IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>Olam Group set to replace <a href="https://www.smartkarma.com/entities/olam-international-ltd" target="_blank" data-smartkarma-citation="entities:765:1" rel="noopener">Olam International (OLAM SP)</a> as the listed company entity on 16 March. It consists of Olam Food Ingredients (ofi), Olam Agri and Olam International (OIL).</li>
<li>The complicated restructuring exercise which was announced in January 2020 is driven by the Board’s intent to unlock long-term shareholder value. </li>
<li>Our SoTP valuation is S$2.36 per share, which is a 34% upside to the last trading price of S$1.76 per share (9 March prior to the suspension of the shares).</li>
</ul>


Olam Group set to replace Olam International (OLAM SP) as the listed company entity on 16 March. It consists of Olam Food Ingredients (ofi), Olam Agri and Olam International (OIL).
The complicated restructuring exercise which was announced in January 2020 is driven by the Board’s intent to unlock long-term shareholder value. 
Our SoTP valuation is S$2.36 per share, which is a 34% upside to the last trading price of S$1.76 per share (9 March prior to the suspension of the shares).


Olam Group: Restructuring to Unlock Value

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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Back on the 26 February this year, Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02347852-3A562617?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02336871-3A560489?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">market update</a> earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020. Concurrent with its 1H21 results, Huon said the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders. In a follow-up announcement on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02387935-3A569418?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 June</a>, Huon said that strategic review remained ongoing. 
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The most likely outcome of the review was a take-private transaction, however, an auction process dragged on, with a number of bidders pulling out on account of pricing. 
On the 6 August, Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02404691-3A572314?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a firm Offer, by way of a Scheme, with  Brazil's <a href="https://www.smartkarma.com/entities/jbs-sa" target="_blank" data-smartkarma-citation="entities:24455:1" rel="noopener">JBS SA (JBSS3 BZ)</a>. Huon shareholders would receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share - if paid - will be netted.
The cash price was a 61% premium to the last close, before the strategic review was announced on the 26 February. The Bender family with 53% of shares out intend to vote all of their shares in support of the Scheme, in the absence of a superior offer. The Offer also required approval from FIRB.
Apart from FIRB signing off - no small ask given JBS had fallen foul of US regulators recently - this looked like a done deal, with possible completion in November. 
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<div>
But Andrew Forrest's family fund Tattarang had other plans and promptly upped its stake to <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02405676-3A572494?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">18.51%</a> on the 10 August from 7.33% at the time of the SID announcement. That current stake all but blocks a Scheme. 
Not to be outdone,  JBS announced a parallel takeover bid on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02406953-3A572757?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">13 August</a>. This second Offer is conditional on 50.1% acceptances from shareholders.  With the Bender's stake, that Offer is effectively done - barring FIRB rejection. The Bender family also entered in a pre-bid acceptance agreement for 19.9% of shares out. 
It was unclear at the time whether Forrest was trying to block JBS in Huon or just looking for a better price.
In various media advertisements last Friday, Forrest <a href="https://www.harvestroad.com/its-time-to-commit-a-public-challenge-to-jbs-from-dr-andrew-forrest-ao/" target="_blank" rel="noopener">called on</a> JBS to commit to the same principles as Tattarang’s agri-food business, Harvest Road, and its beef processing company, Harvey Beef.
<div>
<blockquote>
For a small expense and through good management at Harvey Beef, we have established a clear No Pain No Fear framework in the critical stages of cattle processing as part of our ambition to exceed animal welfare standards and create a path for others to follow.
This means our customers don’t have to compromise their values when they choose to buy our products.
Animals provide humans with a valuable source of protein, the least we can do is respect this by ensuring they are treated with the utmost care.
As the world’s biggest protein producer, JBS can rise to this same standard.
</blockquote>
Not altogether surprisingly, JBS took umbrage with this challenge, saying it already adheres to high standards in its animal handling. As did Huon. 
Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02409974-3A573426?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> this morning...   that it has been...
<blockquote>
uncompromising in its commitment to the highest standards of animal husbandry, biosecurity, environmental management, and sustainable farming practices. Huon remains the only seafood producer in Australia to achieve RSPCA Approved Farming certification and firmly believes its sustainable salmon farming practices can be benchmarked against the best standards in the world.
</blockquote>
</div>
Huon also added Tattarang had earlier expressed interest in Huon and submitted a non-binding and conditional indicative offer. Tattarang was invited to participate further in the strategic review process but declined to do so. Tattarang’s non-binding and conditional indicative offer was at a material discount to JBS’s $3.85 offer.
Oddly, Huon is trading almost at terms. Given the non-negligible risk FIRB blocks the deal, I would avoid shares here.
More below the fold. 

