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

<a href="https://www.smartkarma.com/entities/1104" target="_blank" data-smartkarma-citation="entities:1104:1">Wesfarmers Ltd (WES AU)</a> launched a conditional, non-binding indicative proposal for <a href="https://www.smartkarma.com/entities/20374" target="_blank" data-smartkarma-citation="entities:20374:1">Lynas Corp Ltd (LYC AU)</a>, one of the world’s only rare earths suppliers based outside China. Wesfarmers’ proposal of A$2.25 cash per share values Lynas at A$1.5 billion. Lynas’ share price jumped 35% to A$2.10 before going into a trading halt. <div class="content-highlight">The bid comes at a turbulent time for Lynas, which is caught in a regulatory dispute with authorities in Malaysia. While Wesfarmers proposal could be viewed as a lifeline for Lynas, we believe that Wesfarmers’s proposal is opportunistic and unattractive.</div>

Wesfarmers Ltd (WES AU) launched a conditional, non-binding indicative proposal for Lynas Corp Ltd (LYC AU), one of the world’s only rare earths suppliers based outside China. Wesfarmers’ proposal of A$2.25 cash per share values Lynas at A$1.5 billion. Lynas’ share price jumped 35% to A$2.10 before going into a trading halt. The bid comes at a turbulent time for Lynas, which is caught in a regulatory dispute with authorities in Malaysia. While Wesfarmers proposal could be viewed as a lifeline for Lynas, we believe that Wesfarmers’s proposal is opportunistic and unattractive.

Lynas (LYC AU): Wesfarmers’ Unattractive Bid

Founder & CEO. Oil markets macro-analysis., Vanda Insights

Vandana Hari

Founder & CEO. Oil markets macro-analysis.

Vanda Insights

Vanda Insights is a Singapore-based boutique provider of intelligence on the global energy markets, launched in September 2016. The venture was born out of a desire to extract the signal from the noise in the complex and often volatile oil markets. Our succinct and clear macro analysis is relied upon by thousands of readers globally, including those doing business directly or indirectly in the physical commodity and derivatives markets; wealth managers; governments, regulatory bodies and think-tanks; as well as trade organizations and educational institutions.

Global Energy Markets

Commodities

Tightening supply fundamentals are starting to take centre-stage in the oil market, and briefly sent crude to a four-month high last week. But just as Brent crossed $68 during intraday trading and market watchers began to wonder if it was going to breach $70, the benchmark slipped down a few notches. Crude’s jagged ascent has become a feature since the start of this year, making every upward surge feel tentative. The selling pressure that seized the crude market in the fourth quarter of last year is not yet done. Every rally seems to have plenty of skeptics waiting to sell into it.Aside from OPEC’s output curbs, which surpassed 100% compliance in February, production from at least two producers not bound by quotas is under threat. Crude output in Venezuela, crippled by a major power outage for more than a week now, has plummeted, while the US says it wants to force Iranian crude exports to below 1 million b/d when the current batch of sanctions waivers expire at the start of May. A US-China trade deal looks certain, even though the signing may be pushed back to April...or maybe June. However, economic worries elsewhere continue to weigh on oil market sentiment and demand growth expectations.OPEC appears determined to stay the course with its production cuts in conjunction with its non-OPEC allies. But it sees non-OPEC supply growth this year dwarfing demand growth by nearly 1.1 million b/d, and is feeling the burden of rebalancing the market once again on its shoulders.This week, we also discuss: <ul>
<li>What jumped out at us in the IEA’s annual report</li>
<li>US EIA lowering its production forecasts</li>
<li>WTI Houston’s emergence as US crude benchmark</li>
</ul>We note the controversial decision by Norway’s sovereign wealth fund to unwind its holdings in the upstream oil and gas sector, a topic we will be tackling in the next edition of Weekly Oil Views.

