Global Healthcare Analyst

Tina Banerjee

Equity Capital Markets

<ul>
<li>Ebos Group aims to raise A$ 100 million through a retail offer to partly fund the acquisition of LifeHealthcare. The acquisition creates an exciting platform to drive future growth.</li>
<li>Defensive product mix enabled EBOS to successfully navigate pandemic driven uncertainty and post record high ROCE of 18% in FY21. Balance Sheet remains healthy, with net debt/EBITDA of 0.85x.</li>
<li>FY22 starts on a strong note, with revenue and NPAT growing at over 10% and 14%, y/y, respectively. Dividend is expected at 60–80% of NPAT in FY22.</li>
</ul>


Ebos Group aims to raise A$ 100 million through a retail offer to partly fund the acquisition of LifeHealthcare. The acquisition creates an exciting platform to drive future growth.
Defensive product mix enabled EBOS to successfully navigate pandemic driven uncertainty and post record high ROCE of 18% in FY21. Balance Sheet remains healthy, with net debt/EBITDA of 0.85x.
FY22 starts on a strong note, with revenue and NPAT growing at over 10% and 14%, y/y, respectively. Dividend is expected at 60–80% of NPAT in FY22.


EBOS Group (EBO NZ): Raising Capital to Fund Acquisition; Attractive Bet on Australasian Healthcare

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

<div>
<p>Back on the 12 July, wholesale and retail pharmacy operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder <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> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.</p>
</div>
<div>
<p>The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
</div>
<p>Wesfarmers and API subsequently entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.</p>
<div>
<p>API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.</p>
<h3>The New News</h3>
<p>API has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. </p>
<p>This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.</p>
<p>Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. </p>
<p>Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


Back on the 12 July, wholesale and retail pharmacy operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.


The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 

Wesfarmers and API subsequently entered into a process deed on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.

API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.
The New News
API has now announced it has received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. 
This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.
Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. 
Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.


More below the fold.


Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

APAC IPOs & Placements

Zhen Zhou, Toh

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.

<p>The largest shareholder of <a href="https://www.smartkarma.com/entities/ebos-group-ltd" target="_blank" data-smartkarma-citation="entities:18336:1" rel="noopener">Ebos Group Ltd (EBO NZ)</a>, Sybos Holdings, is looking to sell 15m shares at NZ$22.50 per share. Post sale, Sybos will still hold about 28% of EBOS' shares.</p><p>Overall, the deal scores well on our framework owing to good track record and share price momentum but was weighed down by the sheer size of the deal, representing 223 days of three-month ADV.</p><p>The overhang does not look pretty either. It represents about 678 days of three-month ADV. While there are not mention whether Sybos has the intention to return to the market, the overhang could be enough to limit any upside in the near-term.</p>

The largest shareholder of Ebos Group Ltd (EBO NZ), Sybos Holdings, is looking to sell 15m shares at NZ$22.50 per share. Post sale, Sybos will still hold about 28% of EBOS' shares.Overall, the deal scores well on our framework owing to good track record and share price momentum but was weighed down by the sheer size of the deal, representing 223 days of three-month ADV.The overhang does not look pretty either. It represents about 678 days of three-month ADV. While there are not mention whether Sybos has the intention to return to the market, the overhang could be enough to limit any upside in the near-term.

EBOS Holdings Placement - Selldown by Largest Shareholder - Overhang Is the Concern

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Heightened trade tensions have caused global equities to move from resistance to support in a matter of days. Additional consolidation - i.e., no breakdowns - on the broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) remains the most likely scenario. At the same time, new cracks are beginning to show and as a result we believe global equities are vulnerable to a breakdown.  Along with a recap of important technical levels across major markets, we flip through several attractive Groups and stocks within Advertising, retail, restaurants, and travel, which offer attractive pullback opportunities.</p>

Heightened trade tensions have caused global equities to move from resistance to support in a matter of days. Additional consolidation - i.e., no breakdowns - on the broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) remains the most likely scenario. At the same time, new cracks are beginning to show and as a result we believe global equities are vulnerable to a breakdown.  Along with a recap of important technical levels across major markets, we flip through several attractive Groups and stocks within Advertising, retail, restaurants, and travel, which offer attractive pullback opportunities.

Global Equity Strategy: Another Test of Support

<p>we believe global equities remain in a state of purgatory and consolidation is likely to continue as several major indexes approach logical resistance... <em>see charts below and page 2.</em> With global equity markets generally moving sideways, we want to stick with themes that are working -- we highlight actionable ideas in the following areas: Australian Banks, European/UK Banks and Autos &amp; Parts, Global Health Care stocks, and Japanese Manufacturing stocks.</p>

we believe global equities remain in a state of purgatory and consolidation is likely to continue as several major indexes approach logical resistance... see charts below and page 2. With global equity markets generally moving sideways, we want to stick with themes that are working -- we highlight actionable ideas in the following areas: Australian Banks, European/UK Banks and Autos &amp; Parts, Global Health Care stocks, and Japanese Manufacturing stocks.

Global Equities Nearing Potential Resistance

New Zealand

EBOS Group Limited supplies and distributes medical consumable products and equipment to the hospital and primary care sectors of the New Zealand and Australian healthcare markets. The Company's products include diagnostic instruments, surgical instruments and prosthesis, feminine protection, anesthetic equipment, and other consumer products.

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Ebos Group Ltd (EBO NZ)

EBOS Group (EBO NZ): Raising Capital to Fund Acquisition; Attractive Bet on Australasian Healthcare

EBOS aims to raise A$ 100 million via retail placement to partly fund the acquisition of LifeHealthcare, which should accelerate EBOS' medical...

Tina Banerjee

Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

Trading slightly below Wesfarmer's cash proposal. That looks like a reasonable place to enter. Wesfarmers can easily trump any tilt from Sigma.

David Blennerhassett

EBOS Holdings Placement - Selldown by Largest Shareholder - Overhang Is the Concern

The largest shareholder of Ebos Group Ltd (EBO NZ), Sybos Holdings, is looking to sell 15m shares at NZ$22.50 per share. Post sale, Sybos will...

Zhen Zhou, Toh

Global Equity Strategy: Another Test of Support

Heightened trade tensions have caused global equities to move from resistance to support in a matter of days. Additional consolidation - i.e., no...

Vermilion Research

Global Equities Nearing Potential Resistance

we believe global equities remain in a state of purgatory and consolidation is likely to continue as several major indexes approach logical...

Vermilion Research

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