Australia

• Flight Centre Travel (FLT AU) is looking to raise US$127m from a fully underwritten institutional placement. 
• The proceeds will be used to acquire Luxury Travel Holdings (Scott Dunn), a UK-based luxury travel business.
• In this note, we will discuss deal dynamics, past deal performance, and share the scores on our ECM framework.

SenSen Networks (SNS) maintained its streak of record year-on-year cash receipts in Q223, with customer receipts up 70% against Q222 to A$2.6m. SNS continues to see growth across its key verticals of smart cities, gaming, retail and surveillance, boosting annual recurring revenues (ARR) to c A$8m, and leaving the company well on track to meet management’s expected ARR of A$10m by the end of FY23. SNS’s operational restructuring and previously announced A$2.5m in cost saving efforts should support management’s goal of cash flow neutrality by the end of the fiscal year. These results lead us to maintain our forecasts and if SenSen can continue to grow ARR, then the valuation gap between peers can potentially close.

• X2M Connect Limited (ASX:X2M) has updated several key variables in conjunction with its December quarter 4C release.
• Most key variables were in-line or ahead of RaaS expectations including a cash-flow positive Q2, device growth of 23% on September 2022 to 361k (RaaS 345k), H1 FY23 revenue +96% to $9.0m (RaaS $9.2m), cash costs of ~$4.3m (RaaS $4.6m) and a cash balance of $3.05m.
• Post-month end we estimate a cash balance closer to $3.5m on receipt of a $1.3m R&D credit offset by the repayment of a related R&D loan. 

• We currently see 1 change for the ASX20, 2 for the ASX100, 4 changes for the ASX 200 and 9 adds/ 6 deletes for the ASX300 Index in March.
• Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks. 
• Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.

• Tyro Payments (TYR AU) has offered, Potentia, four weeks of due diligence access to “develop a significantly improved proposal.” The Board rejected Potentia’s previous A$1.60 offer on 12 December.
• Since the rejection of the offer, the FY2023 guidance has been upgraded and peers have re-rated. Therefore, Potentia can afford to be more generous with its terms. 
• Press reports suggest that an offer of around A$1.85 per share would be supported by shareholders. We would be buyers as Tyro is undervalued at the last close price.

• After Potentia bumped indicative terms to A$1.60/share last month, Tyro Payments (TYR AU)‘s board considered the revised terms remained below what is considered fair, and has ceased all discussions.
• Following discussions between Tyro and Potentia, the Tyro Board is now providing Potentia with a 4-week period of due diligence to “enable Potentia to develop a significantly improved proposal“.
• No indicative price was mentioned. Mike Cannon-Brookes’ Grok Ventures was open to a competing proposal of A$1.85/share. 

• It’s a fair bet Hancock Prospecting and Mineral Resources (MIN AU) are actively discussing the final stages for Warrego Energy (WGO AU) behind the scenes.
• It is unlikely MinRes aggressively builds a ~19% stake in a company subject to a two-way takeover battle, and declares its position “strategic” with no intention of making an Offer. 
• This stake may be a bargaining chip from MinRes to keep Hancock on the sidelines in its tilt for Norwest Energy NL (NWE AU).

• Harvest Technology Group Limited (ASX:HTG) licenses its proprietary video compression and encryption technology for low-bandwidth, high-latency applications needing secure real-time streaming video communication.
• The company delivers solutions for data transfer from anywhere via satellite or congested networks.
• Harvest offers a solution which enables real-time monitoring of remote locations, real-time feedback for field technicians, and secure video conferencing. 

Respiri has released its Q223 quarterly activity report and provided a business update for the quarter. The second quarter was characterised by improving commercial traction for Respiri, with the company signing three new contracts for wheezo (including Minnesota Lung Center and Arkansas Heart Hospital), taking the total client count to six at the end of the period. Respiri’s wearable device Sorfe also continues to make progress with clinical studies anticipated to commence by March/April 2023. The recent announcement of a A$1.5m capital raise (with the option to increase the offering size based on investors interest) is expected to extend the company’s cash runway to Q423, based on current burn rates. With patient onboarding ongoing at multiple sites, we expect initial cash inflows from device sales and RPM services in the coming months, which should help scale up commercial activities and likely expand the cash runway further.