Tightening supply fundamentals are starting to take centre-stage in the oil market, and briefly sent crude to a four-month high last week. But just as Brent crossed $68 during intraday trading and market watchers began to wonder if it was going to breach $70, the benchmark slipped down a few notches. Crude’s jagged ascent has become a feature since the start of this year, making every upward surge feel tentative. The selling pressure that seized the crude market in the fourth quarter of last year is not yet done. Every rally seems to have plenty of skeptics waiting to sell into it.Aside from OPEC’s output curbs, which surpassed 100% compliance in February, production from at least two producers not bound by quotas is under threat. Crude output in Venezuela, crippled by a major power outage for more than a week now, has plummeted, while the US says it wants to force Iranian crude exports to below 1 million b/d when the current batch of sanctions waivers expire at the start of May. A US-China trade deal looks certain, even though the signing may be pushed back to April...or maybe June. However, economic worries elsewhere continue to weigh on oil market sentiment and demand growth expectations.OPEC appears determined to stay the course with its production cuts in conjunction with its non-OPEC allies. But it sees non-OPEC supply growth this year dwarfing demand growth by nearly 1.1 million b/d, and is feeling the burden of rebalancing the market once again on its shoulders.This week, we also discuss: 
What jumped out at us in the IEA’s annual report
US EIA lowering its production forecasts
WTI Houston’s emergence as US crude benchmark
We note the controversial decision by Norway’s sovereign wealth fund to unwind its holdings in the upstream oil and gas sector, a topic we will be tackling in the next edition of Weekly Oil Views. 

Weekly Oil Views: Crude Rallies to Four-Month High but Lacks Staying Power

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

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Thematic (Sector/Industry)

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be decided. Imminent political developments will determine whether Brexit is hard, soft, deferred, or aborted.
The UK's principal share index the FTSE 100 is virtually unchanged since we established our Long/Short portfolio a month ago. Results from Lloyds and Centrica have lead to useful outperformance and underperformance respectively. The M&amp;S joint venture with Ocado is judged by investors to have added a lot more value to the latter than the former. We have been wrong-footed by Melrose Industries, but heck, there is always one.
Remembering that no one ever got poor from taking  profits,  we have closed out our long position in Lloyds Banking.  
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/949/original/Capture%201.PNG?1552520300" class="editor-image img-responsive" data-smartkarma-image-id="81949"></figure>
<div class="content-caption">S&amp;P Capital IQ</div>
</div>

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be decided. Imminent political developments will determine whether Brexit is hard, soft, deferred, or aborted.
The UK's principal share index the FTSE 100 is virtually unchanged since we established our Long/Short portfolio a month ago. Results from Lloyds and Centrica have lead to useful outperformance and underperformance respectively. The M&amp;S joint venture with Ocado is judged by investors to have added a lot more value to the latter than the former. We have been wrong-footed by Melrose Industries, but heck, there is always one.
Remembering that no one ever got poor from taking  profits,  we have closed out our long position in Lloyds Banking.  


S&amp;P Capital IQ


Materials Analyst/Strategist, Janus Analysis

Gaius King

Materials Analyst/Strategist

<ul>
<li>China implements coal import caps specifically targeting Australian producers</li>
<li>Unclear as to how widespread these restrictions will eventually be</li>
<li>Thermal and metallurgical coal exports affected</li>
<li>Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income</li>
<li>Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income</li>
<li>Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP </li>
<li>Actions appear to be a response to blocking Huawei bidding for the 5G network</li>
<li>Recent Chinese cyber-attacks harden Australian Government's resolve</li>
<li>Expect similar Chinese measures (in time) to be applied to other commodities and industries</li>
</ul>


China implements coal import caps specifically targeting Australian producers
Unclear as to how widespread these restrictions will eventually be
Thermal and metallurgical coal exports affected
Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP 
Actions appear to be a response to blocking Huawei bidding for the 5G network
Recent Chinese cyber-attacks harden Australian Government's resolve
Expect similar Chinese measures (in time) to be applied to other commodities and industries


Confluence of Politics - China Bans Australian Coal Imports (Flash Note)

LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

After a period of low investments and declining LNG prices, the LNG industry is enjoying a new phase of growth characterized by radical changes, as emerging transformational trends are reshaping its market structure and participants, thereby generating new opportunities for value creation.
The surprise growth of LNG demand from Asia in particular from China that started in 2017, is continuing through 2018 and it is forecasted to remain robust in the coming years.
The feared LNG supply glut that was expected to weigh on the LNG market in 2017, didn’t occur. Shell CEO Ben van Beurden said during the Q4 results “The LNG glut – conspicuously absent, isn’t it? -- in fact, we see a rather tight LNG market”. A consensus is growing among LNG market participants that a demand-supply gap will become apparent post-2020.
The positive outlook for LNG has been reflected on the share prices of the LNG focused players that have been outperforming the oil majors in the last twelve months on the back of stronger LNG prices (Exhibit 1). By contrast, the LNG developers have lagged behind as increased competition and changing market structures have made it more difficult for LNG projects to take FID. At the moment there are at least 15 proposed LNG projects in the US alone and 17 globally competing for offtake deals.
The announcement by <a href="https://www.smartkarma.com/entities/22108" target="_blank" data-smartkarma-citation="entities:22108:1">Royal Dutch Shell (RDSA LN)</a> of the long-awaited FID for LNG Canada last week has been seen as a kick-off for a new wave of project FIDs expected to pick up in 2019. Shell has surprised the market with the news that no off-take deals had been agreed in advance of the FID decision. This aggressive risk-taking approach could be the winning strategy to move forward LNG projects ahead of competitors with a weaker balance sheet unable to do the same.
New technologies that allow scalable, mass-produced LNG solutions at lower cost have been slowly transforming the LNG industry. The mega projects of the past, characterized by bigger trains and higher volumes, often plagued by cost overruns and delays, have been replaced by smaller scale, more cost-efficient, phased projects.
As a result, barriers to entry in the LNG industry are becoming lower as the new wave of LNG projects require lower capital commitments, shorter time to market and less technology risk. Emerging independent US LNG players are rapidly gaining market share. <a href="https://www.smartkarma.com/entities/16683" target="_blank" data-smartkarma-citation="entities:16683:1">Cheniere Energy (LNG US)</a>, Freeport LNG, and Sempra Energy are among the top ten global LNG owners of added capacity, online and in construction, since 2016 alongside the oil majors.
Private equity investors are also among the new participants in the LNG industry. Blackstone has been one of the early entrants that correctly anticipated the significative growth prospects for LNG in the US. Its bet on <a href="https://www.smartkarma.com/entities/27381" target="_blank" data-smartkarma-citation="entities:27381:1">Cheniere Energy Partners LP (CQP US)</a> in 2012 has returned over five times the initial investment in six years. The recent failed $10.5bn takeover bid for Australian LNG player <a href="https://www.smartkarma.com/entities/711" target="_blank" data-smartkarma-citation="entities:711:1">Santos Ltd (STO AU)</a> by Harbour Energy shows that private equity funds are starting to look beyond the US for investment opportunities in the LNG space.
<h2>Exhibit 1: LNG focused players outperforming the oil majors</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/066/331/original/EX1.png?1539091160" class="editor-image img-responsive" data-smartkarma-image-id="66331"></figure>
<div class="content-caption">Source: Capital IQ, Shell 2Q18 results for quarterly JKM prices. Un-weighted index prices. LNG Integrated: Exxon, Chevron, Shell, BP, Total and ENI. Australia LNG: Woodside Energy, Santos, Oil Search. LNG Developers: Tellurian, NextDecade, LNG Ltd, Pieridae Energy.  Prices as of 4th October 2018.</div>

