Australia

• Genesis Minerals (GMD AU) and St Barbara Ltd (SBM AU) have dropped their merger plans. Instead, GMD will acquire SBM’s Leonora gold assets for a total consideration of A$600 million.
• The transaction is favourable for GMD shareholders. GMD is getting the assets at an attractive price. GMD will fund the acquisition through a A$450 million placement at A$1.15 per share.
• The transaction provides a way out for long-suffering SBM shareholders as they retain exposure to gold assets and have option value on the sale of SBM’s remaining assets.

EML Payments’ H123 results reflected the changing mix of revenue (lower establishment fees and breakage, higher interest income), the effect of the ongoing remediation of regulatory issues in the European and UK PFS businesses and the restructuring of the group. With the Irish regulator raising additional concerns post results and applying a more stringent growth cap to EML’s Irish subsidiary, PFS Card Services Ireland Limited (PCSIL), the board has initiated a strategic review of the business.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Softbank Group
2. Central China Real Estate
3. Sino-Ocean Group
4. Seazen (Formerly Future Land)
5. Vedanta Resources

and more…

• Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
• OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
• There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

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.

• Meituan
• Nickel Industries Ltd
• Vedanta Resources

• Under the revised proposal, Newmont (NEM US) has bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held. 
• Including a permissible franked special dividend of up to US$1.10/share, the revised proposal represents an implied value of A$32.87/share. Newmont indicated the revised bid represents its best and final price.
• Newcrest has granted Newmont confirmatory due diligence to put forward a binding proposal.

• Newcrest Mining (NCM AU) disclosed a revised non-binding indicative privatisation proposal from Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend. 
• Since the 6 February announcement, the average implied value of the revised offer is A$29.14 per share, which is 11.6% higher than the average of the previous offer of A$26.12.
• The offer is attractive in terms of historical prices and VWAP ratios but carries the volatility risk around Newmont shares and FX rates. Expect a binding proposal. 

Since our outlook note published on 7 July 2022, Alkane has made several important announcements. Firstly, it improved its FY23 production guidance to 62,000–70,000oz (a 17% increase) after impressive H123 production at Tomingley and now expects to reach the upper end of this range. This has resulted in our EPS forecast for FY23 increasing by 30.6% from A$0.0445/share to A$0.0582/share. This was followed by the approval of the Tomingley Gold Extension Project, permitting open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former), extending the mine life at Tomingley to at least 2031. Additionally, Alkane announced an inferred mineral resource at Kaiser of 4.7Moz AuE (0.48Mt Cu, 2.05Moz Au). Finally, it reported Q323 gold production of 16,641oz, bringing the current year to date production figure to 54,431oz.

• The company has announced a restructure of its domestic retail business following a review that identified excess resourcing levels.
• The result is an estimated 20 redundancies and annualised cost saving of $2m at the EBITDA line
• We have upgraded our forecasts from FY24 and our valuation has increased as well.

• Comms Group Ltd (ASX:CCG) has announced a restructure within its domestic retail business following a review that identified excess resourcing levels.
• The result is an estimated 20 redundancies and an annualised cost saving of $2m at the EBITDA line.
• Guidance for FY23 EBITDA of $5.0m+ (RaaS $5.1m) remains intact for FY23.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU). 
• Lowest spreads – Healius (HLS AU), Golden Energy & Resources (GER SP), Liontown Resources (LTR AU), Norwest Energy NL (NWE AU), Mincor Resources NL (MCR AU), GK Goh.

• Carpentaria-2H testing results continue to build the economic case for EEG
• IP30 gas flow of 3.0 mmcfd/1000m (normalised) is on the button and early analysis suggests gas recoveries of 6-8Bcf/well could be achievable
• The business case is building with upgraded resource certification to come heading to a FID target date of end-2023.

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear, with a core colour range supplemented by regular limited-edition releases, all with FSC (Forest Stewardship Council) certification throughout the supply chain.
• The company has operations in Australia (67% of sales), UK, (30% of sales) and the US (3% of sales). A H1 FY23 sales decline of 5.7% was better than our industry average estimate of-19% cycling lockdown, while lower sales and marketing spend saw EBITDA in-line with the pcp at $7.6m, the highest of any industry peer.
• H2 FY23 should see similar trends and deliver EBITDA well above consensus.

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear.,
• A H1 FY23 sales decline of 5.7% was better than our industry average estimate of -19%, while  EBITDA was in-line with the pcp, the highest of any industry peer.
• On our estimates this superior business model currently trades at a PER of 1.0x ex-cash. Inventory is the key risk, currently representing ~two years’ sales, but is low fashion risk.leared.

