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 December 2023 Rebalance.</li>
<li>
<a href="https://www.smartkarma.com/entities/dechra-pharmaceuticals-plc" target="_blank" data-smartkarma-citation="entities:21908:1" rel="noopener">Dechra Pharmaceuticals (DPH LN)</a> and <a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" data-smartkarma-citation="entities:28918:1" rel="noopener">Network International Holdings (NETW LN)</a> are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.</li>
<li>Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the December 2023 Rebalance.

Dechra Pharmaceuticals (DPH LN) and Network International Holdings (NETW LN) are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.
Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.


Quiddity Leaderboard F100/​​​250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

NTT (Nippon Telegraph & Telephone) (9432 JP)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex (8698 JP)</a> and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won't be egregiously bad.</li>
<li>
<a href="https://www.smartkarma.com/entities/people-s-insurance-co-group-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:362:1" rel="noopener">People's Insurance (PICC) (1339 HK)</a>'s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.</li>
<li>
<a href="https://www.smartkarma.com/entities/jmdc-inc" target="_blank" data-smartkarma-citation="entities:28673:1" rel="noopener">JMDC (4483 JP)</a> is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.</li>
</ul>



Monex (8698 JP) and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won't be egregiously bad.

People's Insurance (PICC) (1339 HK)'s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.

JMDC (4483 JP) is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.


Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<ul>
<li>The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). <a href="https://www.smartkarma.com/entities/pendragon-plc" target="_blank" data-smartkarma-citation="entities:22080:1" rel="noopener">Pendragon PLC (PDG LN)</a>'s shares are trading just below, at 35.2p.</li>
<li>It is now the turn of either Hedin or AutoNation to raise their offers. 32p/share seems a fair value for the standalone business. Synergies could be worth up to 10.54p/share.</li>
<li>Assuming a bidder distributes 60% of synergies to Pendragon shareholders, a potential offer price of 38.3p/share, in cash, 8% above Lithia's offer, could still be value enhancing.</li>
</ul>


The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). Pendragon PLC (PDG LN)'s shares are trading just below, at 35.2p.
It is now the turn of either Hedin or AutoNation to raise their offers. 32p/share seems a fair value for the standalone business. Synergies could be worth up to 10.54p/share.
Assuming a bidder distributes 60% of synergies to Pendragon shareholders, a potential offer price of 38.3p/share, in cash, 8% above Lithia's offer, could still be value enhancing.


<ul>
<li>My comparables derived valuation of <a href="https://www.smartkarma.com/entities/pendragon-plc" target="_blank" data-smartkarma-citation="entities:22080:1" rel="noopener">Pendragon PLC (PDG LN)</a> is 32p/share, above the value of Lithia's "package" and spot-on Hedin's unsolicited &amp; preliminary revised offer (well above its initial lowball offer).</li>
<li>The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.</li>
<li>The revised Hedin's offer is 17% above Lithia's, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board's recommendation. Gross spread, 5.6%. Long.</li>
</ul>


My comparables derived valuation of Pendragon PLC (PDG LN) is 32p/share, above the value of Lithia's "package" and spot-on Hedin's unsolicited &amp; preliminary revised offer (well above its initial lowball offer).
The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.
The revised Hedin's offer is 17% above Lithia's, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board's recommendation. Gross spread, 5.6%. Long.


<ul>
<li>The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for <a href="https://www.smartkarma.com/entities/lookers-plc" target="_blank" data-smartkarma-citation="entities:22031:1" rel="noopener">Lookers PLC (LOOK LN)</a> by 8%, to 130p/share (46.6% premium).</li>
<li>The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).</li>
<li>Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. </li>
</ul>


The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for Lookers PLC (LOOK LN) by 8%, to 130p/share (46.6% premium).
The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).
Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. 


Alpha Auto Group/​​Lookers: Sharp Turn

United Kingdom

Pinewood Technologies Group PLC is a leading cloud-based full-service technology provider for automotive retailers and OEMs, offering Dealer Management System (DMS) software, automotive intelligence platforms, Business Intelligence reporting, and AI-powered automotive solutions across sales, aftersales, accounting, and CRM. The company serves a global user base across more than 36 countries with long-standing partnerships with over 50 OEM brands. It was established in 1981 and is headquartered in Birmingham, UK.

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Pinewood Technologies (PINE LN)

Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

The top 7 F250 Potential ADDs currently have ~10 days of volume to buy and up to a couple of these names could be added on an intra-review basis...

Janaghan Jeyakumar, CFA

Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Proposals, Sweetened Offers & Synergies

The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). Pendragon's shares are trading just...

Jesus Rodriguez Aguilar

Hedin and Lithia Struggle for Pendragon

On 22 September, Hedin submitted a revised offer at 32p (4.1x EV/NTM Fwd EBITDA, in line with the median of UK comparables). If Lithia wants to...

Jesus Rodriguez Aguilar

Alpha Auto Group/Lookers: Sharp Turn

After the deal looked dead in the water, the board of Bidco and the board of Lookers announced that they had agreed on an increased recommended...

Jesus Rodriguez Aguilar

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52-week Range

Market Cap (USDm)

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Quiddity Leaderboard F100/​​​250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

The top 7 F250 Potential ADDs currently have ~10 days of volume to buy and up to a couple of these names could be added on an intra-review basis...

Janaghan Jeyakumar, CFA

Last Week in Event SPACE: Monex/NTT, PICC/PICC P&C, Vertex

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Proposals, Sweetened Offers & Synergies

The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). Pendragon's shares are trading just...

Jesus Rodriguez Aguilar

Hedin and Lithia Struggle for Pendragon

On 22 September, Hedin submitted a revised offer at 32p (4.1x EV/NTM Fwd EBITDA, in line with the median of UK comparables). If Lithia wants to...

Jesus Rodriguez Aguilar

Alpha Auto Group/​​Lookers: Sharp Turn

After the deal looked dead in the water, the board of Bidco and the board of Lookers announced that they had agreed on an increased recommended...

Jesus Rodriguez Aguilar

Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

Alpha Auto Group/Lookers: Sharp Turn