Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The results were mostly driven by factors specific to each group. Still, whether it is the sentiment impact of an isolated theme park tragedy, competitive intensity in the U.S. leisure market, low airfares, or film popularity, the bottom line is there are many variables beyond management's control in the industry. These factors are the very basis for our…

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The results were mostly driven by factors specific to each group. Still, whether it is the sentiment impact of an isolated theme park tragedy, competitive intensity in the U.S. leisure market, low airfares, or film popularity, the bottom line is there are many variables beyond management's control in the industry. These factors are the very basis for our…

Not Much Fun In Leisure; Ardent Leisure Undervalued While Event Hospitality Worth Monitoring

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

<ul><li>Australians' long held fascination with land is part of the national psyche.&nbsp; In a speech delivered overnight, RBA Deputy Governor Philip Lowe shows why.&nbsp;&nbsp;Land accounts for one-third of Australia's national assets and that higher land values - not dwellings - have driven residential property markets higher in recent decades.</li><li>Booming land values reflect favourable demand side influences, including strong growth in population and household incomes, while zoning restrictions have meant that the supply response to higher prices has been muted.&nbsp; With slower expected future income growth and increased concerns about future housing costs, the response to higher housing prices looks to be smaller than it was previously.</li><li>Nonetheless, Mr Lowe acknowledges that that a reduction in the household savings ratio is &lsquo;probably appropriate&rsquo; as the economy re-balances from a terms of trade and mining investment booms.&nbsp; Against this backdrop, I re-iterate my positive view on discretionary retailers.&nbsp; Key stocks to buy: HVN, JBH, DSH, GWA, MYR and PMV.</li></ul>

Australians' long held fascination with land is part of the national psyche.&nbsp; In a speech delivered overnight, RBA Deputy Governor Philip Lowe shows why.&nbsp;&nbsp;Land accounts for one-third of Australia's national assets and that higher land values - not dwellings - have driven residential property markets higher in recent decades.Booming land values reflect favourable demand side influences, including strong growth in population and household incomes, while zoning restrictions have meant that the supply response to higher prices has been muted.&nbsp; With slower expected future income growth and increased concerns about future housing costs, the response to higher housing prices looks to be smaller than it was previously.Nonetheless, Mr Lowe acknowledges that that a reduction in the household savings ratio is &lsquo;probably appropriate&rsquo; as the economy re-balances from a terms of trade and mining investment booms.&nbsp; Against this backdrop, I re-iterate my positive view on discretionary retailers.&nbsp; Key stocks to buy: HVN, JBH, DSH, GWA, MYR and PMV.

Australia's land obsession - Reiterate postive view on discretionary retailers

Macroeconomics

In a blog post last year, I wrote of the lost decade for discretionary retailers; expected profitability was little changed from ten years earlier.&nbsp;A number of structural and cyclical headwinds continued to adversely impact the sector, including the persistently strong Australian dollar, consumer caution associated with the financial crisis and increased competition from e-tailers.&nbsp;In this post, I argue that signs of a less cautious consumer are emerging.&nbsp;There is downside risk to the household saving ratio as households become more optimistic about the future, durable goods spending continues to recover and consumer sentiment should benefit from the positive reaction to the Federal Budget.&nbsp;Against this backdrop, I recommend investors neutralise their under-weight bets in discretionary retailers, with a view to moving overweight as more signs of a less cautious consumer emerge.&nbsp;Getting the sector call right is more important than stock selection, but we highlight stocks that offer the strongest upside, including Echo, GUD, Harvey Norman, Premier Investment and Super Retail.

In a blog post last year, I wrote of the lost decade for discretionary retailers; expected profitability was little changed from ten years earlier.&nbsp;A number of structural and cyclical headwinds continued to adversely impact the sector, including the persistently strong Australian dollar, consumer caution associated with the financial crisis and increased competition from e-tailers.&nbsp;In this post, I argue that signs of a less cautious consumer are emerging.&nbsp;There is downside risk to the household saving ratio as households become more optimistic about the future, durable goods spending continues to recover and consumer sentiment should benefit from the positive reaction to the Federal Budget.&nbsp;Against this backdrop, I recommend investors neutralise their under-weight bets in discretionary retailers, with a view to moving overweight as more signs of a less cautious consumer emerge.&nbsp;Getting the sector call right is more important than stock selection, but we highlight stocks that offer the strongest upside, including Echo, GUD, Harvey Norman, Premier Investment and Super Retail.

A less cautious consumer: Good news for discretionary retailers (finally!)

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/icar-asia-ltd" target="_blank" data-smartkarma-citation="entities:17682:1" rel="noopener">ICar Asia Ltd (ICQ AU)</a>'s Scheme Booklet is now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02464318-3A583287?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">out</a>. The Offer Price is A$0.53/share.</li>
<li>The Scheme Meeting will be held on the 31 January. The Independent Expert has concluded the Offer is fair and reasonable.</li>
<li>A solid premium to the undisturbed price and a multi-year high - this deal is expected to complete. </li>
</ul>



ICar Asia Ltd (ICQ AU)'s Scheme Booklet is now out. The Offer Price is A$0.53/share.
The Scheme Meeting will be held on the 31 January. The Independent Expert has concluded the Offer is fair and reasonable.
A solid premium to the undisturbed price and a multi-year high - this deal is expected to complete. 


