Australia

• RaaS Research Group has published an update on ethically-motivated, diversified financials group Pioneer Credit (ASX:PNC) following the company’s FY24 result in which it delivered NPAT adjusted of $1.2m.
• Our base case valuation has increased to $263m (previously $217m) or $1.96/share reflecting improved financing.
• We model a range based on a number of factors giving us a low case of $1.84/share and high case of $2.23/share.

• ASX 200 index rebalancing: West Gold and Yancoal added, Strike Energy removed
• Impact on stock prices and trading dynamics around index inclusions and removals
• Observations on companies prematurely entering the index and facing challenges after being removed

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• Nextdc Ltd (NXT AU) aims to raise around US$366m via a fully underwritten institutional placement, along with another US$133m via a non-underwritten SPP.
• The company has undertaken a number of deals in the past, most of which have done ok. Although this one appears to be a bit opportunistic.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Iron ore prices declined 9.4% last week, closing below the monthly S1 pivot point, indicating resistance.
• Despite a brief 0.75% rise on Friday, prices signaled a bearish crossover in the 9D and 21D SMAs, reinforcing negative sentiment.
• The 91-price level remains strong support, with key resistance levels at 93.9, 95.7, and 98.9. A sharp reversal could push prices to 96.5 or higher.

• Pub play Hotel Property Investments (HPI AU) has announced – and summarily rejected – a A$3.65/share cash Offer from Charter Hall Retail Reit (CQR AU).
• Terms are a 14.8% premium to the undisturbed share price on March 28; following which a 14.8% “strategic interest” (@ A$3.35/share) was acquired by CQR and Charter Hall (CHC AU).  
• The Offer is subject to a 50.1% acceptance hurdle. The Offer should be open for acceptances around the 23 September.

• Nanosonics Ltd (NAN AU) reported significant turnaround, with recording H2FY24 revenue of A$90M, up 14% over the first half, driven by 20% increase in capital revenue in H2 over H1.
• For FY25, Nanosonics guided for accelerated revenue growth of 8–12%, driven by growing capital revenue with greater unit volumes and increasing recurring revenue aligned with growth in installed base.
• The company expects FY25 gross profit margin of 77–79% versus 77.9% in FY24, on higher production volumes in FY25 after reducing inventory in FY24.

• RaaS has published an update report on ‘Know Your People’ regtech company, Kinatico (ASX:KYP) following its 5 September webinar in which it highlighted for the first time the annual recurring revenue being generated across the group.
• Total ARR for the group was 76% of revenue or $21.7m, comprising $12m in transactional ARR and $9.7m in SaaS revenue.
• • Kinatico is targeting 80% of its revenues from SaaS (currently 34%) within three years, which is well ahead of our forecasts for 60% by FY27.

• RaaS has published an update report on advanced materials manufacturing group Amaero International (ASX:3DA) following its announcement that it has completed qualification of C103 additive manufacturing powder with US advanced manufacturing conglomerate ADDMAN Group more than a quarter ahead of schedule.
• Amaero notes that expected future sales from this relationship are material to its revenue and is a key assumption underpinning Amaero’s guidance that it will achieve EBITDA break-even in FY26.
• Our FY26f EBITDA forecast of $0.1m assumes qualification is achieved.

• There are 2 changes for the S&P/ASX100 Index, 3 changes for the S&P/ASX 200 (AS51 INDEX) and 16 adds/ 8 deletes for the S&P/ASX300 Index.
• The two big surprises are the inclusion of Guzman Y Gomez (GYG AU) and Yancoal Australia (YAL AU) in the S&P/ASX 200 (AS51 INDEX) and S&P/ASX300 Index.
• The adds to the indices have outperformed the deletes over the last few months and there could be profit-taking in the next few days.

• Iron ore broke out of its three-year band two weeks ago and, after a brief recovery, trended lower by 9% WoW. It is now within touching distance of 90 USD/ton. 
• Chinese steel margins showed no signs of improving, with the average mills losing 70-80 USD/ton. Iron ore inventories continued to climb at the ports, exceeding 150 million tons.
• We would stay clear of iron ore names for the time being as we wait for iron ore to consolidate at some levels. 

• RaaS has published an update report on 3D spatial data solutions group Pointerra (ASX:3DP) after the release of its FY24 preliminary final report which saw a 13% improvement in the EBITDA loss to $4.06m.
• Key to the result was a significantly better H2 performance.
• Pointerra reported H2 revenue of $5.2m, a 20% increase of H2 FY23a and ahead of our forecast for $4.8m.

