Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

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Equity Bottom-Up

<h2>
<strong>Examining key questions from the Kioxia &amp; PE </strong><strong>news flow</strong>
</h2><p>In our July 2021 note <a href="https://www.smartkarma.com/insights/toshiba-corp-6502-jp-chapter-5" target="_blank" data-smartkarma-citation="insights:54649" rel="noopener">Toshiba Corp (6502 JP) Chapter 5: Assessing the Next Move</a> we stated that one of the key events to be expected as early as September 2021, was the IPO of the firms 40% stake in Kioxia Holdings Corporation (Kioxia). Kioxia was due to be listed in 2020, but did not occur due to “the coronavirus pandemic and market volatility.” At the time of pulling the IPO in 2020, Toshiba was expecting a valuation of around $16 billion. </p><p>Several media sources, including Bloomberg and the Wall Street Journal, have alluded to the fact that a potential merger of Kioxia with Western Digital to the value of US$20bn may be on the cards. They have cited a possible transaction using shares as opposed to cash or a combination. This is news that shareholders and in particular the activist shareholders have wanted to hear for some time and a transaction that is expected to be welcomed. </p><p>We examine several of the key questions surrounding the Kioxia news and what is next for Toshiba - including the potential for a full PE bid. </p>


Examining key questions from the Kioxia &amp; PE news flow
In our July 2021 note Toshiba Corp (6502 JP) Chapter 5: Assessing the Next Move we stated that one of the key events to be expected as early as September 2021, was the IPO of the firms 40% stake in Kioxia Holdings Corporation (Kioxia). Kioxia was due to be listed in 2020, but did not occur due to “the coronavirus pandemic and market volatility.” At the time of pulling the IPO in 2020, Toshiba was expecting a valuation of around $16 billion. Several media sources, including Bloomberg and the Wall Street Journal, have alluded to the fact that a potential merger of Kioxia with Western Digital to the value of US$20bn may be on the cards. They have cited a possible transaction using shares as opposed to cash or a combination. This is news that shareholders and in particular the activist shareholders have wanted to hear for some time and a transaction that is expected to be welcomed. We examine several of the key questions surrounding the Kioxia news and what is next for Toshiba - including the potential for a full PE bid. 

