Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

<p>Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian dollar was trading below fair value. &nbsp;After what had been a strong period of out-performance from US dollar earners, I concluded that without the tailwind of A$ over-valuation - which prevailed through most of 2014 - their returns in the near term would be capped. In this post, I show that recent currency appreciation has eliminated the modest under-valuation and been associated with under-performance from US$ earners. The basket is trading on a median 12 mth forward PE of 20x, which represents a 25% premium to the median estimate for the ASX100, slightly higher than historical norms. The premium reflects the fact that offshore earners have strong growth expectations and low betas, thanks to their defensive business models. I highlight that the stocks suffering from the highest level of analyst bearishness remain Cochlear, Treasury Wine Estates and Westfield, which each attract less than 20% of buy recommendations from analysts.</p><p>&nbsp;</p>

Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian dollar was trading below fair value. &nbsp;After what had been a strong period of out-performance from US dollar earners, I concluded that without the tailwind of A$ over-valuation - which prevailed through most of 2014 - their returns in the near term would be capped. In this post, I show that recent currency appreciation has eliminated the modest under-valuation and been associated with under-performance from US$ earners. The basket is trading on a median 12 mth forward PE of 20x, which represents a 25% premium to the median estimate for the ASX100, slightly higher than historical norms. The premium reflects the fact that offshore earners have strong growth expectations and low betas, thanks to their defensive business models. I highlight that the stocks suffering from the highest level of analyst bearishness remain Cochlear, Treasury Wine Estates and Westfield, which each attract less than 20% of buy recommendations from analysts.&nbsp;

A new narrative for the Australian dollar (update)

<p>The Reserve Bank Board meets today, a month after cutting the official cash rate (OCR) by 25 basis points&nbsp;to a multi-decade low of 2.25%.&nbsp; This followed an 18 month period of interest rate stability.&nbsp;&nbsp;&nbsp; There is a compelling case for the RBA to ease policy now to restore the psychology of risk taking in the economy and combat the new capital and cost discipline.&nbsp; But Mr Stevens has previously said that it is important that further cuts do not send a signal to the market that the economy is weak, at a time when consumer and business sentiment remain fragile.&nbsp; Thus, I believe that the May meeting presents the best opportunity to ease policy with the positive narrative of a lower inflation outlook following the release of the first quarter CPI in late April.</p>

The Reserve Bank Board meets today, a month after cutting the official cash rate (OCR) by 25 basis points&nbsp;to a multi-decade low of 2.25%.&nbsp; This followed an 18 month period of interest rate stability.&nbsp;&nbsp;&nbsp; There is a compelling case for the RBA to ease policy now to restore the psychology of risk taking in the economy and combat the new capital and cost discipline.&nbsp; But Mr Stevens has previously said that it is important that further cuts do not send a signal to the market that the economy is weak, at a time when consumer and business sentiment remain fragile.&nbsp; Thus, I believe that the May meeting presents the best opportunity to ease policy with the positive narrative of a lower inflation outlook following the release of the first quarter CPI in late April.

The New Capital Discipline and the RBA's Line Ball Decision

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Over the Wire Holdings Ltd / Event-Driven

