Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the September 2024 index rebal event.</li>
<li>There could be up to three M&amp;A-related intra-review changes in the next few weeks.</li>
<li>Apart from that, there could be two changes for the F100 index and two other changes for the F250 index during the September 2024 review.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the September 2024 index rebal event.
There could be up to three M&amp;A-related intra-review changes in the next few weeks.
Apart from that, there could be two changes for the F100 index and two other changes for the F250 index during the September 2024 review.


Quiddity Leaderboard F100/​​​250 Sep 24: High-Impact F250 Potential ADDs Could Outperform the Index

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>
<a href="https://www.smartkarma.com/entities/tabcorp-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6837:1" rel="noopener">Tabcorp Ltd (TAH AU)</a>’s demerger to create two standalone companies listed on the ASX, The Lottery Corporation and New Tabcorp, was approved today.</li>
<li>Subject to the scheme approved by the Court, the Lottery Corporation will trade on a deferred settlement basis on 24 May and a normal settlement basis on 2 June.</li>
<li>Peer derating due to the market sell-off results in a lower SoTP valuation of A$5.62 per share, which is still a 13% upside to the last close.</li>
</ul>



Tabcorp Ltd (TAH AU)’s demerger to create two standalone companies listed on the ASX, The Lottery Corporation and New Tabcorp, was approved today.
Subject to the scheme approved by the Court, the Lottery Corporation will trade on a deferred settlement basis on 24 May and a normal settlement basis on 2 June.
Peer derating due to the market sell-off results in a lower SoTP valuation of A$5.62 per share, which is still a 13% upside to the last close.


Tabcorp’s Demerger Approved Paving the Way to Unlock Value

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tabcorp-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6837:1" rel="noopener">Tabcorp Ltd (TAH AU)</a>’s demerger will create two standalone companies listed on the ASX - The Lottery Corporation and New Tabcorp</li>
<li>The scheme meeting to approve the demerger will be held on 12 May at 10.00 am. The Lottery Corporation will trade on a normal settlement basis on 2 June.</li>
<li>This transaction aims to unlock value. Our SoTP valuation is A$6.13 per share, which is a 14% upside to the last close price of A$5.39 per share.</li>
</ul>



Tabcorp Ltd (TAH AU)’s demerger will create two standalone companies listed on the ASX - The Lottery Corporation and New Tabcorp
The scheme meeting to approve the demerger will be held on 12 May at 10.00 am. The Lottery Corporation will trade on a normal settlement basis on 2 June.
This transaction aims to unlock value. Our SoTP valuation is A$6.13 per share, which is a 14% upside to the last close price of A$5.39 per share.


Tabcorp’s Valuation Discovery into the Demerger

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

<ul>
<li>On the 2 February, <a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a>'s shareholders voted down <a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a>'s £2.1 billion Offer.</li>
<li>The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.</li>
<li>As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs - former and current - are piecing together a deal. </li>
</ul>


On the 2 February, Playtech Plc (PTEC LN)'s shareholders voted down Aristocrat Leisure (ALL AU)'s £2.1 billion Offer.
The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.
As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs - former and current - are piecing together a deal. 