Toshiba Corp (6502 JP) Chapter 6: Potential for Value Creation

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p>On 21 July, Bloomberg reported that Canadian <a href="https://www.smartkarma.com/entities/brookfield-asset-management-cl-a" target="_blank" data-smartkarma-citation="entities:25297:1" rel="noopener">Brookfield Asset Management-Cl A (BAM/A CN)</a> was working with advisers as it considers a potential bid for <a href="https://www.smartkarma.com/entities/alstria-office-reit-ag" target="_blank" data-smartkarma-citation="entities:21582:1" rel="noopener">alstria office reit-ag (AOX GR)</a><a href="https://platform.marketintelligence.spglobal.com/web/client?auth=inherit#company/profile?KeyProductLinkType=2&amp;id=4160242" target="_blank" rel="noopener"></a>. alstria office's shares jumped on the news and closed 9% higher. A buyout of the company would be the biggest take-private deal in Germany in 2021. On the same day, alstria stated it "takes note of the press rumours with respect to a potential takeover offer by Brookfield Asset Management Inc.".</p>
<p>The interest of Brookfield in alstria is a bet on German office market recovery. The portfolio of alstria should hold well in value vis-à-vis any further waves of the pandemic. Moreover cash flows are stable as alstria is mainly exposed to public sector tenants with long-term leases and it has stable occupancy rates.</p>
<p>Before the pandemic, alstria used to trade at a premium to BV, as of 23 July, it traded at 0.94x, and it is showing a remarkable recovery since the lows of November 2020, driven by vaccination campaigns and the soon-to-happen "back-to-office".</p>
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<p>On 4 March 2021, S&amp;P upgraded Alstria to BBB+ (outlook stable) on sustained low debt leverage (low ratio of debt to debt plus equity of 27.6%), material share of public tenants and long lease maturity profile and robust liquidity profile.</p>
<p>A <strong>takeout price</strong> could come in at <strong>€18.68, </strong>a <strong>10% premium over the last reported EPRA NTA</strong> and 6.4% premium to the closing price on 23 July. My PT is <strong>economic-profit based</strong> and equates to a <strong>1% discount to EPRA NTA 22e</strong> (source Capital IQ consensus). alstria trades at <strong>3.5% FFO yield</strong>. and 3% dividend yield.</p>
<p>German property values continue to increase. The ECB does not seem worried about inflation as long as the delta variant is spreading and will not stop its debt purchasing program in the short term, therefore monetary policy will likely remain unchanged.</p>
<p>Recommendation is <strong>Long AOX GR, PT €18.68</strong>.</p>
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On 21 July, Bloomberg reported that Canadian Brookfield Asset Management-Cl A (BAM/A CN) was working with advisers as it considers a potential bid for alstria office reit-ag (AOX GR). alstria office's shares jumped on the news and closed 9% higher. A buyout of the company would be the biggest take-private deal in Germany in 2021. On the same day, alstria stated it "takes note of the press rumours with respect to a potential takeover offer by Brookfield Asset Management Inc.".
The interest of Brookfield in alstria is a bet on German office market recovery. The portfolio of alstria should hold well in value vis-à-vis any further waves of the pandemic. Moreover cash flows are stable as alstria is mainly exposed to public sector tenants with long-term leases and it has stable occupancy rates.
Before the pandemic, alstria used to trade at a premium to BV, as of 23 July, it traded at 0.94x, and it is showing a remarkable recovery since the lows of November 2020, driven by vaccination campaigns and the soon-to-happen "back-to-office".



On 4 March 2021, S&amp;P upgraded Alstria to BBB+ (outlook stable) on sustained low debt leverage (low ratio of debt to debt plus equity of 27.6%), material share of public tenants and long lease maturity profile and robust liquidity profile.
A takeout price could come in at €18.68, a 10% premium over the last reported EPRA NTA and 6.4% premium to the closing price on 23 July. My PT is economic-profit based and equates to a 1% discount to EPRA NTA 22e (source Capital IQ consensus). alstria trades at 3.5% FFO yield. and 3% dividend yield.
German property values continue to increase. The ECB does not seem worried about inflation as long as the delta variant is spreading and will not stop its debt purchasing program in the short term, therefore monetary policy will likely remain unchanged.
Recommendation is Long AOX GR, PT €18.68.






Brookfield/Alstria Office REIT: Potential Takeover

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Three plus months ago I wrote about <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a>'s proposed restructuring Scheme in <a href="https://www.smartkarma.com/insights/capitaland-capl-sp-restructuring-is-big-but-still-vague-lots-of-fine-print-to-read" target="_blank" data-smartkarma-citation="insights:49463" rel="noopener">Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.</a></p><p>The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. </p><p>Late Friday night Capitaland <a href="https://investor.capitaland.com/newsroom/20210716_203319_C31_W6Z3Q02B78EAPQP3.1.pdf" target="_blank" rel="noopener">announced</a> it had received SGX-ST approval to list <strong><a href="https://www.smartkarma.com/entities/capitaland-investment-management" target="_blank" data-smartkarma-citation="entities:33774:1" rel="noopener">Capitaland Investment Management (CAPINVEST SP)</a></strong>. Saturday night, Capitaland released its <a href="https://investor.capitaland.com/misc/20210717_1143_SchemeDocument.pdf" target="_blank" rel="noopener">Scheme Document</a>. It is 922 pages of fine print. There is an <a href="https://links.sgx.com/FileOpen/SCR21050093AmazonIntroDoc.ashx?App=Announcement&amp;FileID=675106" target="_blank" rel="noopener">Introductory Document</a> which is shorter. It is 744 pages. There is also a brief 8-page <a href="https://links.sgx.com/FileOpen/17072021CapitaLand%20to%20seek%20Shareholders%20approval%20of%20proposed%20restructuring.ashx?App=Announcement&amp;FileID=675108" target="_blank" rel="noopener">press release</a> and an <a href="https://links.sgx.com/FileOpen/CL_Despatch_Notices_Announcement.ashx?App=Announcement&amp;FileID=675107" target="_blank" rel="noopener">Announcement of the Scheme Meeting</a>.</p><p>The deal as announced at the time is the same now. We have more timing details. </p><p>The restructuring involves the controlling holder of <a href="https://www.smartkarma.com/entities/capitaland-ltd" target="_blank" data-smartkarma-citation="entities:55:1" rel="noopener">Capitaland (CAPL SP)</a> (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of <a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105:1" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> where the parent's stake will fall. </p><div class="content-remarks"><p>* the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fine</p></div><p>Investors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The <em>Value</em> of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. </p><p>The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).</p><p>That's where the rubber hits the road. </p><p>So we take a closer look below the fold. </p>

