Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In mid-late June, the two largest Listed Investment Corporations in Australia - <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> and <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> - announced plans to merge, with SOL (a.k.a. "WHSP") becoming the surviving entity. 
This was discussed by <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> in <a href="https://www.smartkarma.com/insights/whsp-s-proposed-merger-with-milton-corp" target="_blank" data-smartkarma-citation="insights:53422" rel="noopener">WHSP's Proposed Merger With Milton Corp</a> and by myself in <a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" data-smartkarma-citation="insights:53464" rel="noopener">Milton Merger Is A Most Marvelous Arb</a> and <a href="https://www.smartkarma.com/insights/milton-whsp-merger-index-implications-and-the-marvelous-arb" target="_blank" data-smartkarma-citation="insights:53551" rel="noopener">Milton-WHSP Merger Index Implications and the Marvelous Arb</a>. 
It is a complicated deal. 
Milton had been trading at a discount to NAV, where NAV was 97% or so listed stocks. WHSP had been trading at a premium to NAV. WHSP agreed to pay a premium to NAV for MLT shares, but the construct provided for some really interesting other optionality (some positive, a little negative) for MLT shareholders. 
In early July, Milton announced its NAV at A$5.50/share and assuming it is exactly A$5.5000/share, the Quiddity Milton Model was off by 0.16%. When it released its top 20 stock and weights list which showed about A$50-60mm of adjustments to positions since 31 Dec 2020 within the top 20 names, that lowered the NAV miss to about 0.07% and that is probably a matter of timing and stray dividend income or a mark on its private assets.
Interestingly, as WHSP rose 10% then came back a bit, and Milton rose with it, but the Milton NAV did not rise much, the "spread to terms" has stayed reasonably stable except for some near-market-close shenanigans at times. 
But it still feels like people don't get it. 
There's some really interesting convexity here. Still.
And the supply/demand tilt is remarkable.

In mid-late June, the two largest Listed Investment Corporations in Australia - Milton Corp Ltd (MLT AU) and Washington H. Soul Pattinson and Co. Ltd (SOL AU) - announced plans to merge, with SOL (a.k.a. "WHSP") becoming the surviving entity. 
This was discussed by David Blennerhassett in WHSP's Proposed Merger With Milton Corp and by myself in Milton Merger Is A Most Marvelous Arb and Milton-WHSP Merger Index Implications and the Marvelous Arb. 
It is a complicated deal. 
Milton had been trading at a discount to NAV, where NAV was 97% or so listed stocks. WHSP had been trading at a premium to NAV. WHSP agreed to pay a premium to NAV for MLT shares, but the construct provided for some really interesting other optionality (some positive, a little negative) for MLT shareholders. 
In early July, Milton announced its NAV at A$5.50/share and assuming it is exactly A$5.5000/share, the Quiddity Milton Model was off by 0.16%. When it released its top 20 stock and weights list which showed about A$50-60mm of adjustments to positions since 31 Dec 2020 within the top 20 names, that lowered the NAV miss to about 0.07% and that is probably a matter of timing and stray dividend income or a mark on its private assets.
Interestingly, as WHSP rose 10% then came back a bit, and Milton rose with it, but the Milton NAV did not rise much, the "spread to terms" has stayed reasonably stable except for some near-market-close shenanigans at times. 
But it still feels like people don't get it. 
There's some really interesting convexity here. Still.
And the supply/demand tilt is remarkable.

Milton's Marvelous Arb Meanders Along... Marvelously

David Blennerhassett

Investment houses <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. (SOL AU)</a> (WHSP) and <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> have <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02386623-2A1304538?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a merger by way of a Scheme via a scrip consideration.
The proposal implies Milton shareholders will receive a total consideration of $6.00/share, a 20% premium to last close and a 9.9% premium to the pre-tax NTA, comprising:
<ul>
<li>new WHSP shares;</li>
<li>a fully franked special dividend from Milton of up A$0.37/share;</li>
<li>a fully franked final dividend from Milton of A$.08/share (estimated); and</li>
</ul>
There is also a fully franked final dividend from WHSP of A$0.36 which when applying the scrip ratio will be worth A$0.07/share (estimated) to MLT holders if they hold WHSP as of the record date. 
As such, an additional A$0.22/share in franking credits (including 3c for the ~7c distribution from the WHSP shares) will be distributed for those Milton shareholders who can take advantage.
The merger has limited conditionality - that being the approval by independent Milton shareholders at a Scheme Meeting, tentatively scheduled for mid-September.
Provided all goes to plan, the Scheme is expected to be implemented late October. 
The independent directors of Milton unanimously recommend the proposal.
More below the fold.

Investment houses Washington H. Soul Pattinson and Co. (SOL AU) (WHSP) and Milton Corp Ltd (MLT AU) have announced a merger by way of a Scheme via a scrip consideration.
The proposal implies Milton shareholders will receive a total consideration of $6.00/share, a 20% premium to last close and a 9.9% premium to the pre-tax NTA, comprising:

new WHSP shares;
a fully franked special dividend from Milton of up A$0.37/share;
a fully franked final dividend from Milton of A$.08/share (estimated); and

There is also a fully franked final dividend from WHSP of A$0.36 which when applying the scrip ratio will be worth A$0.07/share (estimated) to MLT holders if they hold WHSP as of the record date. 
As such, an additional A$0.22/share in franking credits (including 3c for the ~7c distribution from the WHSP shares) will be distributed for those Milton shareholders who can take advantage.
The merger has limited conditionality - that being the approval by independent Milton shareholders at a Scheme Meeting, tentatively scheduled for mid-September.
Provided all goes to plan, the Scheme is expected to be implemented late October. 
The independent directors of Milton unanimously recommend the proposal.
More below the fold.

