price (9 June).
• The offer is subject to several conditions such as shareholder, FIRB and OIO approval. FIRB approval is likely due to Australia and France being part of the Nine Eyes alliance.
• Despite the substantial premium, shareholders’ acceptance of the offer could be a risk due to their higher buy-in prices. At the last close, the gross spread is 8.3%.

• Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019.
• 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.
• Carly has attracted larger automotive industry businesses as shareholders, with a model that facilitates sales volumes of new vehicles and delivers a new recurring revenue stream for automotive manufacturers and dealers. 

• Ansell Ltd (ANN AU) and Challenger Ltd (CGF AU) will be deleted from the MVIS Australia Equal Weight Index at the close of trading on 16 June.
• One way turnover is 5.9% resulting in a one-way trade of A$107m. Only the two deletions have more than 1 day of ADV to sell from passive trackers.
• With the passive selling between 33-50% of short interest on the deletions, there could be short covering at the close on Friday.

• Back in February with the H1 results announcement, Abacus Property (ABP AU) announced an intention to spin off an ASX-Listed Self Storage REIT with A$3bn in total assets.
• The stock popped 7.4% to A$3.06 but is -16% since. In April they dropped their equity holding in National Storage REIT (NSR AU), in May they updated again.  
• Last week they had a big new Investor Presentation saying they would go ahead. There’s a trade in here. 

• The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 16 June. There are no constituent changes, but there are float and capping changes.
• Estimated one-way turnover at the rebalance is 2.7% resulting in a one-way trade of A$16.6m. There is limited impact on the index constituents.
• The largest inflows are on Scentre Group, HomeCo Daily Needs REIT and Region Re, while the largest outflows are on Stockland, Mirvac Group, Dexus Property and Goodman Group.

• There are 3 inclusions for the MVIS Global Rare Earth/Strategic Metals Index at the June rebalance. Plus there are free float and capping changes.
• One way turnover is estimated at 10.6% and will result in a one-way trade of US$66m. There are a few stocks with over 0.5 days of ADV to trade.
• Yunnan Chihong Zinc&Germanium Co, Ltd. (600497 CH) was not added to the index while ioneer Ltd (INR AU) has avoided deletion in June.

• Redox (RDX AU), a chemical and ingredients distributor, is looking to raise around US$270m in its Australia IPO. 
• In 2022 it was ranked as the largest chemicals and ingredients distributor in Australia, as well as the 13th largest in the Asia Pacific region and the 35th largest worldwide.
• In this note, we undertake a quick peer comaprison and talk about valuations.

Vection Technologies (VR1) recently announced that its ChatGPT-powered mixed reality solution, 3D Frame, will now be available on Apple’s macOS. The release further highlights the interoperability of VR1’s technology with global powerhouses in the virtual (VR) and augmented (AR) reality space, positioning it well to capitalise on the latest breakthrough advancements, such as Apple’s Vision Pro AR headset. 3D Frame’s cross-platform compatibility with Windows and macOS should ensure wider availability across devices and reaffirms VR1’s position as a major player in the field. Management also announced the proposed acquisition of Invrsion, which it expects to be immediately earnings accretive and brings with it a portfolio of tier 1 customers, including Walgreens, Coca-Cola and Diageo.

Actinogen intends to start patient enrolment and dosing in H2 CY23 in the Phase IIb XanaMIA study portion assessing Xanamem in lead indication Alzheimer’s disease (AD). The company expects to receive FDA approval in the coming weeks on amendments to the study design protocol and the new Xanamem tablet formulation to be used (replacing the capsule used in prior Xanamem trials). It expects to report top-line efficacy data in H2 CY25, with interim readouts projected in or around late CY24 or early CY25. We believe market participants will be keen to observe whether this study, which prospectively enrols patients with elevated pTau, will confirm the positive findings shown in a subset biomarker analysis from the earlier XanADu study. Positive Phase IIb data could introduce the possibility of material out-licensing or value realisation opportunities, in our view.