Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>A drop in global demand resulted in international salmon prices declining 28% in the first six months of 2020. </p>
<p>In June of last year, China experienced a second Covid outbreak in Beijing that Chines authorities attributed to chopping boards used to handle imported salmon at the Xinfadi meat wholesale market. </p>
<p>Tasmania's <a href="https://www.smartkarma.com/entities/huon-aquaculture-group-ltd" target="_blank" data-smartkarma-citation="entities:12348:1" rel="noopener">Huon Aquaculture (HUO AU)</a> and <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a> both sell salmon to China, although China's imports are primarily sourced from Chile, Denmark, and Norway.  </p>
<p>On the 26 February this year, Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02347852-3A562617?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02336871-3A560489?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">market update</a> earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020.</p>
<p>Concurrent with its 1H21 results, Huon said...</p>
<blockquote>
<p>In light of recent unsolicited approaches, the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders.</p>
</blockquote>
<p>In a follow-up announcement on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02387935-3A569418?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 June</a>, Huon said that strategic review remains ongoing. </p>
<p>Huon is in need of cash in the face of burgeoning debt amid falling salmon prices and rising freight expenses. A possible placement has been floated, although it would need to be substantial, which would reduce the Bender family's major shareholding. </p>
<p>A more likely outcome was a take-private transaction, yet an ongoing auction process, one that was (allegedly) repeatedly extended, appeared to be losing traction. As of about a week ago, reportedly only Brazil's <a href="https://www.smartkarma.com/entities/jbs-sa" target="_blank" data-smartkarma-citation="entities:24455:1" rel="noopener">JBS SA (JBSS3 BZ)</a> was still in the running.</p>
<div>
<h3>The New News</h3>
<p>Huon has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02404691-3A572314?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a firm Offer with JBS.</p>
</div>
<div>
<p>Under the terms of the Offer, by way of Scheme, Huon shareholders will receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share  - if paid - will be netted. The cash price is a 61% premium to the last close, before the strategic review was announced on the 26 February. </p>
<p>The founding family (the Benders) with 53% intend to vote all of their shares in support of the Scheme, in the absence of a superior offer.</p>
<p>In addition to a shareholder vote, this Offer requires approval from FIRB.</p>
<p>A Scheme meeting is expected to take place late October with possible competition in November. </p>
</div>
<div>
<p>More below the fold.</p>
</div>
<div>
<p></p>
</div>

A drop in global demand resulted in international salmon prices declining 28% in the first six months of 2020. 
In June of last year, China experienced a second Covid outbreak in Beijing that Chines authorities attributed to chopping boards used to handle imported salmon at the Xinfadi meat wholesale market. 
Tasmania's Huon Aquaculture (HUO AU) and Tassal (TGR AU) both sell salmon to China, although China's imports are primarily sourced from Chile, Denmark, and Norway.  
On the 26 February this year, Huon announced a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a market update earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020.
Concurrent with its 1H21 results, Huon said...

In light of recent unsolicited approaches, the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders.

In a follow-up announcement on the 25 June, Huon said that strategic review remains ongoing. 
Huon is in need of cash in the face of burgeoning debt amid falling salmon prices and rising freight expenses. A possible placement has been floated, although it would need to be substantial, which would reduce the Bender family's major shareholding. 
A more likely outcome was a take-private transaction, yet an ongoing auction process, one that was (allegedly) repeatedly extended, appeared to be losing traction. As of about a week ago, reportedly only Brazil's JBS SA (JBSS3 BZ) was still in the running.

The New News
Huon has now announced a firm Offer with JBS.


Under the terms of the Offer, by way of Scheme, Huon shareholders will receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share  - if paid - will be netted. The cash price is a 61% premium to the last close, before the strategic review was announced on the 26 February. 
The founding family (the Benders) with 53% intend to vote all of their shares in support of the Scheme, in the absence of a superior offer.
In addition to a shareholder vote, this Offer requires approval from FIRB.
A Scheme meeting is expected to take place late October with possible competition in November. 


More below the fold.





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

PT Nippon Indosari Corpindo Tbk. (ROTI) / Equity Bottom-Up

<p>I had a call with the management to find out about internet business contribution from Go-Food, Ramadhan period on revenue for the 2Q, and sales channel. </p>
<p>During the call, the management gave a background on the product boycott in 2016 (that was resolved immediately after it took place), expansion of production and the R&amp;D team in 2017 followed by a release of 45 new SKUs in the market which spilled over to the Q1 2018. </p>
<h2>Sales Channel &amp; Inventory</h2>
<p>ROTI has 2 main sales channel; general trade…</p>

I had a call with the management to find out about internet business contribution from Go-Food, Ramadhan period on revenue for the 2Q, and sales channel. 
During the call, the management gave a background on the product boycott in 2016 (that was resolved immediately after it took place), expansion of production and the R&amp;D team in 2017 followed by a release of 45 new SKUs in the market which spilled over to the Q1 2018. 
Sales Channel &amp; Inventory
ROTI has 2 main sales channel; general trade…