</div>


Back on the 26 February this year, Huon announced a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a market update earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020. Concurrent with its 1H21 results, Huon said the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders. In a follow-up announcement on the 25 June, Huon said that strategic review remained ongoing. 


The most likely outcome of the review was a take-private transaction, however, an auction process dragged on, with a number of bidders pulling out on account of pricing. 
On the 6 August, Huon announced a firm Offer, by way of a Scheme, with  Brazil's JBS SA (JBSS3 BZ). Huon shareholders would receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share - if paid - will be netted.
The cash price was a 61% premium to the last close, before the strategic review was announced on the 26 February. The Bender family with 53% of shares out intend to vote all of their shares in support of the Scheme, in the absence of a superior offer. The Offer also required approval from FIRB.
Apart from FIRB signing off - no small ask given JBS had fallen foul of US regulators recently - this looked like a done deal, with possible completion in November. 


But Andrew Forrest's family fund Tattarang had other plans and promptly upped its stake to 18.51% on the 10 August from 7.33% at the time of the SID announcement. That current stake all but blocks a Scheme. 
Not to be outdone,  JBS announced a parallel takeover bid on the 13 August. This second Offer is conditional on 50.1% acceptances from shareholders.  With the Bender's stake, that Offer is effectively done - barring FIRB rejection. The Bender family also entered in a pre-bid acceptance agreement for 19.9% of shares out. 
It was unclear at the time whether Forrest was trying to block JBS in Huon or just looking for a better price.
In various media advertisements last Friday, Forrest called on JBS to commit to the same principles as Tattarang’s agri-food business, Harvest Road, and its beef processing company, Harvey Beef.


For a small expense and through good management at Harvey Beef, we have established a clear No Pain No Fear framework in the critical stages of cattle processing as part of our ambition to exceed animal welfare standards and create a path for others to follow.
This means our customers don’t have to compromise their values when they choose to buy our products.
Animals provide humans with a valuable source of protein, the least we can do is respect this by ensuring they are treated with the utmost care.
As the world’s biggest protein producer, JBS can rise to this same standard.

Not altogether surprisingly, JBS took umbrage with this challenge, saying it already adheres to high standards in its animal handling. As did Huon. 
Huon said this morning...   that it has been...

uncompromising in its commitment to the highest standards of animal husbandry, biosecurity, environmental management, and sustainable farming practices. Huon remains the only seafood producer in Australia to achieve RSPCA Approved Farming certification and firmly believes its sustainable salmon farming practices can be benchmarked against the best standards in the world.


Huon also added Tattarang had earlier expressed interest in Huon and submitted a non-binding and conditional indicative offer. Tattarang was invited to participate further in the strategic review process but declined to do so. Tattarang’s non-binding and conditional indicative offer was at a material discount to JBS’s $3.85 offer.
Oddly, Huon is trading almost at terms. Given the non-negligible risk FIRB blocks the deal, I would avoid shares here.
More below the fold. 



<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02391761-2A1307944?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a consortium comprising IFM Investors, QSuper, and fund manager Global Infrastructure Management has made an indicative, non-binding Offer by way of a Scheme at $8.25/share,  a 42% premium to last close.  
SYD has commenced an assessment of the proposal but mentions the Offer price is below the Covid-cliff, and that the pandemic effect on operations is expected to be short-term.  
Separately, the Offer is conditional on regulatory approvals such as FIRB and ACCC. As a critical aviation asset, it's not just the opportunistic price that could torpedo this deal.
More below the fold.

