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

<a href="https://www.smartkarma.com/entities/z-energy-ltd" target="_blank" data-smartkarma-citation="entities:9838:1" rel="noopener">Z Energy Ltd (ZEL NZ)</a> is a fuel distribution and retailing business which owns and manages over 300 fuel stations in New Zealand under the Z and Caltex brands. Z Energy revealed a non-binding indicative proposal from <a href="https://www.smartkarma.com/entities/ampol-ltd" target="_blank" data-smartkarma-citation="entities:345:1" rel="noopener">Caltex Australia (ALD AU)</a>/Ampol to acquire it via a scheme of arrangement. Ampol is offering NZ$3.78 per share. The bid represents a 22% premium to the share price on 12 August (prior to receipt of the announced proposal), a 35% premium to the share price on 26 July (prior to media speculation regarding a bid) and a 47% premium to the share price on 1 June (prior to Ampol’s first rejected proposal).Z Energy has agreed to grant Ampol a four-week exclusivity period to conduct due diligence. The indicative offer permits Z Energy to pay dividends up to NZ 10 cents on the scheme implementation to accommodate any regulatory-driven delays. Subject to discussions, Ampol’s offer may include a scrip component and a secondary New Zealand listing.  Pushing for a better price is part of the M&amp;A game. The Board had rejected Ampol’s previous three offers as they did not represent compelling value. The Board was able to secure a sweetened bid which offers a 12.8% bump to Ampol’s first offer of NZ$3.35 per share.  Ampol’s offer is a premium to Z Energy's historical EV/EBITDA multiples but a discount to pre-COVID-19 share prices. Z Energy’s CEO opines that Ampol’s bid could be a catalyst for other bidders that had previously signalled interest to make a move for Z Energy. Potential bidders could be <a href="https://www.smartkarma.com/entities/chevron-corp" target="_blank" data-smartkarma-citation="entities:11091:1" rel="noopener">Chevron Corp (CVX US)</a>, Vitol, <a href="https://www.smartkarma.com/entities/glencore-plc" target="_blank" data-smartkarma-citation="entities:764:1" rel="noopener">Glencore Plc (GLEN LN)</a>, Trafigura and Japanese refiners.<div class="content-highlight">Overall, we think Ampol’s offer is a good starting point to lay down a valuation benchmark and suspect that there is some upside to the final offer price. At the last close price of NZ$3.48, Z Energy’s shares are trading at an 8.6% gross spread to the indicative offer.</div>

Z Energy Ltd (ZEL NZ) is a fuel distribution and retailing business which owns and manages over 300 fuel stations in New Zealand under the Z and Caltex brands. Z Energy revealed a non-binding indicative proposal from Caltex Australia (ALD AU)/Ampol to acquire it via a scheme of arrangement. Ampol is offering NZ$3.78 per share. The bid represents a 22% premium to the share price on 12 August (prior to receipt of the announced proposal), a 35% premium to the share price on 26 July (prior to media speculation regarding a bid) and a 47% premium to the share price on 1 June (prior to Ampol’s first rejected proposal).Z Energy has agreed to grant Ampol a four-week exclusivity period to conduct due diligence. The indicative offer permits Z Energy to pay dividends up to NZ 10 cents on the scheme implementation to accommodate any regulatory-driven delays. Subject to discussions, Ampol’s offer may include a scrip component and a secondary New Zealand listing.  Pushing for a better price is part of the M&amp;A game. The Board had rejected Ampol’s previous three offers as they did not represent compelling value. The Board was able to secure a sweetened bid which offers a 12.8% bump to Ampol’s first offer of NZ$3.35 per share.  Ampol’s offer is a premium to Z Energy's historical EV/EBITDA multiples but a discount to pre-COVID-19 share prices. Z Energy’s CEO opines that Ampol’s bid could be a catalyst for other bidders that had previously signalled interest to make a move for Z Energy. Potential bidders could be Chevron Corp (CVX US), Vitol, Glencore Plc (GLEN LN), Trafigura and Japanese refiners.Overall, we think Ampol’s offer is a good starting point to lay down a valuation benchmark and suspect that there is some upside to the final offer price. At the last close price of NZ$3.48, Z Energy’s shares are trading at an 8.6% gross spread to the indicative offer.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

As long as market dynamics remain largely positive and the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), and EM (EEM-US) indexes are above their respective intermediate-term support levels we believe a constructive outlook is warranted. To reiterate, support levels to watch include $90 on ACWI-US, $53 on ACWX-US, and $52 on EEM-US. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.

As long as market dynamics remain largely positive and the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), and EM (EEM-US) indexes are above their respective intermediate-term support levels we believe a constructive outlook is warranted. To reiterate, support levels to watch include $90 on ACWI-US, $53 on ACWX-US, and $52 on EEM-US. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.

