In today’s briefing:
- Essential Metals (ESS AU)’s Enters a SID at A$0.50 with a Tianqi/IGO JV
- Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact
- How Should We Play with Kakao Pay’s MSCI Inclusion Event?
- Norwest Energy (NWE AU): Valuation Read Across from Warrego’s Takeover Battle
- Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement
Essential Metals (ESS AU)’s Enters a SID at A$0.50 with a Tianqi/IGO JV
- Essential Metals (ESS AU) has entered a SID with a Tianqi Lithium (002466 CH)/IGO Ltd (IGO AU) JV at A$0.50, a 44.9% premium to the undisturbed price (6 January).
- The scheme is subject to shareholder and FIRB approval. The FIRB should approve a 49% Aussie-owned offeror for a project to be processed in Australia.
- There is a possibility of a competing bid as the offer is far from a knockout bid and ESS lacks substantial shareholders. The scheme meeting is in April.
Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact
- In this insight, we take a look at the potential index changes for S&P ASX 20, 50, 100, 200, 300 in the run up to the March 2023 Rebalance.
- I expect there to be one, two, and four changes, respectively, for the ASX 20, ASX 100, and ASX 200 indices in the March 2023 Rebalance.
- For ASX 300, there could be 14 ADDs and 12 DELs in the March 2023 Rebalance including some high impact names based on days-to-trade.
How Should We Play with Kakao Pay’s MSCI Inclusion Event?
- Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
- It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
- More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.
Norwest Energy (NWE AU): Valuation Read Across from Warrego’s Takeover Battle
- Mineral Resources (MIN AU)‘s off-market takeover offer at 1 MIN share for every 1,367 NWE shares closes on 6 February. The target’s statement will be despatched by early to mid-January.
- The Norwest Energy NL (NWE AU) Board recommends shareholders take no action. The timing is opportunistic and motivated by recent Perth Basin consolidation activity.
- Hancock’s latest bid for Warrego Energy (WGO AU) suggests that Norwest is worth at least 20% more than MinRes’ offer. Expect the Board to reject the offer.
Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement
- The agreement between Vodafone and the consortium values the company at a generous 24x EV/Fwd EBITDA, 19% premium over the 3-month VWAP (14.7% above my DCF-based fair value estimate).
- Nevertheless the spread (+0.44%) signals that Oak Holdings may not obtain the necessary 95% to squeeze-out. Risk arb funds are betting on higher returns from a Domination Agreement.
- On rather aggressive assumptions (90% payout, 4.5% rate of return, 2.5% growth) a dividend-discount model provides a €39.6/share valuation. This could still turn into another messy Kabel Deustschland scenario.
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