• The ADDs/DELs for the ASX index family for the September 2024 index rebal event were announced after market close on Friday 6th September 2024.
• In this insight, we take a final look at the flow expectations for each of these index changes.
• We have also highlighted certain names with noticeable movements in short interest.

EML Payments’ FY24 results were the first to show the full impact of the liquidation of PFS Card Services Ireland Limited (PCSIL). Continuing operations, which exclude PCSIL, saw gross debit volume (GDV) growth of 18%, revenue growth of 18% and underlying EBITDA growth of 34%. The sale of Sentenial has since completed with proceeds of A$53.4m, moving EML to a net cash position. Management is now focused on moving back to a growth mindset in the remaining business and optimising the cost base post the disposals. Shifting away from the medium-term targets given in February, management expects to disclose more at its AGM in November. We have reduced our FY25 forecasts to reflect the more modest EBITDA guidance and to remove the Sentenial business.

• Neuren Pharmaceuticals (NEU AU) shares corrected ~14% over the last one month, as Daybue reported disappointing performance in U.S. and partner reduced 2024 revenue guidance for Daybue.
• Muted U.S. performance of Daybue in 1H24 seems to be short-lived and the drug is expected to accelerate in 2H24 and beyond.
• In 2Q24, the rate of new patient starts was 12% higher than the previous quarter and the rate of discontinuations was 46% lower than in the previous quarter. 

• Ionic Rare Earths Ltd (ASX:IXR) is a magnet (REOs) recycling (Belfast, UK) and REE mining explorer (Uganda) plus a Brazilian REE Refining JV, excluded from our NPV, with Viridis Mining and Metals Limited (VMM).
• ACF visited IonicTech’s magnet recycling demo plant in July 2024.
• Since our last IXR Flash Note, we raise our valuation by 16% to A$ 0.109 vs A$ 0.094 previously and put Makuutu in a maintenance period.

• There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
• Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here. 
• Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.

• Louis Dreyfus Company (LDC) and Olam (OLG SP)‘s Olam Agri have been going toe-to-toe over Namoi Cotton (NAM AU) since the 1st February. LDC has now declared its Offer unconditional. 
• It’s an interesting move. Namoi is trading through LDC’s A$0.67/share Offer terms. But unlike Olam’s Offer, LDC now has FIRB and ACCC under its belt.
• Currently trading at Olam’s A$0.70/share terms. All eyes are on ACCC giving Olam the green light. Or not.

• The Rex Minerals (RXM AU) IE considers MACH Metals Australia’s A$0.47 offer fair and reasonable as it is towards the upper end of the A$0.346 to A$0.484 valuation range. 
• The key conditions are shareholder and FIRB approvals. FIRB approval should be forthcoming as Salim is the largest shareholder and the cordial Indonesia-Australia relations.
• An attractive offer, medium retail ownership and no independent substantial shareholder ensures a done deal. At the last close and for the 30 October payment, the gross/annualised spread is 3.3%/15.9%. 

• AP Liberty (Apollo) is looking to raise US$318m from trimming its stake in Challenger Ltd (CGF AU).
• Apollo’s stake in the firm dates back to Jul 2021, when the investor first acquired a 18% stake in the firm for A$720m. 
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• Back on the 8th July, copper-gold play Rex Minerals (RXM AU) entered into a Scheme with MACH Australia. MACH, a wholly-owned entity of Indonesia’s Salim Group, at A$0.47/share, in cash.
• That’s a 71% premium to last close and a decade-high. The Offer has unanimous board support. Apart from Rex shareholder approval, the Offer requires FIRB signing off.
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 10th October. Expected implementation on the 30 October. The IE says fair & reasonable.

• Government hammers the international VET sector:  Government issues tough caps, reducing international students in VET.
• Reliance on international students: NextEd will struggle to operate under reduced international student volumes.
• Diversification underway: NextEd have been proactive in countering government policy.

• Back on the 21st March, Virgin Money UK (VUK AU/VMUK LN), UK’s sixth largest retail bank, entered into a Scheme with Nationwide Building Society, at 220 pence/share, in cash.
• The consideration is a solid 38% premium to undisturbed. And shareholders backed terms at the 22nd May Court Meeting. Plus UK’s CMA signed off on the 19th July. 
• What now? FCA/PRA approvals are the key remaining conditions. These regulatory approvals are imminent.

