Daily Brief Australia: Orecorp Ltd, SiteMinder, Fortescue Metals, Sovereign Metals, ADX Energy Ltd, Kinatico and more

• In OreCorp: Silvercorp Switches To Off-Market Bid, after Silvercorp Metals (SVM CN) switched to an off-market Offer for Orecorp Ltd (ORR AU), I expected Perseus Mining (PRU AU) to counter. 
• Orecorp announced this morning Perseus (with 19.9% of shares out) has pitched an all-cash Offer of A$0.55/share, primarily conditional on getting to 50.1%
• Orecorp has responded by saying Perseus Offer is not superior to Silvercorp cash/scrip terms. Perhaps it’s Orecorp’s way of (temporarily) skirting the break fee and letting the market decide.

• In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
• The conclusion of the Costa Group Holdings (CGC AU) M&A deal could trigger an index change in February 2024.
• Separately, there could be a “surprise” index change in March 2024 caused by a long-term trading suspension. 

• Perseus Mining (PRU AU)’s competing all-cash takeover offer for Orecorp Ltd (ORR AU) is A$0.55, a 4.0% premium to the implied value of the Silvercorp Metals (SVM CN) off-market takeover offer. 
• The Board opines that the PRU offer is not superior. Since announcing the revised SVM scheme on 23 November, the PRU offer has averaged 3.0% lower than the SVM offer.
• The SVM offer, which closes on 23 February, has struggled to gain traction. PRU has the balance sheet to sweeten its offer and gain shareholder traction.   

• In the world of 8-10% dividend-yielding commodities, Fortescue Metals (FMG AU) almost makes the cut. We would wait for a better entry point here despite iron ore strength.
• We are also mindful of the risks associated with capex in the green energy space to achieve zero emissions and ramp costs with the recent production increase.
• We believe numbers are at par, trading at 9.6x PE on the current spot price (130 USD/ton) with a 7% dividend yield ( assuming a 65% payout ratio). 

Key points (machine generated)

• Apple’s focus on carbon-neutral products and use of titanium in iPhone 15 Pro is driving interest in titanium resources.
• Sovereign Metals’ discovery of the world’s largest undeveloped natural rutile deposit has attracted the attention of Rio Tinto, which recently became the largest shareholder in the company.
• Titanium is considered a critical material due to supply shortages and China-controlled supply chains, with its use in Apple products highlighting its growing importance. Investment in Sovereign Metals offers an interesting opportunity, especially given the lack of upcoming funding requirements and a discount to Rio Tinto’s entry price.

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• A rig is expected to be mobilised to the high impact Welchau-1 drilling location during the last week of January.
• Welchau gross prospective resources have been independently estimated at 365 to1,128 bcf (ADX’s internal estimates: 212 to1,631 bcf).
• During 4Q24, ADX plans to drill the IRR-1 gas prospect with 38 bcf gross prospective resources or the LICHT prospect.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People’ regtech company providing workforce compliance monitoring and management technology and services.
• KYP has reported a 6% year-on-year increase in Q2 FY24 revenue to $7.1m, and a 145% year-on-year increase in SaaS revenue to $2.4m.
• SaaS revenue accounted for 33% of total revenue for the quarter, compared to 14% in Q2 FY23.