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/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has granted a consortium (Sydney Aviation Alliance) non-exclusive due diligence access based on a further revised indicative proposal of A$8.75 cash per share. The revised indicative offer is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The revised indicative offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.Pushing for a better price is part of the M&amp;A game. The Board were said to be seeking a price around A$9.00 per share, according to press reports. However, the Board faced increasing shareholder pushback to engage with the consortium and facilitate due diligence. The consortium viewed A$9.00 per share as excessive but shareholder feedback suggested that the price of A$8.75 per share would get the Board onside. UniSuper, the largest independent shareholder, will rollover its shares instead of receiving cash under the scheme and will be required to vote as a separate class on the scheme. The Board intends to recommend the revised offer subject to a binding scheme implementation agreement and no superior offer. The due diligence which is expected to take four weeks should be relatively straightforward due to the consortium’s expertise in airport infrastructure. The deal requires regulatory approval from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board. The ACCC will commence a review of the proposed transaction “in due course” and the review should take about three months to complete. The shareholder vote for approval is likely to be held in 1Q22. <div class="content-highlight">Overall, we think that the further revised indicative offer is attractive and marginally above the pre-COVID-19 rights adjusted share price high reached in December 2019. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.23, the shares are trading at a 6.3% gross spread to the indicative offer.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has granted a consortium (Sydney Aviation Alliance) non-exclusive due diligence access based on a further revised indicative proposal of A$8.75 cash per share. The revised indicative offer is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The revised indicative offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.Pushing for a better price is part of the M&amp;A game. The Board were said to be seeking a price around A$9.00 per share, according to press reports. However, the Board faced increasing shareholder pushback to engage with the consortium and facilitate due diligence. The consortium viewed A$9.00 per share as excessive but shareholder feedback suggested that the price of A$8.75 per share would get the Board onside. UniSuper, the largest independent shareholder, will rollover its shares instead of receiving cash under the scheme and will be required to vote as a separate class on the scheme. The Board intends to recommend the revised offer subject to a binding scheme implementation agreement and no superior offer. The due diligence which is expected to take four weeks should be relatively straightforward due to the consortium’s expertise in airport infrastructure. The deal requires regulatory approval from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board. The ACCC will commence a review of the proposed transaction “in due course” and the review should take about three months to complete. The shareholder vote for approval is likely to be held in 1Q22. Overall, we think that the further revised indicative offer is attractive and marginally above the pre-COVID-19 rights adjusted share price high reached in December 2019. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.23, the shares are trading at a 6.3% gross spread to the indicative offer.