After a period of low investments and declining LNG prices, the LNG industry is enjoying a new phase of growth characterized by radical changes, as emerging transformational trends are reshaping its market structure and participants, thereby generating new opportunities for value creation.
The surprise growth of LNG demand from Asia in particular from China that started in 2017, is continuing through 2018 and it is forecasted to remain robust in the coming years.
The feared LNG supply glut that was expected to weigh on the LNG market in 2017, didn’t occur. Shell CEO Ben van Beurden said during the Q4 results “The LNG glut – conspicuously absent, isn’t it? -- in fact, we see a rather tight LNG market”. A consensus is growing among LNG market participants that a demand-supply gap will become apparent post-2020.
The positive outlook for LNG has been reflected on the share prices of the LNG focused players that have been outperforming the oil majors in the last twelve months on the back of stronger LNG prices (Exhibit 1). By contrast, the LNG developers have lagged behind as increased competition and changing market structures have made it more difficult for LNG projects to take FID. At the moment there are at least 15 proposed LNG projects in the US alone and 17 globally competing for offtake deals.
The announcement by Royal Dutch Shell (RDSA LN) of the long-awaited FID for LNG Canada last week has been seen as a kick-off for a new wave of project FIDs expected to pick up in 2019. Shell has surprised the market with the news that no off-take deals had been agreed in advance of the FID decision. This aggressive risk-taking approach could be the winning strategy to move forward LNG projects ahead of competitors with a weaker balance sheet unable to do the same.
New technologies that allow scalable, mass-produced LNG solutions at lower cost have been slowly transforming the LNG industry. The mega projects of the past, characterized by bigger trains and higher volumes, often plagued by cost overruns and delays, have been replaced by smaller scale, more cost-efficient, phased projects.
As a result, barriers to entry in the LNG industry are becoming lower as the new wave of LNG projects require lower capital commitments, shorter time to market and less technology risk. Emerging independent US LNG players are rapidly gaining market share. Cheniere Energy (LNG US), Freeport LNG, and Sempra Energy are among the top ten global LNG owners of added capacity, online and in construction, since 2016 alongside the oil majors.
Private equity investors are also among the new participants in the LNG industry. Blackstone has been one of the early entrants that correctly anticipated the significative growth prospects for LNG in the US. Its bet on Cheniere Energy Partners LP (CQP US) in 2012 has returned over five times the initial investment in six years. The recent failed $10.5bn takeover bid for Australian LNG player Santos Ltd (STO AU) by Harbour Energy shows that private equity funds are starting to look beyond the US for investment opportunities in the LNG space.
Exhibit 1: LNG focused players outperforming the oil majors

Source: Capital IQ, Shell 2Q18 results for quarterly JKM prices. Un-weighted index prices. LNG Integrated: Exxon, Chevron, Shell, BP, Total and ENI. Australia LNG: Woodside Energy, Santos, Oil Search. LNG Developers: Tellurian, NextDecade, LNG Ltd, Pieridae Energy.  Prices as of 4th October 2018.

LNG Industry Insight: New Entrants Gaining Market Share Amid a Tightening LNG Market (Part 1)

Switzerland

Glencore Plc is a diversified natural resources company. The Company operates in three groups: Metals and Minerals, Energy Products, and Agricultural Products. Glencore Plc offers its products and services around the world.

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Glencore Plc (GLEN LN)

Lynas (LYC AU): Wesfarmers’ Unattractive Bid

Wesfarmers Ltd (WES AU) launched a conditional, non-binding indicative proposal for Lynas Corp Ltd (LYC AU), one of the world’s only rare earths...

Arun George

Weekly Oil Views: Crude Rallies to Four-Month High but Lacks Staying Power

Tightening supply fundamentals are starting to take centre-stage in the oil market, and briefly sent crude to a four-month high last week. But just...

Vandana Hari

FTSE 100 Long/Short: Beginner's Luck

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be...

Boost Research

Confluence of Politics - China Bans Australian Coal Imports (Flash Note)

China implements coal import caps specifically targeting Australian producers Unclear as to how widespread these restrictions will eventually...

Boost Research

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52-week Range

Market Cap (USDm)

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Lynas (LYC AU): Wesfarmers’ Unattractive Bid

Wesfarmers Ltd (WES AU) launched a conditional, non-binding indicative proposal for Lynas Corp Ltd (LYC AU), one of the world’s only rare earths...

Arun George

Weekly Oil Views: Crude Rallies to Four-Month High but Lacks Staying Power

Tightening supply fundamentals are starting to take centre-stage in the oil market, and briefly sent crude to a four-month high last week. But just...

Vandana Hari

FTSE 100 Long/Short: Beginner's Luck

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be...

Boost Research

Confluence of Politics - China Bans Australian Coal Imports (Flash Note)

China implements coal import caps specifically targeting Australian producers Unclear as to how widespread these restrictions will eventually...

Boost Research

LNG Industry Insight: New Entrants Gaining Market Share Amid a Tightening LNG Market (Part 1)

After a period of low investments and declining LNG prices, the LNG industry is enjoying a new phase of growth characterized by radical changes, as...

Massimo Bellino