Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Equity Capital Markets

Duet Group is raising AU$1.672bn via an institutional placement and a&nbsp;rights issue to acquire Pacific Equity Partner owned Energy Development Limited (ENE AU) and strengthen&nbsp;its working capital.Proforma analysis shows that the deal offers both existing shareholders and placement participants an opportunity to own the business at significantly lower valuations than the current market price. However, for yield players, our proforma calculation shows that the deal reduces the dividend yield for both existing sharesholders taking the rights and placement participants.The&nbsp;deal will also increase the freefloat market capitalization of Duet significantly by c.AU$1.6bn and thus increase Duet's market cap to c.AU$5bn. As Duet is already a component stock of Australia's major index (ASX200) and all the new shares from the placement and rights will be accounted as free float, we are expecting inflow from index following funds. The current uninvestable 69% stake held by Pacific Equity Partners in ENE will become investable freefloat of Duet.In addition, with a market cap of c.AU$5bn, and most of its shares floated, Duet could become an attractive&nbsp;investment for renewable energy funds, especially given that&nbsp;ENE is a leader in mining / landfill gas-to-energy generation.&nbsp;On a side note, our Smartkarma placement framework rates the deal below threshold for participation, mainly due to placement properties (long settlement), expensive relative valuation, unappealing financial performance (lower ROE, slower DPS growth) and a high leverage. However, we note that the past performance that our framework relies on&nbsp;is&nbsp;not representative of Duet's future performance given that this acquisition is significant. We also note that&nbsp;Duet's recent deals post GFC has been satisfactory with one week and one year returns of 12% and 25% respectively.Net-net with attractive discount to ex-right price, we would participate in the placement.&nbsp;

Duet Group is raising AU$1.672bn via an institutional placement and a&nbsp;rights issue to acquire Pacific Equity Partner owned Energy Development Limited (ENE AU) and strengthen&nbsp;its working capital.Proforma analysis shows that the deal offers both existing shareholders and placement participants an opportunity to own the business at significantly lower valuations than the current market price. However, for yield players, our proforma calculation shows that the deal reduces the dividend yield for both existing sharesholders taking the rights and placement participants.The&nbsp;deal will also increase the freefloat market capitalization of Duet significantly by c.AU$1.6bn and thus increase Duet's market cap to c.AU$5bn. As Duet is already a component stock of Australia's major index (ASX200) and all the new shares from the placement and rights will be accounted as free float, we are expecting inflow from index following funds. The current uninvestable 69% stake held by Pacific Equity Partners in ENE will become investable freefloat of Duet.In addition, with a market cap of c.AU$5bn, and most of its shares floated, Duet could become an attractive&nbsp;investment for renewable energy funds, especially given that&nbsp;ENE is a leader in mining / landfill gas-to-energy generation.&nbsp;On a side note, our Smartkarma placement framework rates the deal below threshold for participation, mainly due to placement properties (long settlement), expensive relative valuation, unappealing financial performance (lower ROE, slower DPS growth) and a high leverage. However, we note that the past performance that our framework relies on&nbsp;is&nbsp;not representative of Duet's future performance given that this acquisition is significant. We also note that&nbsp;Duet's recent deals post GFC has been satisfactory with one week and one year returns of 12% and 25% respectively.Net-net with attractive discount to ex-right price, we would participate in the placement.&nbsp;

ENE Acquisition / Placement / Rights: earnings accretive, yield dilutive, beware of potential inflow

Australia

DUET Group invests in energy utility assets located in Australia and New Zealand.  The Group's investment assets include gas pipelines and electricity distribution networks.

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DUET Group (DUE AU)

ENE Acquisition / Placement / Rights: earnings accretive, yield dilutive, beware of potential inflow

Duet Group is raising AU$1.672bn via an institutional placement and a rights issue to acquire Pacific Equity Partner owned Energy Development...

Ke Yan, CFA, FRM

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