Australia

• Troubled casino operator Star Entertainment (SGR AU) announced it had “received inbound interest” from several parties, including “Hard Rock Hotels & Resorts … a local partner of Hard Rock”.
• Star is in the doghouse, again,  as the regulator conducts (another) review amid concerns Star did not do enough to remedy the problems identified in the first review. 
• Facing “serious and systemic non-compliance” with anti-money laundering laws, Star faces the distinct possibility of losing is casino licence in Sydney; and potentially the one in Queensland.  

• Ricegrowers Limited, trading as SunRice (ASX:SGLLV), has updated rice growers on paddy prices for CY23 and CY24, and more importantly provided planting guidance for CY25.
• Despite additional US supply and continued shipping disruptions, the lower end of the CY23 paddy price range (sold from FY24) has been increased $10/tonne to $425/tonne.
• The CY24 price range is unchanged at $370 to $430/tonne given the above uncertainties.

• Following our initiation on Mount Gibson Iron (MGX AU) and Kumba Iron Ore (KIO SJ), recently we initiate coverage on Champion Iron (CIA AU), a pure play with Canadian assets.
• Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability. 
• Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty. 

As with Boda before it, April’s resource update at Kaiser saw substantially all of its resource promoted from the inferred to the indicated category at a materially higher grade of both gold and copper. The close-spaced nature of the drilling required to achieve this will now allow these resources to be quickly and easily promoted to reserve status for the purpose of Alkane’s scoping study – or preliminary economic assessment – to be announced later this quarter.

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
• We expect one ASX 20 change and two ASX 100 changes during the regular rebalance event.
• For the ASX 200 index, there could be two intra-review changes in the month of June 2024 and one of those names could be a surprise.

• QANTM Intellectual Property Ltd (ASX:QIP) has announced it has entered into a binding Scheme of Arrangement for an entity associated with Adamantem Capital to acquire all its shares for $1.817/share.
• Shareholders will have the opportunity to elect to receive 100% cash or a combination of 50% cash, 50% scrip, subject to a scrip issuance cap of 24%.
• The QANTM board can elect to pay a special dividend of up to $0.071/share, which will be included in the offer price and enable shareholders who are eligible to benefit from franking credits of up to $0.03/share.

Actinogen announced a capital increase of up to A$8.9m on 3 May, consisting of a A$5.0m (gross) placement along with a shareholder rights offering (‘entitlement offer’) designed to raise up to A$3.9m (gross) from existing shareholders. The closing date of the rights offer is 29 May and, given that Actinogen shares are currently trading at c A$0.028, we assume full exercise of the rights offering in Q424 (Q2 CY24). The company expects that the proceeds (assuming full exercise of the rights offering) will extend its operating runway beyond the interim results release of the first 100 patients of the XanaMIA Phase IIb study in cognitive impairment (CI) in patients with mild-to-moderate Alzheimer’s disease (AD), expected in mid-CY25. These results and the results from the XanaCIDD Phase IIa study in patients with CI associated with major depressive disorder (MDD), expected in early Q3 CY24, represent major potential value inflection points, and Actinogen is now funded past these two key catalysts. Our risk-adjusted net present value (rNPV) is A$544m (vs A$528m previously).

• Back in June 2022, US/Europe toll-road play Atlas Arteria (ALX AU) (ATLIX) rejected IFM Global Infrastructure’s request for limited company information, before deciding whether to submit a non-binding indicative proposal. 
• Undeterred, IFM, which held 15% of shares out at the time, bumped its stake to 19% two months later; and has continued to capitalise on Australia’s creep provisions ever since. 
• This morning, IFM is understood to have lifted its stake to ~26.5%, in an apparent attempt to gain additional board representation. Another tilt cannot be ruled out. 

• 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 numerous Australian vendor partners (18 different vendors in the past 12 months) with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• Pioneer’s success in purchasing large debt portfolios at attractive IRRs since October highlights the strong position the company occupies in the marketplace, now enhanced by the recent purchases on attractive IRRs.

• Cash Converters International (ASX:CCV) is a consumer finance company operating as a service provider, owner and franchisor of second-hand goods and financial services stores in Australia and internationally.
• CCV released a solid Q3 FY24 unaudited trading update with revenue growth of 19% over the previous corresponding period (pcp) to $93.0m.
• The gross loan book has grown 9% to $292m, which is all the more impressive as the business transitions away from Small Amount Credit Contract (SACC) products due to regulatory change, more than offset by growth in other products, domestically and internationally.

• Back in December last year, Aussie-listed equities manager Perpetual Ltd (PPT AU) rejected Washington H. Soul Pattinson (SOL AU)‘s $3bn all-scrip non-binding indicative proposal. 
• Yet Soul Patt’s proposal was in sync with Perpetual’s previously flagged intentions to explore a potential separation of its corporate trust and wealth management businesses, from its asset management business.
• Perpetual has now entered a Scheme, to carve out the corporate trust and wealth management businesses to KKR for A$2.175bn. A lack of clarity on net proceeds saw shares rollover.

• Qantm Intellectual Property (QIP AU)‘s non-binding proposal from IPH Ltd (IPH AU) is at A$0.11 cash + 0.291 IPH shares per QIP share, a 4.5% premium to Adamantem’s A$1.817 offer.
• Since announcing the Adamantem non-binding proposal on 14 March, the IPH offer has been 4.3% higher than the Adamantem offer on average. 
• The IPH proposal also requires approval from the ACCC and NZCC. The presence of two bidders increases the probability of a binding proposal (with a bump). 

