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>The <a href="https://www.afr.com/street-talk/dye-and-durham-re-thinks-link-bid-revised-offer-expected-20220626-p5awns" target="_blank" rel="noopener">AFR reports</a> that after weeks of talk, Dye &amp; Durham (DND) is expected to lob a revised lower proposal for <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration (LNK AU)</a> as soon as this week.</li>
<li>Presumably, DND’s justification for a lower offer is to facilitate ACCC approval timelines. It remains to be seen if this is enough for the Board to recommend a lower offer. </li>
<li>Tweaking the IE’s valuation range for the current peer multiples and <a href="https://www.smartkarma.com/entities/pexa-group-ltd" target="_blank" data-smartkarma-citation="entities:34716:1" rel="noopener">PEXA Group (PXA AU)</a> share price points to a Link valuation range of A$3.52-4.40 per share. </li>
</ul>


The AFR reports that after weeks of talk, Dye &amp; Durham (DND) is expected to lob a revised lower proposal for Link Administration (LNK AU) as soon as this week.
Presumably, DND’s justification for a lower offer is to facilitate ACCC approval timelines. It remains to be seen if this is enough for the Board to recommend a lower offer. 
Tweaking the IE’s valuation range for the current peer multiples and PEXA Group (PXA AU) share price points to a Link valuation range of A$3.52-4.40 per share. 


Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer

<ul>
<li>DND’s 3QFY22 last night continued to suggest DND’s commitment to complete the <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> acquisition.</li>
<li>DND management's messaging in the call downplayed the MAC risk of a contract renewal but shifted incrementally more bearish on the ACCC review, in our view.</li>
<li>The risk-reward calculus is now incrementally more positive. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 (-5% below the last close) limiting downside risk.</li>
</ul>


DND’s 3QFY22 last night continued to suggest DND’s commitment to complete the Link Administration Holdings (LNK AU) acquisition.
DND management's messaging in the call downplayed the MAC risk of a contract renewal but shifted incrementally more bearish on the ACCC review, in our view.
The risk-reward calculus is now incrementally more positive. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 (-5% below the last close) limiting downside risk.


Link Risk/Reward Benefits with the Messaging from DND’s Earnings Call

<ul>
<li>
<a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> claims to be not aware of any reason for today’s -15% share collapse. The market seems nervy that DND will exhibit buyer’s remorse. </li>
<li>The scheme consideration is now 2.6x DND’s market cap. The ACCC delayed review and the contract renewal MAC clause could be DND’s get-out-of-jail-free card for a lower price/walk-away. </li>
<li>Our “deal-break” SoTP valuation suggests a valuation of A$4.24 per share, which is broadly in line with the last close price. The next catalyst is DND’s results tomorrow.</li>
</ul>



Link Administration Holdings (LNK AU) claims to be not aware of any reason for today’s -15% share collapse. The market seems nervy that DND will exhibit buyer’s remorse. 
The scheme consideration is now 2.6x DND’s market cap. The ACCC delayed review and the contract renewal MAC clause could be DND’s get-out-of-jail-free card for a lower price/walk-away. 
Our “deal-break” SoTP valuation suggests a valuation of A$4.24 per share, which is broadly in line with the last close price. The next catalyst is DND’s results tomorrow.


Link’s Shares Collapse as Worries of Buyer’s Remorse Sets In

<ul>
<li>The <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> scheme meeting is scheduled for 13 July. The independent expert has concluded that the Dye &amp; Durham (DND) offer is fair and reasonable.</li>
<li>The offer faces significant risks which are ACCC review (<a href="https://www.accc.gov.au/public-registers/mergers-registers/public-informal-merger-reviews/dye-durham-corporation-link-administration-holdings" target="_blank" rel="noopener">findings delayed</a> from the 26 May release date), a contract renewal potentially triggering the MAC clause and an ongoing <a href="https://www.fca.org.uk/news/news-stories/lf-woodford-equity-income-fund-investigation" target="_blank" rel="noopener">FCA investigation</a>.</li>
<li>At the last close, the gross spread to the base offer is 10.7%. We would be buyers up to A$5.20 per share (implies 75% deal probability).</li>
</ul>


