Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Bain Bails on BWX, BWX Bails on Old Management, Myles Anceschi At the Wheel

BWX - More Than One Game of Chicken Here

Quiddity Advisors

Event-Driven

Last year, <a href="https://www.smartkarma.com/entities/24268" target="_blank" data-smartkarma-citation="entities:24268:1">BWX Ltd (BWX AU)</a> went on an acquisition spree, buying Mineral Fusion Natural Brands, the Nourish assets, then Andalou Naturals, and the company issued lots of new equity through share issuance and a large renounceable rights offering, diluting earnings while raising top line EBITDA (perhaps not coincidentally because the extraordinary compensation package to which Mr. Humble was subject rewarded a very sharp gain in top line EBITDA, seemingly without regard to dilution). In February, results were such that revenue forecasts fell and full-year EBITDA forecasts were lowered to A$42-46mm and the stock fell hard. It was reported in the Australian media that investors unhappy with the over-acquisitiveness had effectively staged an intervention, asking top management to stop acquiring assets for a while. This would hinder the growth of EBITDA and therefore the likelihood of then CEO John Humble and Finance Director Aaron Finlay's comp packages achieving all the hurdles necessary to max out, and three months later the duo offered a non-binding, indicative (MBO) proposal to be backed by Bain Capital contingent on due diligence, at A$6.60/share. This was discussed in <a href="https://www.smartkarma.com/insights/bwx-more-than-one-game-of-chicken-here" target="_blank" data-smartkarma-citation="insights:20603">BWX - More Than One Game of Chicken Here</a>. The stock popped to ~A$6.00 and then three weeks later on 13 June the board said it would set up an Independent Board Committee to undertake a "Strategic Review of Options available to BWX." This was discussed in <a href="https://www.smartkarma.com/insights/bwx-mbo-game-of-chicken-is-extended" target="_blank" data-smartkarma-citation="insights:21229">BWX MBO Game of Chicken Is Extended</a>. Former COO Myles Anceschi was made Interim CEO.In mid-July, a Sydney Morning Herald <a href="https://www.smh.com.au/business/companies/us-lawsuit-hits-skin-care-firm-bwx-amid-buyout-deal-20180708-p4zq81.html" target="_blank">article</a> revealed that a US M&amp;A advisor was taking BWX to court, accusing it of copying their idea for the company to be taken over through an MBO, and the shares declined further. The company disputes this and my read on it is that it is something of a spurious suit.On August 8th, after the shares had dropped about 10% from their A$6.00 range in late May early June, the company announced a full-year results <a href="https://www.asx.com.au/asxpdf/20180808/pdf/43x565pgxhzl56.pdf" target="_blank">preview</a> noting a delay in the release and that full-year EBITDA would be A$40-41mm, which was well below the A$42-46mm range. The stock fell 8.7% that day to break A$5.00, closing at A$4.95, traded there another day, then fell another 4% over the next three days to reach A$4.75. After dithering for a few days, the stock then fell 6.3% on August 20th for no apparent reason, reaching A$4.50/share which was back to post-February lows and only about 10-15% above late 2016 lows, when the company was an entirely different animal. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/062/045/original/Screen%20Shot%202018-08-29%20at%2011.17.39%20PM.png?1535555931" class="editor-image img-responsive" data-smartkarma-image-id="62045"></figure><div style="text-align: left;" class="content-caption">data source: capitalIQ</div>The questions which remain are about the ongoing Strategic Review and the Bain bid.News on both should be available from mid-late September.

Last year, BWX Ltd (BWX AU) went on an acquisition spree, buying Mineral Fusion Natural Brands, the Nourish assets, then Andalou Naturals, and the company issued lots of new equity through share issuance and a large renounceable rights offering, diluting earnings while raising top line EBITDA (perhaps not coincidentally because the extraordinary compensation package to which Mr. Humble was subject rewarded a very sharp gain in top line EBITDA, seemingly without regard to dilution). In February, results were such that revenue forecasts fell and full-year EBITDA forecasts were lowered to A$42-46mm and the stock fell hard. It was reported in the Australian media that investors unhappy with the over-acquisitiveness had effectively staged an intervention, asking top management to stop acquiring assets for a while. This would hinder the growth of EBITDA and therefore the likelihood of then CEO John Humble and Finance Director Aaron Finlay's comp packages achieving all the hurdles necessary to max out, and three months later the duo offered a non-binding, indicative (MBO) proposal to be backed by Bain Capital contingent on due diligence, at A$6.60/share. This was discussed in BWX - More Than One Game of Chicken Here. The stock popped to ~A$6.00 and then three weeks later on 13 June the board said it would set up an Independent Board Committee to undertake a "Strategic Review of Options available to BWX." This was discussed in BWX MBO Game of Chicken Is Extended. Former COO Myles Anceschi was made Interim CEO.In mid-July, a Sydney Morning Herald article revealed that a US M&amp;A advisor was taking BWX to court, accusing it of copying their idea for the company to be taken over through an MBO, and the shares declined further. The company disputes this and my read on it is that it is something of a spurious suit.On August 8th, after the shares had dropped about 10% from their A$6.00 range in late May early June, the company announced a full-year results preview noting a delay in the release and that full-year EBITDA would be A$40-41mm, which was well below the A$42-46mm range. The stock fell 8.7% that day to break A$5.00, closing at A$4.95, traded there another day, then fell another 4% over the next three days to reach A$4.75. After dithering for a few days, the stock then fell 6.3% on August 20th for no apparent reason, reaching A$4.50/share which was back to post-February lows and only about 10-15% above late 2016 lows, when the company was an entirely different animal. data source: capitalIQThe questions which remain are about the ongoing Strategic Review and the Bain bid.News on both should be available from mid-late September. 

BWX Near Pre-Bid Lows - Risk Reward Now Skews Better