Sydney Airport’s Further Revised Offer Gets the Board’s Approval

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has rejected a revised conditional, non-binding indicative offer of A$8.45 per share from a consortium (Sydney Aviation Alliance). The revised indicative offer of A$8.45 per share is a 45% premium to the unaffected price of A$5.81 (2 July). The revised indicative offer is also a marginal 2.4% bump to the original offer of A$8.25 per share received from the consortium on 5 July. The Board rejected the revised offer as it continues to undervalue Sydney Airport and is opportunistic considering the COVID-19 pandemic. The Board argues that Sydney Airport has a 74-year lease on one of Australia’s most important valuable pieces of infrastructure. Pushing for a better price is part of the M&amp;A game. The consortium responded to the Board’s rejection by warning that they are prepared to walk away but at the same time failing to declare that the A$8.45 per share revised offer was its final offer. The Board is open to engaging with the consortium if they lift the offer and is said to be seeking a price around A$9.00 per share, according to press reports. The issue is complicated by the different methodologies used by the Board and the consortium to determine the rights adjusted share price to account for the dilutive raise in August 2020. The Board also argues that any proposal should be benchmarked against the pre-COVID share price high of A$9.20 per share reached on 6 December 2019. We think that the revised indicative offer is in line with the pre-COVID-19 rights adjusted share price high reached in December 2019. The Board is facing increasing shareholder pushback to at least engage with the consortium and facilitate due diligence. UniSuper, the largest shareholder, has branded the rejection of the revised offer as “disappointing” and wants the Board to engage with the consortium.<div class="content-highlight">Overall, the gamesmanship suggests both sides are now invested in securing a deal and the 6.5% valuation differential (A$9.00 Board’s value vs A$8.45 bid) suggest the two sides are not far apart on price. At the last close price of A$7.70, the shares are trading at a 9.7% gross spread to the revised indicative offer. The interim results will be announced on 20 August before market open.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has rejected a revised conditional, non-binding indicative offer of A$8.45 per share from a consortium (Sydney Aviation Alliance). The revised indicative offer of A$8.45 per share is a 45% premium to the unaffected price of A$5.81 (2 July). The revised indicative offer is also a marginal 2.4% bump to the original offer of A$8.25 per share received from the consortium on 5 July. The Board rejected the revised offer as it continues to undervalue Sydney Airport and is opportunistic considering the COVID-19 pandemic. The Board argues that Sydney Airport has a 74-year lease on one of Australia’s most important valuable pieces of infrastructure. Pushing for a better price is part of the M&amp;A game. The consortium responded to the Board’s rejection by warning that they are prepared to walk away but at the same time failing to declare that the A$8.45 per share revised offer was its final offer. The Board is open to engaging with the consortium if they lift the offer and is said to be seeking a price around A$9.00 per share, according to press reports. The issue is complicated by the different methodologies used by the Board and the consortium to determine the rights adjusted share price to account for the dilutive raise in August 2020. The Board also argues that any proposal should be benchmarked against the pre-COVID share price high of A$9.20 per share reached on 6 December 2019. We think that the revised indicative offer is in line with the pre-COVID-19 rights adjusted share price high reached in December 2019. The Board is facing increasing shareholder pushback to at least engage with the consortium and facilitate due diligence. UniSuper, the largest shareholder, has branded the rejection of the revised offer as “disappointing” and wants the Board to engage with the consortium.Overall, the gamesmanship suggests both sides are now invested in securing a deal and the 6.5% valuation differential (A$9.00 Board’s value vs A$8.45 bid) suggest the two sides are not far apart on price. At the last close price of A$7.70, the shares are trading at a 9.7% gross spread to the revised indicative offer. The interim results will be announced on 20 August before market open.

Sydney Airport's Rejection of a Revised Offer Is Likely Not the Final Act

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport revealed a conditional, non-binding indicative offer from a consortium (Sydney Aviation Alliance) comprising of IFM, QSuper and Global Infrastructure Partners. The indicative offer of A$8.25 per share is a 42% premium to the unaffected price of A$5.81 (2 July). The offer price will be reduced by any dividends declared or paid prior to the scheme taking effect. The proposed transaction would be implemented via a scheme of arrangement.The Board noted the offer was below its pre-pandemic share price and said it would review the proposal, which is contingent on granting due diligence and unanimous recommendation by the Board in the absence of a superior offer. Crucially, the offer is conditional on UniSuper agreeing to reinvest its equity interest for an equivalent equity interest in the consortium’s holding vehicle. UniSuper is the largest shareholder who represents 15.28% of the outstanding shares. In response to the indicative offer, UniSuper said that it saw “merit in Sydney Airport being converted from a publicly listed company to an unlisted company. UniSuper also has a favourable view of the consortium partners." UniSuper will make a final decision after all details have been considered.We think that the indicative offer is opportunistic as it offers a modest premium to pre-COVID-19 share prices. However, airports in Australia have been hard hit by tough international travel restrictions, sporadic lockdowns and slow vaccination roll-out. The timing and the shape of a recovery (particularly the crucial international travel) remains highly uncertain suggesting the shares are more suited to the patient long-term investor.<div class="content-highlight">Nevertheless, this non-binding indicative offer lays a marker for the intrinsic value of the shares, gives the Board an opportunity to negotiate a bump or entice other infrastructure bidders to start a bidding war. At the last close price of A$7.78, the shares are trading at a 6% gross spread to the indicative offer.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport revealed a conditional, non-binding indicative offer from a consortium (Sydney Aviation Alliance) comprising of IFM, QSuper and Global Infrastructure Partners. The indicative offer of A$8.25 per share is a 42% premium to the unaffected price of A$5.81 (2 July). The offer price will be reduced by any dividends declared or paid prior to the scheme taking effect. The proposed transaction would be implemented via a scheme of arrangement.The Board noted the offer was below its pre-pandemic share price and said it would review the proposal, which is contingent on granting due diligence and unanimous recommendation by the Board in the absence of a superior offer. Crucially, the offer is conditional on UniSuper agreeing to reinvest its equity interest for an equivalent equity interest in the consortium’s holding vehicle. UniSuper is the largest shareholder who represents 15.28% of the outstanding shares. In response to the indicative offer, UniSuper said that it saw “merit in Sydney Airport being converted from a publicly listed company to an unlisted company. UniSuper also has a favourable view of the consortium partners." UniSuper will make a final decision after all details have been considered.We think that the indicative offer is opportunistic as it offers a modest premium to pre-COVID-19 share prices. However, airports in Australia have been hard hit by tough international travel restrictions, sporadic lockdowns and slow vaccination roll-out. The timing and the shape of a recovery (particularly the crucial international travel) remains highly uncertain suggesting the shares are more suited to the patient long-term investor.Nevertheless, this non-binding indicative offer lays a marker for the intrinsic value of the shares, gives the Board an opportunity to negotiate a bump or entice other infrastructure bidders to start a bidding war. At the last close price of A$7.78, the shares are trading at a 6% gross spread to the indicative offer.