The Link Administration Holdings (LNK AU) scheme meeting is scheduled for 13 July. The independent expert has concluded that the Dye &amp; Durham (DND) offer is fair and reasonable.
The offer faces significant risks which are ACCC review (findings delayed from the 26 May release date), a contract renewal potentially triggering the MAC clause and an ongoing FCA investigation.
At the last close, the gross spread to the base offer is 10.7%. We would be buyers up to A$5.20 per share (implies 75% deal probability).


Link’s Scheme Meeting on 13 July, High Spread Reflects Deal Risk

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<div><p>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.</p></div><div>We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - <a href="https://www.smartkarma.com/entities/centuria-capital-group" target="_blank" data-smartkarma-citation="entities:15546:1" rel="noopener">Centuria Capital (CNI AU)</a>, <a href="https://www.smartkarma.com/entities/pinnacle-investment-manageme" target="_blank" data-smartkarma-citation="entities:20624:1" rel="noopener">Wilson (PNI AU)</a> and <a href="https://www.smartkarma.com/entities/sealink-travel-group-ltd" target="_blank" data-smartkarma-citation="entities:6400:1" rel="noopener">Sealink Travel (SLK AU)</a> while the potential deletions are <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/nrw-holdings-ltd" target="_blank" data-smartkarma-citation="entities:9271:1" rel="noopener">NRW Holdings (NWH AU)</a> and <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/galaxy-resources-ltd" target="_blank" data-smartkarma-citation="entities:13914:1" rel="noopener">Galaxy Resources (GXY AU)</a> is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" data-smartkarma-citation="entities:3572:1" rel="noopener">Orocobre Ltd (ORE AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> is a close add and the corresponding deletion is <a href="https://www.smartkarma.com/entities/westgold-resources-ltd" target="_blank" data-smartkarma-citation="entities:24269:1" rel="noopener">Westgold Resources (WGX AU)</a>.</div><div></div><div>There is a large impact expected on the inclusions while the impact on the deletions is lower.</div><div></div><div>For <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>, the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.</div>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - Centuria Capital (CNI AU), Wilson (PNI AU) and Sealink Travel (SLK AU) while the potential deletions are Nuix Limited (NXL AU), NRW Holdings (NWH AU) and G8 Education (GEM AU).
Galaxy Resources (GXY AU) is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with Orocobre Ltd (ORE AU).
De Grey Mining (DEG AU) is a close add and the corresponding deletion is Westgold Resources (WGX AU).There is a large impact expected on the inclusions while the impact on the deletions is lower.For G8 Education (GEM AU), the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

Australia

Bravura Solutions Limited provides wealth management applications software to the pension, investment management, and life insurance industries. The Company offers consulting, applications development and implementation, maintenance, support, training, and business process outsourcing services. Bravura Solutions serves customers worldwide.

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Bravura Solutions (BVS AU)

Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer

Renewed bid spec is an unexpected positive catalyst. Tweaking the IE’s valuation range for the market sell-off points to a Link valuation range of...

Arun George

Link Risk/Reward Benefits with the Messaging from DND’s Earnings Call

The risk-reward calculus gets a lift from the DND 3Q call. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 limiting...

Arun George

Link’s Shares Collapse as Worries of Buyer’s Remorse Sets In

Shares collapsed today on concerns that the deal is on shaky grounds as DND may push for a lower price or walk away. Link is now trading at our...

Arun George

Link’s Scheme Meeting on 13 July, High Spread Reflects Deal Risk

The high gross spread of 10.7% reflects significant risks which are ACCC review, a contract renewal potentially leading to MAC and an FCA...

Arun George

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

We see 3 potential changes to the ASX200 at the Sep rebalance with CNI, PNI and SLK being included and NXL, NRW and GEM being deleted. Passive...

Brian Freitas

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