ICar (ICQ AU): Scheme Booklet Out. Meeting on 31 January

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Back on the 30 October 2020, automotive portal play <a href="https://www.smartkarma.com/entities/icar-asia-ltd" target="_blank" data-smartkarma-citation="entities:17682:1" rel="noopener">iCar Asia Ltd (ICQ AU)</a> fielded a non-binding <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02301823-3A554168?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">proposal</a> from China-based <a href="https://www.smartkarma.com/entities/autohome-inc" target="_blank" data-smartkarma-citation="entities:33492:1" rel="noopener">Autohome (2518 HK)</a> at A$0.50/share. Minimal updates followed as negotiations between the two parties appeared to have stalled.
On the 13 July this year, iCar <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394670-3A570637?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it had received a non-binding proposal from privately-held Malaysian-based Carsome Group to acquire 100% of iCar's shares for A$0.55/share by way of a Scheme.
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In addition,  Carsome entered into an agreement with Catcha Group, iCar's largest shareholder at the time, to acquire 19.9% of shares out in iCar via the issuance of shares in Carsome. That side agreement was conditional on ASIC relief. (ASIC relief was received on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02406897-3A572744?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">13 August</a>, and the share transfer competed on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02416345-3A574854?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">1 September</a>.)
On the 20 July, iCar <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02396948-3A570980?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">granted</a> Carsome due diligence access. This access was not exclusive. Separately, Autohome informed iCar that it had decided to terminate discussions in relation to the acquisition of iCar.
Exclusive DD through to the 8 September was <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400507-3A571613?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">granted</a> on the 29 July after iCar and Carsome entered into a process deed. On the 9 September, Carsome <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02419518-3A575449?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">requested</a> an extension of the exclusivity period to the 30 September, then to automatically to the 30 October, provided Carsome had completed DD by the 30 Sept. iCar's board <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422437-3A576014?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">agreed</a> to the extension on the 16 September. 
After completing the DD on the 1 October, Carsome <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02429764-3A577203?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">advised</a> iCar it would <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02429764-3A577203?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">revise down</a> its indicative Offer to A$0.53-$0.54/share. 
Yesterday iCar and Carsome <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02436657-3A578395?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">entered</a> into Scheme Implementation Deed with a Scheme consideration of A$0.53/share.
This looks done. More below the fold. 
</div>


Back on the 30 October 2020, automotive portal play iCar Asia Ltd (ICQ AU) fielded a non-binding proposal from China-based Autohome (2518 HK) at A$0.50/share. Minimal updates followed as negotiations between the two parties appeared to have stalled.
On the 13 July this year, iCar announced it had received a non-binding proposal from privately-held Malaysian-based Carsome Group to acquire 100% of iCar's shares for A$0.55/share by way of a Scheme.


In addition,  Carsome entered into an agreement with Catcha Group, iCar's largest shareholder at the time, to acquire 19.9% of shares out in iCar via the issuance of shares in Carsome. That side agreement was conditional on ASIC relief. (ASIC relief was received on the 13 August, and the share transfer competed on the 1 September.)
On the 20 July, iCar granted Carsome due diligence access. This access was not exclusive. Separately, Autohome informed iCar that it had decided to terminate discussions in relation to the acquisition of iCar.
Exclusive DD through to the 8 September was granted on the 29 July after iCar and Carsome entered into a process deed. On the 9 September, Carsome requested an extension of the exclusivity period to the 30 September, then to automatically to the 30 October, provided Carsome had completed DD by the 30 Sept. iCar's board agreed to the extension on the 16 September. 
After completing the DD on the 1 October, Carsome advised iCar it would revise down its indicative Offer to A$0.53-$0.54/share. 
Yesterday iCar and Carsome entered into Scheme Implementation Deed with a Scheme consideration of A$0.53/share.
This looks done. More below the fold. 


ICar (ICQ AU) & Carsome Enter Into Scheme

Malaysia

iCar Asia Ltd owns a portfolio of automotive websites in Malaysia, Indonesia and Thailand and an automotive magazine in Malaysia. The Company's businesses are focused on providing online advertising services and solutions to the automotive and related industries, and automotive content to car buyers and enthusiasts across the South East Asian region.

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iCar Asia Ltd (ICQ AU)

Not Much Fun In Leisure; Ardent Leisure Undervalued While Event Hospitality Worth Monitoring

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The...

Morningstar, Inc.

Australia's land obsession - Reiterate postive view on discretionary retailers

Australians' long held fascination with land is part of the national psyche. In a speech delivered overnight, RBA Deputy Governor Philip Lowe...

Sam Ferraro

A less cautious consumer: Good news for discretionary retailers (finally!)

In a blog post last year, I wrote of the lost decade for discretionary retailers; expected profitability was little changed from ten years...

Sam Ferraro

ICar (ICQ AU): Scheme Booklet Out. Meeting on 31 January

Trading at a relatively wide gross/annualised spread of 2.9%/16.7%. That looks attractive, however, this is not a super-liquid arb situation.

David Blennerhassett

ICar (ICQ AU) & Carsome Enter Into Scheme

This looks done. Trading at a gross/annualised spread of 2.9%/9.2%, assuming mid-Feb 2022 completion. That looks reasonable.

David Blennerhassett

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