Sydney Airport Gets an Opportunistic Indicative Offer

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/121/original/image_17443488521623225592751.png?1623225593" class="editor-image img-responsive" data-smartkarma-image-id="212121"></figure>
source: Reuters

Airports of Thailand (AOT TB) path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.

source: Reuters

Airport of Thailand (AOT): Phuket Sandbox

Founder of Antler Capital

Stanley Tsai, CFA

BOC Aviation | BOCAVI <a href="https://www.smartkarma.com/entities/boc-aviation" target="_blank" data-smartkarma-citation="entities:22689:1" rel="noopener">(2588 HK)</a> 
As a follow-up on <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a>'s Smartkarma Original <a href="https://www.smartkarma.com/insights/asia-pac-airports-ups-but-mostly-downs" target="_blank" data-smartkarma-citation="insights:51855" rel="noopener">Asia-Pac Airports: Ups, But Mostly Downs</a>, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation | BOCAVI (2588 HK) 
As a follow-up on David Blennerhassett's Smartkarma Original Asia-Pac Airports: Ups, But Mostly Downs, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

Japan

Japan Airport Terminal Co., Ltd. constructs, manages and maintains passenger terminals and airport facilities at Haneda and Narita airports.  The Company operates parking-lots, souvenir shops, and duty-free stores.  Japan Airport Terminal, through its subsidiaries, manages restaurants and in-flight meal services.

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Japan Airport Terminal Co (9706 JP)

Sydney Airport’s Further Revised Offer Gets the Board’s Approval

Sydney Airport has granted DD to a Sydney Aviation Alliance based on a revised price of A$8.75. The offer is attractive and at the last price of...

Arun George

Sydney Airport's Rejection of a Revised Offer Is Likely Not the Final Act

The Board rejects a revised offer of A$8.45, a 2.4% bump to the previous offer. At the last close price of A$7.70, the shares are trading at a...

Arun George

Sydney Airport Gets an Opportunistic Indicative Offer

The non-binding indicative offer lays a marker for the intrinsic value of the shares, gives the Board an opportunity to negotiate a bump or entice...

Arun George

Airport of Thailand (AOT): Phuket Sandbox

The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2)...

Henry Soediarko

BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

As downstream players continue to hemorrhage cash, over 99% of BOCAVI’s aircraft are still cash-generating. Valuation is undemanding for a high...

Stanley Tsai, CFA

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