• Back on the 10 January, Norwest Energy NL (NWE AU) rejected Mineral Resources (MIN AU)‘s off-market scrip Offer.
• It was apparent what MinRes needed to bump. This was an easy win if they do. On cue, they have now increased the scrip terms and NWE’s directors are supportive. 
• Scrip terms are now 1 MinRes for every 1,300 NWE shares – from 1,367. I think NWE could have held out for more, but it is what it is. 

• Origin Energy (ORG AU)’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.
• Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.
• Peers’ share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself. 

AFT Pharmaceuticals has announced an exclusive licensing and distribution agreement for the Maxigesic intravenous (IV) formulation with Salus Pharmaceuticals (a Slovenia-based wholesaler of pharmaceutical products) for nine Eastern European countries across the Balkan and Baltic regions. Maxigesic IV is already registered in five of the nine countries, with launches planned in CY23. AFT will also file registration applications for the remaining countries during the year. Maxigesic IV is registered in 41 countries globally and has been launched in more than 10, including the key markets of France and Italy in November 2022. As AFT awaits Maxigesic IV approval in the US, we see this new agreement as an encouraging step towards expanding its international presence, in line with its strategic priorities for CY23.

• Mineral Resources (MIN AU) has revised its offer from 1 MinRes share for every 1,367 NWE shares to 1 MinRes share for every 1,300 NWE shares. The offer is unconditional. 
• The Norwest Energy NL (NWE AU) Board now recommends the offer. Most of the value uplift is due to the 17.4% increase in MinRes’ share price since 15 December.
• MinRes’ revised off-market takeover offer is fair in comparison to Warrego Energy (WGO AU)’s bids and historical ranges. However, this is predicated on the MinRes maintaining its share price run.

• PolyNovo Ltd (PNV AU) reported record high sales of A$27.3 million, up 67.5% YoY during H1FY23, mainly driven by the strong momentum in the U.S.
• The company has continued to increase the sales team, particularly in the U.S. which has driven sales growth and customer account acquisition, entailing long-term visibility.
• Recently, PolyNovo has raised A$53 million to fund its global growth aspirations. The company is entering new markets, enhancing portfolio, and expanding manufacturing facility to support 5x sales.

• Schrole Group Ltd (ASX:SCL) is an Australian software company focused on providing human resource technology solutions to the international education and training sector.
• Schrole has developed a suite of five HR Software-as-a-Service (SaaS) offerings including the core product, Schrole Connect, a SaaS-based staff recruitment platform.
• Schrole Group has reported its best- ever quarterly cash receipts and operating cashflow which respectively increased 38% and 138% over the same period in CY21.

• Warrego Energy (WGO AU)’s offers from Hancock and Strike Energy (STX AU) close on 31 January and 13 February, respectively. As time passes, the chance of a further bump is slim.
• Mineral Resources (MIN AU) is the kingmaker. A MinRes/Strike pairing results in a combined min of 49.83% to a max of 73.93% of outstanding shares (if Hancock retains its stake).
• A MinRes/Hancock pairing results in a combined min of 45.21% to a max of 69.32% of outstanding shares (if Strike retains its stake). This is the likely scenario.

As Medlab Clinical moves into 2023, the expected commencement of a Phase III trial for NanaBis (the company’s cannabinoid based analgesic therapy) in cancer-induced bone pain will be the focus for investors. Management made considerable progress towards Phase III in 2022, by switching to a purely synthetic cannabinoid formulation and gathering encouraging real-world data on NanaBis use. We believe these actions should maximise the potential for NanaBis in both a regulatory and a commercial setting. We note that successful progression of the company’s programmes will be contingent on Medlab’s ability to raise capital, given the short cash runway (funded into March 2023) and recent setback with the Nasdaq listing plans. We update our estimates to reflect the financing risk and macro uncertainty, resulting in our valuation decreasing to A$183.5m or A$80.4/share, from A$236.1m or A$103.5/share.

• Acrow Formwork and Construction Services (‘ACF’) and Big River Industries (‘BRI’) are key players within the Australian Building Products and Distribution markets.
• Acrow focuses upon Formwork, Industrial Services and Scaffolding; and Big River specialises in the manufacturing of timber veneer, plywood and formply, and distribution of building supplies.
• Both businesses have undergone significant strategic pivots over the past 4-5 years and are now reaping the rewards.

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• Pickle Crow represents a medium to long-term development proposition with potential for exploration results that shift the paradigm along the journey.
• We model one of many potential development pathways as a starting point for valuation.
• With a decent lead-time to first gold, exploration results will be the main share-price driver near-term.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.