Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

Previously, on 16 November, Australia-based Childcare company <a href="https://www.smartkarma.com/entities/think-childcare-ltd" target="_blank" data-smartkarma-citation="entities:18899:1" rel="noopener">Think Childcare (TNK AU)</a> ("TNK") announced they had received a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02308970-3A555430?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Non-binding Indicative Proposal</a> from the PE arm of Australian investments firm <a href="https://www.alceon.com.au/" target="_blank" rel="noopener">Alceon Group</a>. The Offer Price was A$1.35/share and the form of consideration was expected to be either cash or a combination of cash and shares in an unlisted newly-formed entity. In my insight <a href="https://www.smartkarma.com/insights/think-childcare-tnk-au-takeover-proposal-from-alceon-group-seems-light" target="_blank" data-smartkarma-citation="insights:45429" rel="noopener">Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light</a>, I concluded the Offer Price of A$1.35 seemed light on a growth-adjusted basis and when compared against the valuations of other local and global peers.  Today, before the market opened, <a href="https://www.smartkarma.com/entities/think-childcare-ltd" target="_blank" data-smartkarma-citation="entities:18899:1" rel="noopener">Think Childcare (TNK AU)</a> announced that they had received an "unsolicited, conditional, non-binding all cash proposal" from unlisted peer Busy Bees Early Learning Australia Pty Ltd at an Offer Price of A$1.75/share, which is ~30% higher than Alceon's proposal.<div>More below the fold. </div><hr><div><div class="content-remarks">For more information about M&amp;A rules, regulations, and practices in Australia, please refer to <a href="https://www.smartkarma.com/insights/quiddity-australia-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30118" rel="noopener">Quiddity Australia M&amp;A Guide 2019</a> and <a href="https://www.smartkarma.com/insights/quiddity-m-a-australia-foreign-investment-reforms" target="_blank" data-smartkarma-citation="insights:40210" rel="noopener">Quiddity M&amp;A: Australia Foreign Investment Reforms</a> </div></div>

Previously, on 16 November, Australia-based Childcare company Think Childcare (TNK AU) ("TNK") announced they had received a Non-binding Indicative Proposal from the PE arm of Australian investments firm Alceon Group. The Offer Price was A$1.35/share and the form of consideration was expected to be either cash or a combination of cash and shares in an unlisted newly-formed entity. In my insight Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light, I concluded the Offer Price of A$1.35 seemed light on a growth-adjusted basis and when compared against the valuations of other local and global peers.  Today, before the market opened, Think Childcare (TNK AU) announced that they had received an "unsolicited, conditional, non-binding all cash proposal" from unlisted peer Busy Bees Early Learning Australia Pty Ltd at an Offer Price of A$1.75/share, which is ~30% higher than Alceon's proposal.More below the fold. For more information about M&amp;A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&amp;A Guide 2019 and Quiddity M&amp;A: Australia Foreign Investment Reforms 

Think Childcare (TNK AU): Competitive Bid by Busy Bees

On 16 November, Australia-based Childcare company <a href="https://www.smartkarma.com/entities/think-childcare-ltd" target="_blank" data-smartkarma-citation="entities:18899:1" rel="noopener">Think Childcare (TNK AU)</a> announced they had received a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02308970-3A555430?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Non-binding Indicative Proposal</a> from the PE arm of Australian investments firm <a href="https://www.alceon.com.au/" target="_blank" rel="noopener">Alceon Group</a>.<a href="https://www.alceon.com.au/" target="_blank" rel="noopener">Alceon Group</a> is an Australian independent multi-strategy alternative investments firm with "four key investment platforms": Private Equity, Real Estate, Corporate Credit, and Liquid Strategies. They have around A$2bn in capital under management. The Offer Price is A$1.35/share and the form of consideration could be either cash or a combination of cash and shares in an unlisted newly-formed entity. This Deal values the Target company at an enterprise value of A$300mn and a market cap of A$82mn. The successful completion of this transaction is likely to be conditional on the completion of confirmatory due diligence, obtaining necessary funding, regulatory approvals and Target Shareholder approval. More below the fold. <hr><div>For more information about M&amp;A rules, regulations, and practices in Australia, please refer to <a href="https://www.smartkarma.com/insights/quiddity-australia-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30118" rel="noopener">Quiddity Australia M&amp;A Guide 2019</a> and <a href="https://www.smartkarma.com/insights/quiddity-m-a-australia-foreign-investment-reforms" target="_blank" data-smartkarma-citation="insights:40210" rel="noopener">Quiddity M&amp;A: Australia Foreign Investment Reforms</a> </div>

On 16 November, Australia-based Childcare company Think Childcare (TNK AU) announced they had received a Non-binding Indicative Proposal from the PE arm of Australian investments firm Alceon Group.Alceon Group is an Australian independent multi-strategy alternative investments firm with "four key investment platforms": Private Equity, Real Estate, Corporate Credit, and Liquid Strategies. They have around A$2bn in capital under management. The Offer Price is A$1.35/share and the form of consideration could be either cash or a combination of cash and shares in an unlisted newly-formed entity. This Deal values the Target company at an enterprise value of A$300mn and a market cap of A$82mn. The successful completion of this transaction is likely to be conditional on the completion of confirmatory due diligence, obtaining necessary funding, regulatory approvals and Target Shareholder approval. More below the fold. For more information about M&amp;A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&amp;A Guide 2019 and Quiddity M&amp;A: Australia Foreign Investment Reforms 

Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

The Australian federal election result wasn't a great outcome for child-care centre operator G8 Education as the prospect of a weak federal government is likely to impede the passage of favourable child-care legislation. However, in the long term, the company's prospects are brighter as demand and government funding for early childhood education and care services are likely to grow. Both the Liberal and Labor parties propose increasing ECEC funding, but the method, magnitude and timing remain uncertain.At AUD 3.92, the market price implies a fiscal 2016 price/earnings ratio of 15 times, based on a December financial year-end, and a PE/EPS growth ratio of 1.1 times. The dividend yield is 6.5%, or 9.0% including franking credits, and assumes a 95% payout ratio. In comparison, the ASX 200 index trades on a forward P/E ratio of 16 times and dividend yield of 4.6%. Analyst: Gareth James

The Australian federal election result wasn't a great outcome for child-care centre operator G8 Education as the prospect of a weak federal government is likely to impede the passage of favourable child-care legislation. However, in the long term, the company's prospects are brighter as demand and government funding for early childhood education and care services are likely to grow. Both the Liberal and Labor parties propose increasing ECEC funding, but the method, magnitude and timing remain uncertain.At AUD 3.92, the market price implies a fiscal 2016 price/earnings ratio of 15 times, based on a December financial year-end, and a PE/EPS growth ratio of 1.1 times. The dividend yield is 6.5%, or 9.0% including franking credits, and assumes a 95% payout ratio. In comparison, the ASX 200 index trades on a forward P/E ratio of 16 times and dividend yield of 4.6%. Analyst: Gareth James

G8 Education Remains Undervalued for Risk-Tolerant Investors

Australia

Think Childcare Limited owns, manages, and operates long day childcare facilities. The Company offers child development and education services. Think Childcare serves customers in Australia.

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Think Childcare (TNK AU)