Since <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>'s surprise <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">announcement</a> earlier this week to acquire the 15.11% in <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> it does not own, I've fielded numerous questions concerning:
<ul>
<li>Who is entitled to vote at the forthcoming shareholder meeting for Strategic?</li>
<li>What rights do minorities have if they object to the Offer?</li>
<li>Why is there not a shareholder meeting for Matheson shareholders to vote on the acquisition of Strategic?</li>
<li>What is an effective economic interest in a cross-holding?</li>
</ul>
This insight answers these questions, among others.
Shareholders may feel aggrieved - and Matheson is getting Strategic for a bargain if simply eye-balling the long-term price chart.
But the risk to holding Strategic has been present ever since the Jardine's group moved the primary listings of their companies to the UK's Standard Board in 2014 from the Primary Board. 
For a more detailed run-through of the transaction itself, please refer to <a href="https://skr.ma/p6cqh" target="_blank" rel="noopener">Jardine Matheson: Collapsing The Circularity</a>.
More below the fold.

Since Jardine Matheson Holdings (JM SP)'s surprise announcement earlier this week to acquire the 15.11% in Jardine Strategic Holdings (JS SP) it does not own, I've fielded numerous questions concerning:

Who is entitled to vote at the forthcoming shareholder meeting for Strategic?
What rights do minorities have if they object to the Offer?
Why is there not a shareholder meeting for Matheson shareholders to vote on the acquisition of Strategic?
What is an effective economic interest in a cross-holding?

This insight answers these questions, among others.
Shareholders may feel aggrieved - and Matheson is getting Strategic for a bargain if simply eye-balling the long-term price chart.
But the risk to holding Strategic has been present ever since the Jardine's group moved the primary listings of their companies to the UK's Standard Board in 2014 from the Primary Board. 
For a more detailed run-through of the transaction itself, please refer to Jardine Matheson: Collapsing The Circularity.
More below the fold. 

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.

<a href="https://www.smartkarma.com/entities/19508" target="_blank" data-smartkarma-citation="entities:19508:1">DuluxGroup Ltd (DLX AU)</a> is Australia’s largest player in the decorative paint market, with well-known brands Dulux in paints and Selleys in adhesives. On 17 April, DuluxGroup announced a recommended scheme of arrangement from <a href="https://www.smartkarma.com/entities/7387" target="_blank" data-smartkarma-citation="entities:7387:1">Nippon Paint Holdings (4612 JP)</a> for A$9.80 cash per share. <div class="content-highlight">Overall, we believe that Nippon Paint’s bid is attractive with limited chance of a superior proposal. </div>

DuluxGroup Ltd (DLX AU) is Australia’s largest player in the decorative paint market, with well-known brands Dulux in paints and Selleys in adhesives. On 17 April, DuluxGroup announced a recommended scheme of arrangement from Nippon Paint Holdings (4612 JP) for A$9.80 cash per share. Overall, we believe that Nippon Paint’s bid is attractive with limited chance of a superior proposal. 

DuluxGroup’s Attractive Bid from Nippon Paint

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018) to reflect slightly stronger cost-out in the Building Products division. We also include AUD 50 million of property profits from the sale in December 2016 of Oakdale West as a significant item.We maintain our 13.70 DCF-based fair value estimate. (A recent cut to our <a href="https://www.smartkarma.com/entities/323" target="_blank" data-smartkarma-citation="entities:323:1">TPG Telecom Ltd (TPM AU)</a> fair value and upgrades to <a href="https://www.smartkarma.com/entities/4414" target="_blank" data-smartkarma-citation="entities:4414:1">New Hope Corp Ltd (NHC AU)</a> results…

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018) to reflect slightly stronger cost-out in the Building Products division. We also include AUD 50 million of property profits from the sale in December 2016 of Oakdale West as a significant item.We maintain our 13.70 DCF-based fair value estimate. (A recent cut to our TPG Telecom Ltd (TPM AU) fair value and upgrades to New Hope Corp Ltd (NHC AU) results…

Expected Rerate of TPG To Support Brickworks' Investment Portfolio; Shares Fairly Valued

Australia

Brickworks Limited manufactures and distributes clay products including brick, paver and floor tile products.  The Company also has investment interests in unlisted and listed companies along with property development activities.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Brickworks Ltd (BKW AU)

Milton's Marvelous Arb Meanders Along... Marvelously

The Marvelous Milton Merger Arb is still trading slightly wide on a "straight arb" basis. On a "true arb" basis including optionality, it is...

Travis Lundy

WHSP's Proposed Merger With Milton Corp

Pretty tight for what has a three and half month expected timeline. Plus terms fluctuate with the market. If the NTA, for example, falls 5% and...

David Blennerhassett

Jardine Strategic: What's Yours Is Mine

What rights do minorities have if they object to the Offer? Why is there not a shareholder meeting for Matheson shareholders to vote on the...

David Blennerhassett

DuluxGroup’s Attractive Bid from Nippon Paint

DuluxGroup Ltd (DLX AU) is Australia’s largest player in the decorative paint market, with well-known brands Dulux in paints and Selleys in...

Arun George

Expected Rerate of TPG To Support Brickworks' Investment Portfolio; Shares Fairly Valued

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018)...

Morningstar, Inc.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)