• 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 NT energy basins are fast developing as strategic high-calorific gas bolsters for east coast Australia’s future domestic requirements, growing Gladstone LNG ullage and potential supply for Darwin’s expanding LNG export terminals, amid funding support from Territory and Federal governments.

• X2M Connect Ltd (ASX:X2M) has developed and is commercialising a patented proprietary Internet of Things (IoT) solution predominantly focused on the utilities sector across the Asia Pacific region, converting legacy meters into smart meters.
• The company has announced it has secured $1.8m in hardware water quality sensor sales in China with three new contracts.
• The contracts bring the contribution from China to $3.4m this financial year to date which exceeds the revenue generated from China in FY22.

• Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
• Following a strategic review, Amaero has shifted its focus to titanium powder production and has created a new United Arab Emirates-based enterprise, Amaero Advanced Metals Ltd, to build an 827-tonne a year titanium powder operation within Abu Dhabi’s KEZAD industrial park.
• The nuances of the focus have shifted since the company first announced plans to concentrate on the UAE and titanium powder operations but “Plan B” allows Amaero shareholders to retain 100% ownership of the project which has been scaled back to focus on the opportunity with the greatest economic return.

• X2M Connect (ASX:X2M), which is focused on digitising the utilities sector across APAC,  has secured $1.8m in hardware water quality sensor sales in China with three new contract.
• The contracts bring the contribution from China to $3.4m this financial year which exceeds the revenue generated from China in FY22;
• While this announcement is in our numbers, it provides comfort for both near-term and longer-term estimates as units in the field support future recurring subscription fees.

• Amaero has substantially shifted its strategy to focus on titanium powder production with a new project planned for the UAE.
• With the greenlight slated for the end of June 2023, we conservatively anticipate first production in H1 FY25, powder qualification in H1 FY27 and “at capacity” production in H1 FY2.
• We have substantially restruck our earnings forecasts to reflect this new project.

• Taiwan has been our top long but showing momentum deterioration. ASX and Kospi met rally targets to finesse a dip and secondary push. HSI long struggling. Short near 21,000.
• Japan and India are our immediate short plays. NKY dip and rally with bigger top due at 28,500.
• April is a bullish month but once the buoyant cycle terminates, we will turn more aggressive on the short side (NKY, HSI, Korea and even Taiwan is on our radar.

Paradigm has announced day 168 (six-month) data from the PARA_OA_008 trial, which is evaluating injectable pentosan polysulfate sodium (iPPS) as a potentially disease-modifying treatment for knee osteoarthritis (kOA). Highlights from the interim data include: structural changes in several disease features as measured by magnetic resonance imaging (MRI), potential support for disease-modifying OA drug (DMOAD) activity from trends in biomarker data, and persistent positive responses in WOMAC scores. During the second half of CY23, Paradigm intends to discuss with the FDA and EMA a potential regulatory pathway for DMOAD indication labelling; we believe that the outcome, along with clarification on the Phase III development pathway, could represent a significant catalyst for the company.

• This morning, ACCC announced that it had released a “Statement of Preliminary Views” on the ANZ/Suncorp deal and sought further views. 
• For now, the ACCC questions “the nature, likelihood, and extend of claimed public benefits” including synergies or claims regarding investment in Queensland. 
• Based on my reading of the document, this view is likely to carry over through the final decision due mid-June 2023. That means there’s likely a trade here. 

• On the 20 March, gold play Breaker Resources Nl (BRB AU) announced a Offer from Ramelius Resources (RMS AU) of 1 RMS for every 2.82 BRB shares. 
• The all-scrip takeover Offer backs out an implied Offer price of A$0.403/share or a 38.9% premium to last close.
• The Offer is conditional on 50.1% tendering with 19.92% of shares out supportive. The first close is the 1 May. 

• Mincor Resources NL (MCR AU)’s Board has unanimously recommended Wyloo’s unconditional off-market takeover bid at A$1.40 per share. The offer price is final. 
• The Board has taken the path of least resistance by recommending the offer instead of rejecting the low-balled offer and addressing the production quality issues.
• The offer is attractive in terms of multiples (EV/Resource and EV/Reserve) but at a discount to recent share prices and analyst price targets. Shares are trading in line with terms.

