Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

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Quiddity Advisors

Event-Driven

Thirty minutes after <a href="https://www.smartkarma.com/entities/339" target="_blank" data-smartkarma-citation="entities:339:1">Eclipx (ECX AU)</a> guided down its <a href="https://www.asx.com.au/asxpdf/20190129/pdf/44245c85d9thh5.pdf" target="_blank">FY19 NPATA figure</a>, <a href="https://www.smartkarma.com/entities/3023" target="_blank" data-smartkarma-citation="entities:3023:1">Mcmillan Shakespeare (MMS AU)</a> <a href="https://www.asx.com.au/asxpdf/20190129/pdf/44248pyx7jnl1g.pdf" target="_blank">announced</a> that the first court meeting to be held on the 1st February - which would consider the Scheme documents that are sent to ECX shareholders - will be rescheduled. No new date was announced.
As to ECX's FY19 guidance:
<ul>
<li>FY19 NPATA (net profit after tax and before amortisation) is expected to be broadly flat vs. FY18.</li>
<li>1H19 is expected to ~40% of FY19 NPATA.</li>
<li>Certain equipment finance exposure has emerged in 1Q19, which will result in expected provisions of A$2.3mn and an allowance for further provisioning of A$0.8mn.</li>
<li>FY19 net profit is expected to grow versus FY19 but this is "due to the average corporate tax rate for FY18 being 25% compared to the estimated FY19 corporate tax rate of 29%."</li>
</ul>
The key MACs (Material Adverse Effect) under the SIA, means a specified event, which is reasonably likely to have:
<blockquote>
a material adverse effect on the business, assets, liabilities, financial or trading positions, profitability or prospects of ECX taken as a whole; OR
the effect that the value of the net tangible assets of ECX is reduced by at least A$13mn, measured against the net tangible assets stated in the ECX audited FY18 financial statements;
the effect that the value of the annual NPATA of ECX is reduced by at least 10% measured against the NPATA stated in EXC's audited FY18 financial statements. (my emphasis)
</blockquote>
That word may prove to be significant.
But at a 20% gross spread to terms (ECX is down ~19% as I type) and trading bang in line with its undisturbed price, prior to <a href="https://www.smartkarma.com/entities/13984" target="_blank" data-smartkarma-citation="entities:13984:1">Sg Fleet (SGF AU)</a>'s August proposal, the negative news surrounding the NPATA guidance and the MACs appears fully priced in.

Thirty minutes after Eclipx (ECX AU) guided down its FY19 NPATA figure, Mcmillan Shakespeare (MMS AU) announced that the first court meeting to be held on the 1st February - which would consider the Scheme documents that are sent to ECX shareholders - will be rescheduled. No new date was announced.
As to ECX's FY19 guidance:

FY19 NPATA (net profit after tax and before amortisation) is expected to be broadly flat vs. FY18.
1H19 is expected to ~40% of FY19 NPATA.
Certain equipment finance exposure has emerged in 1Q19, which will result in expected provisions of A$2.3mn and an allowance for further provisioning of A$0.8mn.
FY19 net profit is expected to grow versus FY19 but this is "due to the average corporate tax rate for FY18 being 25% compared to the estimated FY19 corporate tax rate of 29%."

The key MACs (Material Adverse Effect) under the SIA, means a specified event, which is reasonably likely to have:

a material adverse effect on the business, assets, liabilities, financial or trading positions, profitability or prospects of ECX taken as a whole; OR
the effect that the value of the net tangible assets of ECX is reduced by at least A$13mn, measured against the net tangible assets stated in the ECX audited FY18 financial statements;
the effect that the value of the annual NPATA of ECX is reduced by at least 10% measured against the NPATA stated in EXC's audited FY18 financial statements. (my emphasis)

That word may prove to be significant.
But at a 20% gross spread to terms (ECX is down ~19% as I type) and trading bang in line with its undisturbed price, prior to Sg Fleet (SGF AU)'s August proposal, the negative news surrounding the NPATA guidance and the MACs appears fully priced in.

FleetPartners Group

McMillan's Offer For Eclipx Wobbles