Sydney Airport (SYD AU) has announced a consortium comprising IFM Investors, QSuper, and fund manager Global Infrastructure Management has made an indicative, non-binding Offer by way of a Scheme at $8.25/share,  a 42% premium to last close.  
SYD has commenced an assessment of the proposal but mentions the Offer price is below the Covid-cliff, and that the pandemic effect on operations is expected to be short-term.  
Separately, the Offer is conditional on regulatory approvals such as FIRB and ACCC. As a critical aviation asset, it's not just the opportunistic price that could torpedo this deal.
More below the fold.

Sydney Airports (SYD AU): Opportunistic Tilt Amid Cloudy Future

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Thematic (Sector/Industry)

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 
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This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 
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In this report, we identify that <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> , <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and <a href="https://www.smartkarma.com/entities/singapore-post-ltd" target="_blank" data-smartkarma-citation="entities:150:1" rel="noopener">Singapore Post (SPOST SP)</a>as winners while <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> and <a href="https://www.smartkarma.com/entities/genting-singapore-ltd" target="_blank" data-smartkarma-citation="entities:439:1" rel="noopener">Genting Singapore (GENS SP)</a>as losers.

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 

This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP) and Genting Singapore (GENS SP)as losers. 

Singapore Mini Lockdown: Winners and Losers

On the 27 February this year, <a href="https://www.smartkarma.com/entities/4285" target="_blank" data-smartkarma-citation="entities:4285:1" rel="noopener">Ruralco Holdings (RHL AU)</a> <a href="https://www.asx.com.au/asxpdf/20190227/pdf/4430v0cv3wwr8q.pdf" target="_blank" rel="noopener">announced</a> it had entered into a Scheme Implementation Deed in which <a href="https://www.smartkarma.com/entities/27261" target="_blank" data-smartkarma-citation="entities:27261:1" rel="noopener">Nutrien Ltd (NTR CN)</a> had agreed to take Ruralco private at $4.40/share - a 44% premium to last close and the one-month VWAP. The Scheme was subject to shareholder approval, and approval from the ACCC and FIRB. 
The ACCC <a href="https://www.accc.gov.au/media-release/accc-to-not-oppose-ruralcos-proposed-acquisition-of-elders-rural-services" target="_blank" rel="noopener">did not oppose</a> Ruralco's proposed acquisition of <a href="https://www.smartkarma.com/entities/elders-ltd" target="_blank" data-smartkarma-citation="entities:10040:1" rel="noopener">Elders Ltd (ELD AU)</a> back in May 2013. ACCC's chairman said at the time the combined rural services retail networks of the merger parties would be constrained by alternative retail suppliers of agri-products located nearby.
Ruralco and Elders are the No.1 &amp; 2 players, with Nutrien's Landmark third. If there was no issue with Ruralco &amp; Elders combining, there should have been no issue with Ruralco and Nutrien/Landmark teaming up.
On the 13 June, the ACCC <a href="https://www.accc.gov.au/system/files/public-registers/documents/Landmark%20Ruralco%20-%20SOI%20-%2013%20June%202019.pdf" target="_blank" rel="noopener">announced</a> its Statement of Issues (SOI), raising preliminary competition concerns. The key issue centers on merchandising and the dilution of competition from this transaction. The ACCC had fewer concerns over the amalgamated impact on the agency businesses.
The ACCC's concerns were not definitive nor strongly worded, therefore the possibility of a formal clearance remained. But on balance, my read was that there was sufficient weight surrounding merchandising issues such that the divestment of some stores was likely required for this deal to get up. 
To make matters interesting, Elders made an A$187mn scrip/cash (50:50) <a href="https://www.asx.com.au/asxpdf/20190715/pdf/446m5htsc5yp55.pdf" target="_blank" rel="noopener">Offer</a> on the 15 July for unlisted wholesale buying group Australian Independent Rural Retailers (AIRR), by way of a Scheme. This transaction also requires ACCC approval.
Oddly, one media source <a href="https://www.theaustralian.com.au/subscribe/news/1/?sourceCode=TAWEB_WRE170_a_GGL&amp;dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Fcompanies%2Fnutriens-ruralco-bid-facing-accc-knockback%2Fnews-story%2Fad1c4f49c98c766229950fc8afcbf2fe&amp;memtype=anonymous&amp;mode=premium" target="_blank" rel="noopener">reported</a> yesterday (paywalled) that ACCC would reject the Nutrien/Ruralco merger. 
This morning,  the ACCC <a href="https://www.asx.com.au/asxpdf/20190822/pdf/447qmxjqm4m560.pdf" target="_blank" rel="noopener">cleared</a> the merger. The clearance is subject to Nutrien divesting merchandise stores located in Broome, Alice Springs and Hughenden. 
The Scheme Meeting is tabled for the 6 September with an expected Implementation Date of 30 September.
This is a done deal and will trade tight to terms.
<a href="https://www.asx.com.au/asxpdf/20190822/pdf/447qmxjqm4m560.pdf" target="_blank" rel="noopener"></a>