• CSL Ltd (CSL AU) is well-positioned to report double-digit revenue and profit growth through FY25, driven by strong performance of existing business and new growth engines.
• CSL will launch FDA-approved gene therapy Hemgenix for Hemophilia B in the US in 2H23. With estimated global annual peak sales of $2.4B, Hemgenix is a compelling opportunity for CSL.
• During H1FY23, CSL reported record level of plasma collections, with 36% growth in                volume. Current plasma collection is 10% above the pre-pandemic. Higher volume and yield will improve profitability.

• BHP Group Limited’s recent drawdown presents a lucrative opportunity for investors seeking to lower their portfolio cost basis.
• BHP’s exploration pipeline and planned pivot out of coal might add volume to its stock’s valuation.
• BHP is yet to realize the benefits of higher base metals prices.

• AUD and NZD bear patterns stand out versus the Euro’s rebound which is at the top end of the range as the DXY finds a foothold at 102/101.
• Sterling met our 1.24 rally objective where we reversed to short. USD/JPY rise from 130 reaching for 134. USD/ZAR near our buy zone.
• Yield basing needed to support any sort of meaningful USD rise (DXY 104 near resistance) but there are tradable patterns to work with. USD shows a firmer tone in Asia.

• Discounts to NAV of covered holdcos have shown mixed performance during March, with spreads widening until short after the UBS/CS deal, now tightening. 
• Discounts to NAV: C.F.Alba, 51.2%; GBL, 35.8%; Heineken Holding, 14.6%; Industrivärden C, 11.1%; Investor B, 9.7%; Porsche Automobile Holding, 49.6%. The spread of Rio Tinto DLC widened to 18.9%.
• Recommended trades: Heineken Holding, Investor AB (long Investor B/short main holdings) and Rio DLC.

• Last week, Mincor Resources NL (MCR AU) said BHP Group Ltd (BHP AU) would not agree to amend off-take agreement specifications, and therefore would no longer accept lower-quality ore.
• Mincor subsequently withdrew its earnings guidance, and Wyloo Metals shortly followed by declaring its A$1.40/share unconditional on-market Offer best and final.
• This morning (4 April), Mincor released its Target Statement, and recommends shareholders accept the Offer from Wyloo.

• Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
• Mincor delivers 100% of its ore to BHP.  It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance. 
• Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.

• Lithium play Liontown Resources (LTR AU) has now thrice rejected Albemarle Corp (ALB US)‘s proposals. 
• Liontown has labeled Albermarle’s third bid of A$2.50/share as opportunistic. 
• Albemarle has picked up 2.2% in Liontown. But that is dwarfed by Tim Goyder’s (chairman)’s 15% stake, who is not engaged at the current bid price. 

• Liontown Resources (LTR AU) has rejected an unsolicited non-binding privatisation proposal from Albemarle Corp (ALB US) at A$2.50 per share, which is a 63.9% premium to the undisturbed price (27 March).
• The offer is attractive in comparison to peer multiples and historical share prices. Liontown suggests that the offer does not appropriately value the Kathleen Valley Lithium Project.
• A bump to the Board’s desired A$3.00 offer is justifiable based on the Kathleen Valley NPV sensitivity analysis related to spodumene prices. Albemarle remains willing to engage. 

• United Malt Group Ltd (UMG AU) has granted privately-held Fench rival Malteries Soufflet due diligence on an exclusive basis after receiving an indicative Offer by way of a Scheme.
• Malteries Soufflet’s non-binding proposal for the Graincorp Ltd A (GNC AU)-spin-off of $5.00/share is a 45.3% premium to undisturbed.
• The Offer will be subject to FIRB approval. Malteries Soufflet and United Malt are the second and fourth-largest maltsters in the world.

AFT Pharmaceuticals (AFT) has announced that it has signed three additional licensing agreements for Maxigesic IV – with Labatec in Switzerland and Pharma Bavaria in Argentina and Paraguay. The product franchise continues its international expansion, with the deals following the recent launches of Maxigesic IV in five European countries. To date (FY23, ending 31 March) AFT’s flagship product, Maxigesic, is available in 61 countries (across all dose forms), up 15 from the prior year. This is marginally lower than the target of 63 countries for FY23, but the company also announced achieving its first product registration in China with Crystawash Extend, its long-lasting sanitiser. China launches are generally highly sought after, and this announcement should provide access to the larger offline retail and hospitals segments (c 75% of the over-the-counter (OTC) market in China). Currently AFT only has an online retail presence in China (under the Cross Border E-Commerce OTC scheme).