Sari (ROTI): Long-Term Positive But No near Term Catalyst in FY 2018

Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

<p>QAF’s 72% drop in headline net profit for 1H17 does not look pretty, but it masks the overall potential of the underlying businesses. Also, the Group recorded an exceptional gain of SGD 9.7m in 1H16 due to the sale of its 20% shareholding interest in GBKL. Excluding this, Group PBT in 1H17 decreased by only 27%. </p><p>In this article, I hope to address some of the bright spots found beyond the headline figures:</p><ol class=""><li>The bakery segment EBIT fell 41%YoY largely due to the deconsolidation of GBKL and some one-off events. With steps taken to ensure smoother production in 2H17, EBIT margins are likely to stabilize from here.</li><li>QAF is planning to list its primary production segment on the Australia Stock Exchange. Peer valuations indicate that the market is undervaluing the pork business by almost half. </li><li>The current share price weakness means that the market is overlooking the work-in-progress at its bakery, the unlocking of value at its primary production segment, and historically steady dividends. </li></ol>

QAF’s 72% drop in headline net profit for 1H17 does not look pretty, but it masks the overall potential of the underlying businesses. Also, the Group recorded an exceptional gain of SGD 9.7m in 1H16 due to the sale of its 20% shareholding interest in GBKL. Excluding this, Group PBT in 1H17 decreased by only 27%. In this article, I hope to address some of the bright spots found beyond the headline figures:The bakery segment EBIT fell 41%YoY largely due to the deconsolidation of GBKL and some one-off events. With steps taken to ensure smoother production in 2H17, EBIT margins are likely to stabilize from here.QAF is planning to list its primary production segment on the Australia Stock Exchange. Peer valuations indicate that the market is undervaluing the pork business by almost half. The current share price weakness means that the market is overlooking the work-in-progress at its bakery, the unlocking of value at its primary production segment, and historically steady dividends. 

QAF: Improving Bakery + Listing of Pork Business + Net Cash = 10% to 16% Upside Not Yet Baked In

<p>In part 1 of the series, I have discussed the primary production (pork) segment of <a href="https://www.smartkarma.com/entities/10396" target="_blank" data-smartkarma-citation="entities:10396:1">QAF Ltd (QAF SP)</a>. In part 2, I will provide an overview of its bakery segment, its profit trend in the last decade, and a bit of history. Those familiar with the story of<em> Gardenia</em> and<em> Bonjour</em> breads can skip the history portion.  </p><p>In the later part of this article, I try to evaluate the market’s implied valuation for its bakery division, my findings for this business, and near-term risks that can affect its share price.</p>

In part 1 of the series, I have discussed the primary production (pork) segment of QAF Ltd (QAF SP). In part 2, I will provide an overview of its bakery segment, its profit trend in the last decade, and a bit of history. Those familiar with the story of Gardenia and Bonjour breads can skip the history portion.  In the later part of this article, I try to evaluate the market’s implied valuation for its bakery division, my findings for this business, and near-term risks that can affect its share price.

Unlocking QAF's Value (Part 2) - Artisan Bakery in the Making?

<p><a href="https://www.smartkarma.com/entities/10396" target="_blank" data-smartkarma-citation="entities:10396:1">QAF Ltd (QAF SP)</a> is a food distribution company with presence primarily in ASEAN and Australia, with three main business segments -  bakery, primary production, and trading. Recently, it announced that it is doing a strategic review of its primary production (ie pork production) segment, so as to enhance shareholder value. In this article, I will primarily discuss QAF’s primary production business, its appealing traits, and why <a href="https://www.smartkarma.com/entities/13200" target="_blank" data-smartkarma-citation="entities:13200:1">WH Group Ltd (288 HK)</a> could be interested in it.</p>

QAF Ltd (QAF SP) is a food distribution company with presence primarily in ASEAN and Australia, with three main business segments -  bakery, primary production, and trading. Recently, it announced that it is doing a strategic review of its primary production (ie pork production) segment, so as to enhance shareholder value. In this article, I will primarily discuss QAF’s primary production business, its appealing traits, and why WH Group Ltd (288 HK) could be interested in it.

Unlocking QAF's Value (Part 1) - Why Its Pork Business May Be Attractive to WH Group

Singapore

QAF Limited manufactures and distributes bread, bakery, and confectionery products.  The Company also operates supermarkets and cold storage warehousing. QAF trades and distributes food, beverages, food related ingredients and commodities.  QAF produces, processes, and markets pork and feed mill production.

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QAF Ltd (QAF SP)

JBS Nets Huon Agriculture (ASX: HUO)

The company is on the back foot in the face of increasing debt amid falling salmon prices and skyrocketing freight prices. JBS appears the only...

David Blennerhassett

Sari (ROTI): Long-Term Positive But No near Term Catalyst in FY 2018

I had a call with the management to find out about internet business contribution from Go-Food, Ramadhan period on revenue for the 2Q, and sales...

Henry Soediarko

QAF: Improving Bakery + Listing of Pork Business + Net Cash = 10% to 16% Upside Not Yet Baked In

QAF’s 72% drop in headline net profit for 1H17 does not look pretty, but it masks the overall potential of the underlying businesses. Also, the...

Valerie Law, CFA

Unlocking QAF's Value (Part 2) - Artisan Bakery in the Making?

In part 1 of the series, I have discussed the primary production (pork) segment of QAF Ltd (QAF SP). In part 2, I will provide an overview of its...

Valerie Law, CFA

Unlocking QAF's Value (Part 1) - Why Its Pork Business May Be Attractive to WH Group

QAF Ltd (QAF SP) is a food distribution company with presence primarily in ASEAN and Australia, with three main business segments - bakery,...

Valerie Law, CFA

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