On the 27 February this year, Ruralco Holdings (RHL AU) announced it had entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) had agreed to take Ruralco private at $4.40/share - a 44% premium to last close and the one-month VWAP. The Scheme was subject to shareholder approval, and approval from the ACCC and FIRB. 
The ACCC did not oppose Ruralco's proposed acquisition of Elders Ltd (ELD AU) back in May 2013. ACCC's chairman said at the time the combined rural services retail networks of the merger parties would be constrained by alternative retail suppliers of agri-products located nearby.
Ruralco and Elders are the No.1 &amp; 2 players, with Nutrien's Landmark third. If there was no issue with Ruralco &amp; Elders combining, there should have been no issue with Ruralco and Nutrien/Landmark teaming up.
On the 13 June, the ACCC announced its Statement of Issues (SOI), raising preliminary competition concerns. The key issue centers on merchandising and the dilution of competition from this transaction. The ACCC had fewer concerns over the amalgamated impact on the agency businesses.
The ACCC's concerns were not definitive nor strongly worded, therefore the possibility of a formal clearance remained. But on balance, my read was that there was sufficient weight surrounding merchandising issues such that the divestment of some stores was likely required for this deal to get up. 
To make matters interesting, Elders made an A$187mn scrip/cash (50:50) Offer on the 15 July for unlisted wholesale buying group Australian Independent Rural Retailers (AIRR), by way of a Scheme. This transaction also requires ACCC approval.
Oddly, one media source reported yesterday (paywalled) that ACCC would reject the Nutrien/Ruralco merger. 
This morning,  the ACCC cleared the merger. The clearance is subject to Nutrien divesting merchandise stores located in Broome, Alice Springs and Hughenden. 
The Scheme Meeting is tabled for the 6 September with an expected Implementation Date of 30 September.
This is a done deal and will trade tight to terms.


Australia

GrainCorp Limited operates as a food ingredients and agribusiness company. The Company processes and distributes wheat, barley, and canola, as well as offers a range of malt products and service to brewers and distillers. GrainCorp also supplies and refines edible oils. GrainCorp serves customers worldwide.*Dummy ticker for index membership mapping

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Graincorp Ltd A (GNC AU)

Olam Group: Restructuring to Unlock Value

Olam Group set to replace Olam International as the listed company entity on 16 March. Our SoTP valuation is S$2.36 per share, which is a 34%...

Arun George

Huon Ag (Huo AU): Twiggy Went To Market

Trading at a gross/annualised return of 0.2%/1.2%. I doubt there is a bump here. I'd be inclined to avoid this transaction. I think FIRB approval...

David Blennerhassett

Sydney Airports (SYD AU): Opportunistic Tilt Amid Cloudy Future

A full Offer probably needs to be tabled at $9+, ~9% up from the current proposal, and an additional $2bn outlay from the Consortium. I think DD...

David Blennerhassett

Singapore Mini Lockdown: Winners and Losers

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP)...

Henry Soediarko

ACCC Green Lights Ruralco/Nutrien Merger

On the 27 February this year, Ruralco Holdings (RHL AU) announced it had entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN)...

David Blennerhassett

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