European Event-Driven Analyst

Jesus Rodriguez Aguilar

<a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a>'s shareholders have won big time at the casino table. On late Sunday 17 October, Playtech, a FTSE 250 white label gambling-technology company, said that it has agreed to a £2.1 billion takeover from Australian slot machine manufacturer <a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a> through its subsidiary Aristocrat (UK) Holdings Ltd. The acquisition is to be effected by means of a scheme of arrangement under Part X of the Isle of Man Companies Act 2006. Aristocrat's offer is its fourth bid, but the first one to be made public.
<div>
Under the offer, accepting shareholders of Playtech will get 680p/share in cash, cum dividend, a 58% premium to the closing price of 429.20p on Friday 15 October.
</div>
The offer puts an enterprise value on Playtech of £2.7 billion. Gambling companies are rushing to profit off the deregulated gambling market in the USA, which is forecast to become one of the biggest betting and gaming markets in the world. The USA online gambling market was valued at USD 2,178 million in 2020, and it is estimated to have a CAGR of 17.34% during the period 2021-2026 (source: Mordor Intelligence). Online betting is expected to be the fastest-growing segment during 2021-2026. Software providers are embarking on M&amp;A to achieve consolidation and optimise their product portfolio. See <a href="https://www.smartkarma.com/insights/mgm-s-prospective-offer-for-entain" target="_blank" data-smartkarma-citation="insights:46752" rel="noopener">MGM's Prospective Offer for Entain</a> and <a href="https://www.smartkarma.com/insights/enlabs-entain-raised-offer" target="_blank" data-smartkarma-citation="insights:48838" rel="noopener">Enlabs - Entain: Raised Offer</a> and <a href="https://www.smartkarma.com/insights/draftkings-entain-cash-and-shares-approach" target="_blank" data-smartkarma-citation="insights:57963" rel="noopener">DraftKings/Entain: Cash and Shares Approach</a>. The Americas are driving the growth of Playtech.
The deal should allow Aristocrat to gain scale and increase offering in both Aristocrat’s casino business and the online sports betting market in the USA, where Playtech has recently expanded in response to more relaxed rules allowing online gambling and sports betting. Aristocrat expects to realise additional EPS in the high single digits in the first year after purchase.
Playtech's est. WACC is 9.2% vs a LTM ROIC of 4.6%. This means that the company destroys value as it grows. Aristocrat est. WACC is 9.6% vs. a LTM ROIC of 4.5%. Like Playtech, it destroys value as it grows. This may be the reason why Aristocrat is seeking scale.
I value Playtech using a SOTP model (gaming business valued at sector multiples and Financials business in line with financial trading peers and call options related to Latin America structured agreements at book value). My estimate of fair value is 590p.
Paraphrasing the Chairman of Playtech, the deal provides an attractive opportunity for shareholders to cash the chips. This is a done deal, as shareholders are highly likely to approve it, in my view. Gross spread is just 0.4%. I would wait for share price weakness before establishing a position.
Playtech was in the process of streamlining and divesting poor performing divisions (Finalto), thus becoming more attractive and the latest London-listed gambling company to be targeted for a takeover, as operators rush to build scale and break into the USA. 2021 has seen the takeover of <a href="https://www.smartkarma.com/entities/william-hill-plc" target="_blank" data-smartkarma-citation="entities:22210:1" rel="noopener">William Hill (WMH LN)</a> (<a href="https://www.smartkarma.com/insights/william-hill-caesars-almost-done-deal-trading-above-terms" target="_blank" data-smartkarma-citation="insights:43809" rel="noopener">William Hill - Caesars (Almost) Done Deal, Trading Above Terms</a>), and two attempts on <a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a>.

Playtech Plc (PTEC LN)'s shareholders have won big time at the casino table. On late Sunday 17 October, Playtech, a FTSE 250 white label gambling-technology company, said that it has agreed to a £2.1 billion takeover from Australian slot machine manufacturer Aristocrat Leisure (ALL AU) through its subsidiary Aristocrat (UK) Holdings Ltd. The acquisition is to be effected by means of a scheme of arrangement under Part X of the Isle of Man Companies Act 2006. Aristocrat's offer is its fourth bid, but the first one to be made public.

Under the offer, accepting shareholders of Playtech will get 680p/share in cash, cum dividend, a 58% premium to the closing price of 429.20p on Friday 15 October.