• It always seemed like a question of when, not if, IPH (IPH AU) would make an Offer for QANTM (QIP AU). IPH previously approached QANTM in 2018, but was spurned.
• Capitalising on ongoing extensions to Adamantem’s exclusivity, as it relates to its all-cash A$1.817/share Offer by way of a Scheme, IPH has now tabled an all-scrip, plus A$0.11/share dividend NBIO.
• IPH’s implied Scheme value of A$1.90/share is a premium to Adamantem’s proposal. The catch: apart from terms being indicative, IPH’s Offer requires ACCC and NZCC clearance.

• 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 numerous Australian vendor partners (18 different vendors in the past 12 months) with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• Pioneer’s success in purchasing large debt portfolios at attractive IRRs since October highlights the strong position the company occupies in the marketplace, now enhanced by the recent purchases on attractive IRRs.

• Singapore’s Olam Agri and global commodity merchant Louis Dreyfus Company (LDC) are duking it out for Namoi Cotton Co Operative (NAM AU), Australia’s largest cotton producer.
• After both initially lobbed competing Schemes, both have now tabled off-market Offers – A$0.67/share from LDC, A$0.66/share from Olam – each contingent on a 50.1% acceptance hurdle, FIRB, and ACCC. 
• LDC, currently holding 17%, announced it will reject Olam Agri’s Offer. Top shareholder Samuel Terry Asset Management, with 24.5%, is expected to support the winning (or superior) bid.  

• Pureprofile Ltd (ASX:PPL) is a data analytics and consumer insights company underpinned by proprietary technology, servicing business decision makers in brands and media companies as well as market researchers.
• Pureprofile reported a 6% increase in Q3 FY24 revenue to $10.9m and a 49% decline in Q3 EBITDA to $0.5m versus the previous corresponding period (pcp).
• Q3 is seasonally the weakest quarter for PPL and EBITDA was affected, in part, by the change in executive remuneration policy to cash-based payments.

Recce Pharmaceuticals has reported several encouraging developments in recent weeks for its lead development compound RECCE® 327 (R327). The intravenous (IV) R327 formulation is advancing to a higher dose level (4,000mg) in its ongoing Phase I/II rapid infusion study and the company is progressing in its plan to submit a US Investigational New Drug (IND) application to commence a US Phase II complicated urinary tract infection (cUTI) study before end-CY24. Recce is also planning to start an Indonesian Phase III registrational study in Q3 CY24, which we anticipate could lead to initial commercialisation in South-East Asia in H2 CY26. We have made minor adjustments to our valuation and now obtain a risk-adjusted net present value (rNPV) of A$661.3m (or A$3.27/share), versus A$644.4m previously.

• In early December, pharmacy distributor Sigma Healthcare (SIG AU) arranged a “transformational merger” with mega chain Chemist Warehouse (CWG). Effectively a reverse takeover designed to get CWG listed.
• SIG issued shares, raising cash, enabling it so NEWCO had high enough minimum float upon merging. Financial engineering for the win. SIG popped – a kind of IPO premium trade.
• But plenty of people are against the deal, and ACCC hasn’t yet opined (13 June is the provisional date), but on Thursday, S&P announced SIG would join ASX200 despite risks.

• The Adbri (ABC AU) IE considers CRH (CRH US) and Barro’s A$3.20 offer fair and reasonable as it is within its A$ A$3.09-3.53 per share valuation range. 
• The scheme is conditional on FIRB approval, which should be forthcoming as CRH, the offeror, is a Fortune 500 company headquartered in Ireland.
• The offer is attractive, and this is a done deal. At the last close and for the 1 July payment, the gross/annualised spread was 1.3%/8.4%.

• Pureprofile Ltd (ASX:PPL) is a data analytics and consumer insights company underpinned by proprietary technology, servicing business decision makers in brands and media companies as well as market researchers.
• Pureprofile has reported a 6% increase in Q3 FY24 revenue to $10.9m and 49% decline in Q3 EBITDA to $0.5m.
• Q3 is seasonally the weakest quarter for PPL and EBITDA was affected, in part, by the change in executive remuneration policy to cash-based payments.

• Fluence Corporation (ASX:FLC) specialises in the delivery of water and wastewater solutions in industrial, municipal and commercial industries across the globe.
• The company released an update on Q1 performance (note: FLC has a December balance date), that clearly validates the change in group strategy away from large construction and engineering projects, and towards smaller, higher margin, proprietary solutions, with a clear push into North America.
• The company has maintained full year guidance of US$90m-$100m of revenue and EBITDA of US$3.5m-$4.0m, a positive turnaround from the EBITDA breakeven position of FY23.

• Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for Iron Ore and The China Property/Auto Stimulus Angle 
• Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. 
• The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.

• On the 27 Feb 2024, construction play Adbri (ABC AU) entered into a Scheme Implementation Deed with CRH (CRH US) and 42.7%-shareholder Raymond Barro (Chairman) at $5.20/share.
• Conditions include Adbri’s shareholder approval and FIRB signing off. Optically, it doesn’t appear to be a knockout price. However, Adbri’s share price has laboured since the onset of Covid.
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 12th June. Expected implementation on the 1 July. IE says fair & reasonable.