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<p>There have been numerous take-private transactions for listed-Aussie IT service companies in recent years, some of which have been discussed on Smartkarma. These include...</p>
<ul>
<li>the November 2015 <a href="https://www.asx.com.au/asxpdf/20151125/pdf/4338cczfxtqgs3.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/uxc-ltd" target="_blank" data-smartkarma-citation="entities:965:1" rel="noopener">UXC Ltd (UXC AU)</a>;</li>
<li>the September 2016 <a href="https://www.asx.com.au/asxpdf/20161102/pdf/43clwcp6rxzv35.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/asg-group-ltd" target="_blank" data-smartkarma-citation="entities:7590:1" rel="noopener">ASG Group Ltd (ASZ AU)</a>;</li>
<li>the October 2019 <a href="https://www.asx.com.au/asxpdf/20191218/pdf/44cpl5rwnq34zq.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/csg-ltd" target="_blank" data-smartkarma-citation="entities:12317:1" rel="noopener">CSG Ltd (CSV AU)</a>;</li>
<li>the <a href="https://www.asx.com.au/asxpdf/20201030/pdf/44pcdfqrs4wzm0.pdf" target="_blank" rel="noopener">September 2020</a> Scheme for <a href="https://www.smartkarma.com/entities/dws-ltd" target="_blank" data-smartkarma-citation="entities:10622:1" rel="noopener">DWS Ltd (DWS AU)</a>, discussed by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar</a> in <a href="https://skr.ma/kJomK" target="_blank" rel="noopener"> <em>HCL-DWS(DWS AU): Cash Deal Trading Wide</em></a>;</li>
<li>the September 2020 <a href="https://www.asx.com.au/asxpdf/20201030/pdf/44pc22zh1mh1f4.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/citadel-group-ltd-the" target="_blank" data-smartkarma-citation="entities:14087:1" rel="noopener">Citadel Group (CGL AU)</a>, discussed in <em><a href="https://skr.ma/i6V5x" target="_blank" rel="noopener">Citadel Group: Private Equity Partners' Offer</a></em>;</li>
<li>Capgemini's November 2020 <a href="https://assets-global.website-files.com/5eb3a33204ebab1ecd0b72c9/60176e3f9a311b7f4cb909f6_Scheme%20Booklet%20-%20RXP%20Group%20ASX.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/rxp-services-ltd" target="_blank" data-smartkarma-citation="entities:15047:1" rel="noopener">RXP Services (RXP AU)</a>, and its follow up Scheme in July this year for <a href="https://www.smartkarma.com/entities/empired-ltd" target="_blank" data-smartkarma-citation="entities:9406:1" rel="noopener">Empired Ltd (EPD AU)</a> (<em><a href="https://skr.ma/YWsn3" target="_blank" rel="noopener">Empired (EPD AU): Capgemini's Full Offer</a></em>)); and</li>
<li>Norway's Crayon Group Holdings' July 2021 <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02418756-3A575319?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/rhipe-ltd" target="_blank" data-smartkarma-citation="entities:19128:1" rel="noopener">rhipe Ltd (RHP AU)</a> - see <em><a href="https://skr.ma/9ysNF" target="_blank" rel="noopener">Rhipe (RHP AU): Done Deal As Scheme Booklet Dispatched</a></em>.    </li>
</ul>
<div class="content-highlight">
<p>When <a href="https://www.smartkarma.com/entities/bulletproof-group-ltd" target="_blank" data-smartkarma-citation="entities:3324:1" rel="noopener">Bulletproof (BPF AU)</a>, an IT play, was taken private in 2018, the independent expert cited <a href="https://www.asx.com.au/asxpdf/20180410/pdf/43t32h54tfrk38.pdf" target="_blank" rel="noopener">10 peers</a> (page 28). Five of those peers have been taken private.</p>
<p>Now we have a proposal for the sixth. </p>
</div>
<p><a href="https://www.smartkarma.com/entities/aussie-broadband-pty-ltd" target="_blank" data-smartkarma-citation="entities:30812:1" rel="noopener">Aussie Broadband Pty Ltd (ABB AU)</a> has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02439848-2A1332945?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">offered</a> to acquire Brisbane-based telecommunications and IT solutions provider <a href="https://www.smartkarma.com/entities/over-the-wire-holdings-ltd" target="_blank" data-smartkarma-citation="entities:30653:1" rel="noopener">Over the Wire Holdings Ltd (OTW AU)</a> by way of a Scheme at $5.75/share.</p>
<p>This is an unsolicited and non-binding proposal. Via a process deed filed on 16 October, OTW said it has granted Aussie Broadband to undertake due diligence and negotiate transaction documentation. That process period ends on the 30 November.</p>
<p>More below the fold.</p>
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There have been numerous take-private transactions for listed-Aussie IT service companies in recent years, some of which have been discussed on Smartkarma. These include...

the November 2015 Scheme for UXC Ltd (UXC AU);
the September 2016 Scheme for ASG Group Ltd (ASZ AU);
the October 2019 Scheme for CSG Ltd (CSV AU);
the September 2020 Scheme for DWS Ltd (DWS AU), discussed by Janaghan Jeyakumar in  HCL-DWS(DWS AU): Cash Deal Trading Wide;
the September 2020 Scheme for Citadel Group (CGL AU), discussed in Citadel Group: Private Equity Partners' Offer;
Capgemini's November 2020 Scheme for RXP Services (RXP AU), and its follow up Scheme in July this year for Empired Ltd (EPD AU) (Empired (EPD AU): Capgemini's Full Offer)); and
Norway's Crayon Group Holdings' July 2021 Scheme for rhipe Ltd (RHP AU) - see Rhipe (RHP AU): Done Deal As Scheme Booklet Dispatched.    


When Bulletproof (BPF AU), an IT play, was taken private in 2018, the independent expert cited 10 peers (page 28). Five of those peers have been taken private.
Now we have a proposal for the sixth. 

Aussie Broadband Pty Ltd (ABB AU) has offered to acquire Brisbane-based telecommunications and IT solutions provider Over the Wire Holdings Ltd (OTW AU) by way of a Scheme at $5.75/share.
This is an unsolicited and non-binding proposal. Via a process deed filed on 16 October, OTW said it has granted Aussie Broadband to undertake due diligence and negotiate transaction documentation. That process period ends on the 30 November.
More below the fold.