Three plus months ago I wrote about Capitaland (CAPL SP)'s proposed restructuring Scheme in Capitaland (CAPL SP) Restructuring Is Big But Still Vague. Lots of Fine Print to Read.The proposed construct was complicated, and difficult to value, and required reading a lot of fine print, only some of which we had available. Little did I know how much fine print there would be. Late Friday night Capitaland announced it had received SGX-ST approval to list Capitaland Investment Management (CAPINVEST SP). Saturday night, Capitaland released its Scheme Document. It is 922 pages of fine print. There is an Introductory Document which is shorter. It is 744 pages. There is also a brief 8-page press release and an Announcement of the Scheme Meeting.The deal as announced at the time is the same now. We have more timing details. The restructuring involves the controlling holder of Capitaland (CAPL SP) (CLA Real Estate Holdings - ultimately that is Temasek) buying out the real estate development business of Capitaland in return for S$0.951/share of cash and 0.155* units/share of Capitaland Integrated Commercial Trust (CICT SP) where the parent's stake will fall. * the CICT distribution is actually 0.1546727 shares of CICT per share of Capitaland, but fractional entitlements will be disregarded so using 0.155 is probably fineInvestors who own CAPL, assuming that the 10 August EGM approves the deal, will get shares in Capitaland Investment ("CLI") which is a kind of SpinCo, the cash, and the CICT units. The Value of that consideration as per the Scheme Document is S$4.102/share with the idea that the CLI portion itself will have a per-share Value of 1.0x NAV which will be S$2.823/share. Importantly, that is a pro-forma NAV as per 31 December 2020. The Scheme Document itself contains an Independent Financial Advisor letter to the Independent Directors which comes to the conclusion that the Assessed Value of the Consideration was S$4.56-4.99/share, which was well above the S$4.102/share in the document, coming to the conclusion that it is "fair and reasonable". Given that the value of the 0.155 shares of is S$0.3248 per Capitaland share (though assessed value is slightly higher), and the cash is unchanging at S$0.951/share, that means the major difference between S$4.102/share and S$4.56-4.99/share is the idea that CLI is worth S$3.19-S$3.62/share rather than S$2.823/share (the difference here is the FY20 dividend).That's where the rubber hits the road. So we take a closer look below the fold. 