• On 15 August, Latin Resources (LRS AU) disclosed a binding offer from Pilbara Minerals (PLS AU) at 0.07 PLS share per LRS share, a 66.3% premium to the undisturbed price. 
• The key condition is LRS shareholder approval. No disinterested shareholder holds the 25% blocking stake, and low retail ownership lowers the headcount test risk. 
• The Salinas definitive feasibility study, expected in September, provides option value. A strong result could draw a competing offer or force PLS into sweetening terms.  

• Discounts to NAV of covered holdcos did not follow a clear trend during August. Discounts to NAV: C.F.Alba, 46.2% (vs. 45.3% as of August 9); GBL, 41.1% (vs. 42.2%); 
• Heineken Holding, 16.5% (vs. 16%); Industrivärden C, 1.7% (vs. 2.2%); Investor B, 1.9% (vs.7.5%); Porsche Automobile Holding, 35.7% (vs. 34.6%). Rio DLC spread tightened to 19.8% (vs. 22.1%).
• What seems interesting (unchanged views): Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).

• Opthea Ltd (OPT AU) completed enrollment in two Phase 3 trials for sozinibercept in wet AMD. Topline data from these trials are expected by mid-2025.
• During FY24, Opthea raised $295M to extend runway through topline data readouts of Phase 3 clinical trials. Further, in July, Opthea raised $38M through retail entitlement offer.
• Although Opthea is well-funded through mid-2025, any fund requirement beyond that period will be easier to meet amid lower interest rate scenario.

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
• New World Development
• Nickel Industries

• On 22 August, the Psc Insurance (PSI AU) IE considered Ardonagh’s A$6.19 offer fair and reasonable as it is within the A$5.69 to A$6.65 valuation range. 
• The offer is conditional on shareholder approval of the scheme. No disinterested shareholder holds the 25% blocking stake. The scheme meeting is on 26 September.
• The offer is attractive and represents an all-time high. At the last close and for the 11 October payment, the gross/annualised spread is 1.3%/12.1%.

• Iron ore futures rose 5.3% last week but declined 3% on September 2nd, signaling a potential continuation of the downtrend.
• Technical indicators such as RSI, MACD, and Bollinger Bands suggest a short-term downtrend, with price struggling to break above the 21-day moving average.
• Elevated historical volatility near a 4-month high indicates that market instability may persist, suggesting caution in trade setups.

• Back on the 8th May, PSC Insurance (PSI AU), a diversified insurance service provider, entered into a Scheme with Ardonagh Group, at A$6.19/share, in cash.
• That’s a 27.6% premium to undisturbed, and a lifetime high. Directors and key executives holding ~39.6% of shares out, are supportive. 
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 26th September. Expected implementation on the 11 October. The IE says fair & reasonable.

• Despite sharp price moves, iron ore options activity was muted with a sharp decline in put volumes.
• The DCE/SGX spread widened from 4.6% to 7.5% as DCE futures traded at a premium.
• SGX Iron Ore options volume fell by 31.8% WoW, with increased call activity focused on September expiries at the 105 strike.

• Iron ore futures surged 5.3% last week but fell 3% on September 2nd, reflecting uncertain price sentiment.
• Chinese portside inventories rose by 3.4 million tons, reaching a two-year high, driven by high arrivals and reduced pick-up volumes.
• Heading into peak consumption season in China, supply headwinds may drive sentiment rather than demand tailwinds.

The publication of the results of its initial scoping study on the Tunkillia project on 16 July puts Barton well on the road to executing its three-phase development strategy to achieve c 150,000oz gold production. The study posited a 5Mtpa bulk open-pit mine operating over 6.4 years to process 30.7Mt of material at an average grade of 0.93g/t Au to generate a pre-tax NPV7.5 of A$512m and an internal rate of return (IRR) of 40% at a gold price of A$3,500/oz, an average all-in sustaining cost of A$1,917/oz and an initial capital cost of A$374m. Barton is now advancing an optimisation review targeting further cost savings and mine life growth.

• RaaS Research Group has published an update report on data analytics company Pureprofile (ASX:PPL) following the release of its audited FY24 accounts which includes confirmation that it delivered a maiden reported NPAT of $0.1m, and an adjusted NPAT of $1.26m, up 25% on the pcp and ahead of our forecast for $1.17m.
• Adjusted EBITDA for FY24 was $4.4m, down 4% on the pcp, but up 8% excluding the impact of cash short-term-incentive (STI) payments to executives.
• We note EBITDA was slightly ahead of our forecast for $4.3m and within the company’s guidance range of $4.1m to $4.5m.