Over The Wire (OTW AU): The Latest Aussie IT Play

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<p>Systems integrator <a href="https://www.smartkarma.com/entities/empired-ltd" target="_blank" data-smartkarma-citation="entities:9406:1" rel="noopener">Empired Ltd (EPD AU)</a> has entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02396546-6A1041326?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Scheme</a> with <a href="https://www.smartkarma.com/entities/capgemini-se" target="_blank" data-smartkarma-citation="entities:28633:1" rel="noopener">Capgemini SE (CGEMY US)</a> at a price of A$1.35/share, a 64.6% premium to last close, and an all-time high.</p>
<p>The Offer has the unanimous backing of Empired's board. In addition, CEO Russell Baskerville with 5.8% of Empired's outstanding shares intends to vote in favour of the Scheme.</p>
</div>
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<p>In addition to shareholder approval, the Offer is subject to OIO approval. The Offer is <em>not</em> subject to due dili or financing.</p>
<p>This looks done. </p>
</div>
<div>
<p>More below the fold.</p>
</div>


Systems integrator Empired Ltd (EPD AU) has entered into a Scheme with Capgemini SE (CGEMY US) at a price of A$1.35/share, a 64.6% premium to last close, and an all-time high.
The Offer has the unanimous backing of Empired's board. In addition, CEO Russell Baskerville with 5.8% of Empired's outstanding shares intends to vote in favour of the Scheme.


In addition to shareholder approval, the Offer is subject to OIO approval. The Offer is not subject to due dili or financing.
This looks done. 


More below the fold.


Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p><em>We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.</em></p><p>Risk arbitrage trades we have our eyes on are:</p><ul><li><a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson (2651 JP)</a> / <a href="https://www.smartkarma.com/entities/20668" target="_blank" data-smartkarma-citation="entities:20668:1">Mitsubishi Corp (8058 JP)</a> </li><li><a href="https://www.smartkarma.com/entities/12090" target="_blank" data-smartkarma-citation="entities:12090:1">SAI Global Ltd (SAI AU)</a> / Baring Asia Private Equity</li><li><a href="https://www.smartkarma.com/entities/20581" target="_blank" data-smartkarma-citation="entities:20581:1">Dan Form Holdings Co Ltd (271 HK)</a> / <a href="https://www.smartkarma.com/entities/13665" target="_blank" data-smartkarma-citation="entities:13665:1">Tian An China Investment (28 HK)</a></li><li><a href="https://www.smartkarma.com/entities/1090" target="_blank" data-smartkarma-citation="entities:1090:1">Vard Holdings Ltd (VARD SP)</a> / Fincantieri</li><li><a href="https://www.smartkarma.com/entities/7590" target="_blank" data-smartkarma-citation="entities:7590:1">ASG Group Ltd (ASZ AU)</a> / <a href="https://www.smartkarma.com/entities/18129" target="_blank" data-smartkarma-citation="entities:18129:1">Nomura Research Institute Lt (4307 JP)</a></li></ul><p><em>Have a great weekend!</em></p>

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.Risk arbitrage trades we have our eyes on are:Lawson (2651 JP) / Mitsubishi Corp (8058 JP) SAI Global Ltd (SAI AU) / Baring Asia Private EquityDan Form Holdings Co Ltd (271 HK) / Tian An China Investment (28 HK)Vard Holdings Ltd (VARD SP) / FincantieriASG Group Ltd (ASZ AU) / Nomura Research Institute Lt (4307 JP)Have a great weekend!

Smartkarma - Special Situations Weekly Update (21 November 2016)

Australia

ASG Group Limited is an information technology company involved in the outsourcing of computer infrastructure, application development, technical support and systems integration services.  The Group also provides Internet and e-commerce security services.

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ASG Group Ltd (ASZ AU)

A new narrative for the Australian dollar (update)

Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian...

Sam Ferraro

The New Capital Discipline and the RBA's Line Ball Decision

The Reserve Bank Board meets today, a month after cutting the official cash rate (OCR) by 25 basis points to a multi-decade low of 2.25%. This...

Sam Ferraro

Over The Wire (OTW AU): The Latest Aussie IT Play

Given DD has been afforded, $5.75/share is probably approaching full value Currently trading at a gross spread of 4.5%. That looks a tad tight,...

David Blennerhassett

Empired (EPD AU): Capgemini's Full Offer

This is a done deal and trading at a 3.4%/11% gross/annualised spread. Not bad, but this is not a terribly liquid arb situation.

David Blennerhassett

Smartkarma - Special Situations Weekly Update (21 November 2016)

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in...

Crispin Francis

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52-week Range

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