In today’s briefing:
- Link Admin: Dye & Durham’s Deal All But Dead
- ACCC’s Concerns Likely to End in a Link-DND Deal Bust
- Nexon Buyback May Signal End To Near-Term Relative Outperformance
- ExaWizards IPO Lock-Up – PE/Investment Funds Coming off Lockup, Could See Some Scattered Selling
- Lasertec (6920) | A Monopoly with a Long Runway
- Tcs – Healthy Demand Environment; H1 Likely to See Usual Seasonality
Link Admin: Dye & Durham’s Deal All But Dead
- This transaction is looking increasingly toast. The ACCC has outlined significant preliminary competition concerns with Dye & Durham’s (D&D) proposed acquisition of Link Administration (LNK AU).
- Separately, Link’s subsidiary, Link Fund Solutions Limited, has been notified that an application for a “Group Litigation Order” has been filed in the English High Court.
- Link has to exit PEXA for this transaction to proceed. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally, separate from D&D’s Offer.
ACCC’s Concerns Likely to End in a Link-DND Deal Bust
- The ACCC’s Statement of Issues noted “significant preliminary competition concerns” in relation to Dye & Durham/DND’s acquisition of Link Administration (LNK AU). The findings will be announced on 8 September.
- There is no easy fix. We think that satisfying the ACCC requires a PEXA Group (PXA AU) stake disposal which could trigger a material adverse clause.
- Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.
Nexon Buyback May Signal End To Near-Term Relative Outperformance
- Nexon (3659 JP) founder Kim Jung Ju tried to sell his holdco in 2019, didn’t, now shares are higher, but he passed suddenly in Q1. The stock popped.
- Inheritance tax issues for the estate are complicated, but the buyback just executed might signal a “pause” for a while.
- In the meantime, recent underperformance in terms of Peer-relative earnings forecasts suggests the stock could drift.
ExaWizards IPO Lock-Up – PE/Investment Funds Coming off Lockup, Could See Some Scattered Selling
- ExaWizards (4259 JP) raised around US$300m in its Japan IPO in Dec 2021, where its IPO had been priced at the top end of its indicative price range.
- ExaWizards is an AI service provider in Japan, it develops and delivers AI products with the aim of addressing industry and social issues.
- While in our view, we would not expect a large block to come from this lockup expiry, we could expect some scattered selling across the shareholders.
Lasertec (6920) | A Monopoly with a Long Runway
- After a 50% fall in the share price, Lasertec looks cheap on an historical basis and trades at a discount to ASML
- The secular growth outlook for its extreme ultraviolet (EUV) inspection systems is brighter than ever
- Lasertec should be a core holding for Japan growth funds on expectations for continued earnings growth and high returns on equity
Tcs – Healthy Demand Environment; H1 Likely to See Usual Seasonality
- Optimistic about sustaining revenue growth momentum in FY23: TCS has implemented a new organization structure to enhance its customer centricity in order to capture Horizon 2 and Horizon 3 demand and to drive sustained revenue growth.
- The new structure retains the atomicity of its earlier architecture, and its three dimensions – industry verticals, horizontal service lines and geography-based sales.
- TCS has now added a fourth dimension, the stage of the customer’s relationship journey with TCS, wherein it has rearranged existing units into three business groups, each aligned to a particular phase in the customer relationship journey
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