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

<p>The fact is that Toshiba is now in play for privatisation with the CEO out and one of the more prominent activists citing their position and desired starting valuation. However, this is likely to be far from a linear trajectory to its end chapter. It will likely remain a fast-moving situation – as we write this note, the landscape has evolved almost on an hourly basis – and we do not expect it to slow in the next few weeks. As we stand at the time of publishing, there are several summary points to consider, particularly as we leave the Introduction phase of this story and proceed to embark on Chapter One of our fourth theme in 2021’s activist landscape. </p>

The fact is that Toshiba is now in play for privatisation with the CEO out and one of the more prominent activists citing their position and desired starting valuation. However, this is likely to be far from a linear trajectory to its end chapter. It will likely remain a fast-moving situation – as we write this note, the landscape has evolved almost on an hourly basis – and we do not expect it to slow in the next few weeks. As we stand at the time of publishing, there are several summary points to consider, particularly as we leave the Introduction phase of this story and proceed to embark on Chapter One of our fourth theme in 2021’s activist landscape. 

Toshiba Corp (6502 JP) Chapter 1: CEO Out, Activists up the Game

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Dalrymple Bay Infrastructure / Equity Capital Markets

<div><p>Dalrymple Bay Infrastructure (DBI from hereon) raised around US$500m in its Australian listing. It is owned by <a href="https://www.smartkarma.com/entities/brookfield-asset-manage-cl-a-0483cfb5-71a5-4931-af80-901e5f30aace" target="_blank" data-smartkarma-citation="entities:23741:1" rel="noopener">Brookfield Asset Management (BAM US)</a>. The stock will start trading tomorrow. </p></div><div><p>It holds a 99-lease for Dalrymple Bay Terminal (DBT), a coal export terminal. DBT was commissioned in 1983 and is located close to Bowen Basin, the world’s largest met coal export region, in Queensland.  </p></div><div>
<p>I've covered various aspects of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/dalrymple-bay-infrastructure-highly-curious-timing" target="_blank" rel="noopener">Dalrymple Bay Infrastructure - Highly Curious Timing.</a></p>
<p>In this note, I'll talk about the trading dynamics and provide a table with implied valuations at different share price levels. </p>
</div>

Dalrymple Bay Infrastructure (DBI from hereon) raised around US$500m in its Australian listing. It is owned by Brookfield Asset Management (BAM US). The stock will start trading tomorrow. It holds a 99-lease for Dalrymple Bay Terminal (DBT), a coal export terminal. DBT was commissioned in 1983 and is located close to Bowen Basin, the world’s largest met coal export region, in Queensland.  
I've covered various aspects of the deal in my earlier note, Dalrymple Bay Infrastructure - Highly Curious Timing.
In this note, I'll talk about the trading dynamics and provide a table with implied valuations at different share price levels. 


Dalrymple Bay Infrastructure IPO Trading - Yield Limits Downside, for Now

Canada

Brookfield Asset Management Ltd. operates as an investment management firm. The Company focuses on property development, renewable energy, infrastructure, insurance, and private equity. Brookfield Asset Management serves customers worldwide.

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Brookfield Asset Management Lt (BAM US)

Toshiba Corp (6502 JP) Chapter 6: Potential for Value Creation

@Toshiba (6502.JP) activists might applaud a Wester Digital Merger, but this is just one alternative - PE bids still viable. Perhaps value...

David Lepper

Brookfield/Alstria Office REIT: Potential Takeover

A takeout price could come in at €18.68, 10% premium overlast reported EPRA NTA, 6.4% premium to last closing price. PT is economic-profit...

Jesus Rodriguez Aguilar

Capitaland Restructuring - Be Careful Not to Price In the NEXT Restructuring Too Soon

Capitaland proposed a restructuring where parent CLA will buy the development biz, and spin out to investors a kind of large virtually-stapled...

Travis Lundy

Toshiba Corp (6502 JP) Chapter 1: CEO Out, Activists up the Game

Since “Toshiba Corp: And so, it begins”, several items have fallen into place making this a situation, in which Private Equity and Activists are...

David Lepper

Dalrymple Bay Infrastructure IPO Trading - Yield Limits Downside, for Now

Dalrymple Bay Infrastructure (DBI from hereon) raised around US$500m in its Australian listing. It is owned by Brookfield Asset Management (BAM...

Sumeet Singh

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