Global Equity Strategy: Constructive Pullback; Overweight Value

The number of major country indexes showing major bullish inflections continues to grow. Broad commodities (Bloomberg Commodity index) also display a bullish reversal topside a 12.5-year downtrend. This type of evidence helps affirm our bullish outlook and suggests higher prices are ahead. Continue to add exposure on pullbacks.

The number of major country indexes showing major bullish inflections continues to grow. Broad commodities (Bloomberg Commodity index) also display a bullish reversal topside a 12.5-year downtrend. This type of evidence helps affirm our bullish outlook and suggests higher prices are ahead. Continue to add exposure on pullbacks.

Long-Term Bullish Inflections For Hang Seng, DAX, MSCI EM, & Bloomberg Commodity Index

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group Holding (BABA US)</a> plans to launch a $10-15 billion secondary listing in Hong Kong on 11 November, Singles Day, according to press reports. Alibaba is hoping to take advantage of an anticipated record sales on Singles Day to push ahead with its Hong Kong listing hearing. If the listing hearing is successful, the deal could price as soon as the end of the week.<div class="content-highlight">If successful, Alibaba will be the largest company to have a secondary listing in Hong Kong with a primary listing in the US. Alibaba will likely price its H-shares at a discount to its ADRs to entice investors to participate in the secondary listing. Our analysis suggests that Alibaba pricing its H-shares at a 1.5% to 3.0% discount to its ADRs would be reasonable.</div>

Alibaba Group Holding (BABA US) plans to launch a $10-15 billion secondary listing in Hong Kong on 11 November, Singles Day, according to press reports. Alibaba is hoping to take advantage of an anticipated record sales on Singles Day to push ahead with its Hong Kong listing hearing. If the listing hearing is successful, the deal could price as soon as the end of the week.If successful, Alibaba will be the largest company to have a secondary listing in Hong Kong with a primary listing in the US. Alibaba will likely price its H-shares at a discount to its ADRs to entice investors to participate in the secondary listing. Our analysis suggests that Alibaba pricing its H-shares at a 1.5% to 3.0% discount to its ADRs would be reasonable.

Alibaba HK Listing: Thoughts on the Premium/Discount to the ADRs

Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Alpha Factors

Equity Bottom-Up

INVESTMENT CONCLUSION:  We recommend Buying <a href="https://www.smartkarma.com/entities/vale-indonesia-tbk" target="_blank" data-smartkarma-citation="entities:19226:1" rel="noopener">Vale Indonesia Tbk (INCO IJ)</a> shares with a price target of Rp.4,500/sh.  INCO is a beneficiary of stronger <a href="https://www.smartkarma.com/entities/nickel" target="_blank" data-smartkarma-citation="entities:26790:1" rel="noopener">Nickel (NICKEL COMDTY)</a> prices and we forecast 4Q19 EBITDA jumping back toward the US$100mn level or US$400mn on an annualized level, which is well ahead of the current consensus forecasts today.

INVESTMENT CONCLUSION:  We recommend Buying Vale Indonesia Tbk (INCO IJ) shares with a price target of Rp.4,500/sh.  INCO is a beneficiary of stronger Nickel (NICKEL COMDTY) prices and we forecast 4Q19 EBITDA jumping back toward the US$100mn level or US$400mn on an annualized level, which is well ahead of the current consensus forecasts today. 

PT Vale Indonesia: Consensus Looks Too Conservative - Trading Buy

Switzerland

Glencore Plc is a diversified natural resources company. The Company operates in three groups: Metals and Minerals, Energy Products, and Agricultural Products. Glencore Plc offers its products and services around the world.

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Glencore Plc (GLEN LN)

Ampol Lobs an Offer for Z Energy

Z Energy revealed a non-binding indicative proposal from Ampol at NZ$3.78 per share. We suspect that there is some upside to the final offer price....

Arun George

Global Equity Strategy: Constructive Pullback; Overweight Value

As long as the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), and EM (EEM-US) indexes are above their respective intermediate-term support levels we...

Vermilion Research

Long-Term Bullish Inflections For Hang Seng, DAX, MSCI EM, & Bloomberg Commodity Index

The number of major country indexes showing major bullish inflections continues to grow. Broad commodities also breaking a 12.5-year downtrend....

Vermilion Research

Alibaba HK Listing: Thoughts on the Premium/Discount to the ADRs

Alibaba Group Holding (BABA US) plans to launch a $10-15 billion secondary listing in Hong Kong on 11 November, Singles Day, according to press...

Arun George

PT Vale Indonesia: Consensus Looks Too Conservative - Trading Buy

INVESTMENT CONCLUSION: We recommend Buying Vale Indonesia Tbk (INCO IJ) shares with a price target of Rp.4,500/sh. INCO is a beneficiary of...

Charles Spencer

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