The offer puts an enterprise value on Playtech of £2.7 billion. Gambling companies are rushing to profit off the deregulated gambling market in the USA, which is forecast to become one of the biggest betting and gaming markets in the world. The USA online gambling market was valued at USD 2,178 million in 2020, and it is estimated to have a CAGR of 17.34% during the period 2021-2026 (source: Mordor Intelligence). Online betting is expected to be the fastest-growing segment during 2021-2026. Software providers are embarking on M&amp;A to achieve consolidation and optimise their product portfolio. See MGM's Prospective Offer for Entain and Enlabs - Entain: Raised Offer and DraftKings/Entain: Cash and Shares Approach. The Americas are driving the growth of Playtech.
The deal should allow Aristocrat to gain scale and increase offering in both Aristocrat’s casino business and the online sports betting market in the USA, where Playtech has recently expanded in response to more relaxed rules allowing online gambling and sports betting. Aristocrat expects to realise additional EPS in the high single digits in the first year after purchase.
Playtech's est. WACC is 9.2% vs a LTM ROIC of 4.6%. This means that the company destroys value as it grows. Aristocrat est. WACC is 9.6% vs. a LTM ROIC of 4.5%. Like Playtech, it destroys value as it grows. This may be the reason why Aristocrat is seeking scale.
I value Playtech using a SOTP model (gaming business valued at sector multiples and Financials business in line with financial trading peers and call options related to Latin America structured agreements at book value). My estimate of fair value is 590p.
Paraphrasing the Chairman of Playtech, the deal provides an attractive opportunity for shareholders to cash the chips. This is a done deal, as shareholders are highly likely to approve it, in my view. Gross spread is just 0.4%. I would wait for share price weakness before establishing a position.
Playtech was in the process of streamlining and divesting poor performing divisions (Finalto), thus becoming more attractive and the latest London-listed gambling company to be targeted for a takeover, as operators rush to build scale and break into the USA. 2021 has seen the takeover of William Hill (WMH LN) (William Hill - Caesars (Almost) Done Deal, Trading Above Terms), and two attempts on Entain (ENT LN).

Aristocrat/Playtech: Cashing in the Chips

United Kingdom

Entain is a global sports betting and gaming company operating in regulated online and retail markets. It offers a diverse portfolio of services, including sports betting platforms and online gaming experiences through brands like bwin, Coral, Ladbrokes, and PartyPoker. Entain was founded in 2004 and is headquartered in Douglas, Isle of Man.

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Entain (ENT LN)

Quiddity Leaderboard F100/250 Sep 24: High-Impact F250 Potential ADDs Could Outperform the Index

The top-ranked F250 potential ADDs would have a large number of days to buy if they got added to F250. There are multiple opportunities for both...

Janaghan Jeyakumar, CFA

Tabcorp’s Demerger Approved Paving the Way to Unlock Value

The demerger was overwhelming approved. Peer derating due to the market sell-off results in a lower SoTP valuation of A$5.62, a 13% upside to the...

Arun George

Tabcorp’s Valuation Discovery into the Demerger

The scheme meeting to approve the demerger will be held on 12 May at 10.00 am. Our SoTP valuation is A$6.13 per share, which is a 14% upside to the...

Arun George

Playtech (PTEC LN): A Nuanced Flutter

Presumably, a firm Offer from TTB could only unfold if they have the inside track on the Asian block's intentions. This is a messy, nuanced affair,...

David Blennerhassett

Aristocrat/Playtech: Cashing in the Chips

Shareholders are highly likely to cash in the chips, in my view. Gross spread is just 0.4%. Wait for share price weakness. London-listed gambling...

Jesus Rodriguez Aguilar

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Quiddity Leaderboard F100/​​​250 Sep 24: High-Impact F250 Potential ADDs Could Outperform the Index

The top-ranked F250 potential ADDs would have a large number of days to buy if they got added to F250. There are multiple opportunities for both...

Janaghan Jeyakumar, CFA

Tabcorp’s Demerger Approved Paving the Way to Unlock Value

The demerger was overwhelming approved. Peer derating due to the market sell-off results in a lower SoTP valuation of A$5.62, a 13% upside to the...

Arun George

Tabcorp’s Valuation Discovery into the Demerger

The scheme meeting to approve the demerger will be held on 12 May at 10.00 am. Our SoTP valuation is A$6.13 per share, which is a 14% upside to the...

Arun George

Playtech (PTEC LN): A Nuanced Flutter

Presumably, a firm Offer from TTB could only unfold if they have the inside track on the Asian block's intentions. This is a messy, nuanced affair,...

David Blennerhassett

Aristocrat/Playtech: Cashing in the Chips

Shareholders are highly likely to cash in the chips, in my view. Gross spread is just 0.4%. Wait for share price weakness. London-listed gambling...

Jesus Rodriguez Aguilar

Quiddity Leaderboard F100/250 Sep 24: High-Impact F250 Potential ADDs Could Outperform the Index