In this briefing:
- Lynas Investor Briefing – Looks Like More Capex Ahead
- OUE C-REIT, OUE H-TRUST – First Thoughts on Merger Scenario
- Last Week in GER Research: Huya, Bilibili and Qutoutiao
- GrainCorp: Demerger Underpins the Share Price but a Second-Best Option
- APE-AHG Merger: Value Accretive but AHG Shareholders Need Improved Terms
1. Lynas Investor Briefing – Looks Like More Capex Ahead
At noon Sydney time Lynas Corp Ltd (LYC AU) held an investor briefing by webcast regarding comments made by the Malaysian Prime Minister in his first cabinet press conference on Friday 5 April 2019. Those comments were noted in the ASX regulatory update.
2. OUE C-REIT, OUE H-TRUST – First Thoughts on Merger Scenario
Last evening, Wall Street Journal reported that Oue Commercial Real Estate Investment Tr (OUECT SP) and Oue Hospitality Trust (OUEHT SP) are in discussions to merge in a cash and stock deal. OUE Commercial will offer to buy OUE Hospitality to create a single entity that will remain listed on the SGX.
The enlarged entity will have a combined portfolio value of S$6.7 bil, propelling the enlarged entity to become one of the biggest REITs in Singapore in terms of portfolio size.
Based on last traded prices, the combined entity will have an enlarged market capitalization of S$2.83 bil, making it the 11th biggest S-REIT in terms of market capitalization.
For OUE C-REIT, it enjoys fewer benefits from enlarged portfolio but a merger will alleviate concern on the CPPU timebomb.
For OUE H-TRUST, unitholders benefit more from an improve asset/sector diversification and also a potential cash payout.
For sponsor OUE LTD, it will find it easier to recycle assets in an enlarged REIT.
OUE C-REIT and OUE H-TRUST have announced trading halts this morning pending release of announcements. A clarification announcement on the merger is likely to be issued.
3. Last Week in GER Research: Huya, Bilibili and Qutoutiao
Below is a recap of the key IPO/placement research produced by the Global Equity Research team. This week, we update on the bevvy of placements offered by various companies. After placements by Pinduoduo (PDD US) and Sea Ltd (SE US) , we saw more offerings from HUYA Inc (HUYA US) , Bilibili Inc (BILI US) and Qutoutiao Inc (QTT US). We update on these three offerings and perhaps big picture, this could reflect a signalling inflection point in these shares. More details below
In addition, we have provided an updated calendar of upcoming catalysts for EVENT driven names below.
Best of luck for the new week – Arun, Venkat and Rickin
4. GrainCorp: Demerger Underpins the Share Price but a Second-Best Option
Graincorp Ltd A (GNC AU) said on Thursday it plans to spin off its malting and craft brewing distribution business (MaltCo). The proposed demerger, which will complete at the end of the year, would result in two independent ASX-listed companies – MaltCo and GrainCorp’s Grains and Oils businesses (New GrainCorp).
In the absence of an LTAP binding proposal, the GrainCorp Board to their credit has proposed an alternative way to create shareholder value or at least minimise a share price fall. Unfortunately, the proposed demerger is unlikely to be superior to the LTAP proposal, in our view.
5. APE-AHG Merger: Value Accretive but AHG Shareholders Need Improved Terms
On 5 April, Ap Eagers Ltd (APE AU) announced that it had lobbed an unsolicited all-scrip takeover for Automotive Holdings (AHG AU)/AHG. Under the proposal, AHG’s shareholders would receive 1 AP Eagers share for every 3.8 AHG share. In a 100% acquisition scenario, AP Eagers shareholders would own 75.5% of the merged AP Eagers-AHG.
Presumably, AP Eagers believes its proposal delivers fair value to both AP Eagers and AHG shareholders. While AP Eagers’ bid provides some relief for AHG shareholders, our analysis suggests that AP Eagers’ bid requires a bump to cross the finish line.
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