Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Transurban Group / Equity Capital Markets

<div>
<p>Transurban has almost raised (barring the shortfall) around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement to fund the acquisition of the remaining 49% stake in WestConnex. In this note, we will talk about the retail entitlement worth US$273m (A$371m) which was launched today.</p>
<p>We have covered most aspects of the deal in our earlier note <a href="https://www.smartkarma.com/insights/transurban-entitlement-and-shortfall-well-flagged-deal-for-a-well-known-asset" target="_blank" rel="noopener">Transurban Entitlement and Shortfall - Well Flagged Deal for a Well Known Asset</a>. </p>
</div><div><p>We have covered some of the prior entitlement offer related shortfall bookbuilds in the past:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/acquisition-appears-attractive-and-track-record-remains-stellar-but-upside-seems-limited" target="_blank" rel="noopener">Nov 2015: Acquisition Appears Attractive and Track Record Remains Stellar but Upside Seems Limited</a></li>
<li>Dec 2017: <a href="https://www.smartkarma.com/insights/transurban-entitlement-offer-uncertainty-abound" target="_blank" rel="noopener">Transurban Entitlement Offer - Uncertainty Abound</a>
</li>
<li>Sep 2018: <a href="https://www.smartkarma.com/insights/transurban-entitlement-and-short-fall-long-term-value-accretion-with-short-term-earnings-drag" target="_blank" rel="noopener">Transurban Entitlement and Short-Fall - Long-Term Value Accretion with Short-Term Earnings Drag</a> and <a href="https://www.smartkarma.com/insights/transurban-retail-short-fall-quick-take-much-better-positioned-now" target="_blank" rel="noopener">Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now</a>
</li>
<li>Aug 2019: <a href="https://www.smartkarma.com/insights/transurban-retail-short-fall-quick-take-much-better-positioned-now" target="_blank" rel="noopener">Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now</a>
</li>
</ul></div><div><p></p></div>


Transurban has almost raised (barring the shortfall) around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement to fund the acquisition of the remaining 49% stake in WestConnex. In this note, we will talk about the retail entitlement worth US$273m (A$371m) which was launched today.
We have covered most aspects of the deal in our earlier note Transurban Entitlement and Shortfall - Well Flagged Deal for a Well Known Asset. 
We have covered some of the prior entitlement offer related shortfall bookbuilds in the past:
Nov 2015: Acquisition Appears Attractive and Track Record Remains Stellar but Upside Seems Limited
Dec 2017: Transurban Entitlement Offer - Uncertainty Abound

Sep 2018: Transurban Entitlement and Short-Fall - Long-Term Value Accretion with Short-Term Earnings Drag and Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now

Aug 2019: Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now



<p><a href="https://www.smartkarma.com/entities/scientific-games-corp-a" target="_blank" data-smartkarma-citation="entities:9746:1" rel="noopener">Scientific Games Corp A (SGMS US)</a> aims to raise around US$3.7bn (A$5bn) via selling a majority of its stake in SG Lottery (SGL) in an Australian IPO.</p><p>SGL runs a global lottery business supplying lottery products and services across the lottery ecosystem. It works with various governments globally who use its products and services to run their lotteries. As of FY20, SGL had more than 130 customers in over 50 countries. Revenue from North America and Europe accounted for 73% and 24% of its FY20 revenue, respectively.</p><p>SGL generates most of its sales from instant lottery products. It has supplied instant lottery products to 40 of the 46 US jurisdictions that sell instant lottery products and has sold instant lottery products to customers in approximately 50 countries. Its  relationship with its top 10 customers have been ongoing for an average 35 years.</p><p>SGL has been reporting steady past growth and margins have been relatively stable as well.</p>

Scientific Games Corp A (SGMS US) aims to raise around US$3.7bn (A$5bn) via selling a majority of its stake in SG Lottery (SGL) in an Australian IPO.SGL runs a global lottery business supplying lottery products and services across the lottery ecosystem. It works with various governments globally who use its products and services to run their lotteries. As of FY20, SGL had more than 130 customers in over 50 countries. Revenue from North America and Europe accounted for 73% and 24% of its FY20 revenue, respectively.SGL generates most of its sales from instant lottery products. It has supplied instant lottery products to 40 of the 46 US jurisdictions that sell instant lottery products and has sold instant lottery products to customers in approximately 50 countries. Its  relationship with its top 10 customers have been ongoing for an average 35 years.SGL has been reporting steady past growth and margins have been relatively stable as well.

SG Lottery Pre-IPO - First Look at Possibly Australia’s Largest IPO in 2021

<div>
<p>Transurban aims to raise around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement to AustralianSuper to fund the acquisition of the remaining 49% stake in WestConnex.</p>
<p>We have covered some of the prior entitlement offer related shortfall bookbuilds in the past:</p>
</div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/acquisition-appears-attractive-and-track-record-remains-stellar-but-upside-seems-limited" target="_blank" rel="noopener">Nov 2015: Acquisition Appears Attractive and Track Record Remains Stellar but Upside Seems Limited</a></li>
<li>Dec 2017: <a href="https://www.smartkarma.com/insights/transurban-entitlement-offer-uncertainty-abound" target="_blank" rel="noopener">Transurban Entitlement Offer - Uncertainty Abound</a>
</li>
<li>Sep 2018: <a href="https://www.smartkarma.com/insights/transurban-entitlement-and-short-fall-long-term-value-accretion-with-short-term-earnings-drag" target="_blank" rel="noopener">Transurban Entitlement and Short-Fall - Long-Term Value Accretion with Short-Term Earnings Drag</a> and <a href="https://www.smartkarma.com/insights/transurban-retail-short-fall-quick-take-much-better-positioned-now" target="_blank" rel="noopener">Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now</a>
</li>
<li>Aug 2019: <a href="https://www.smartkarma.com/insights/transurban-retail-short-fall-quick-take-much-better-positioned-now" target="_blank" rel="noopener">Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now</a>
</li>
</ul></div><p>In this note, we will talk about the deal dynamics and run the deal through our ECM framework.</p>


Transurban aims to raise around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement to AustralianSuper to fund the acquisition of the remaining 49% stake in WestConnex.
We have covered some of the prior entitlement offer related shortfall bookbuilds in the past:

Nov 2015: Acquisition Appears Attractive and Track Record Remains Stellar but Upside Seems Limited
Dec 2017: Transurban Entitlement Offer - Uncertainty Abound

Sep 2018: Transurban Entitlement and Short-Fall - Long-Term Value Accretion with Short-Term Earnings Drag and Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now

Aug 2019: Transurban Retail Short-Fall - Quick Take - Much Better Positioned Now

In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Transurban Entitlement and Shortfall - Well Flagged Deal for a Well Known Asset

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On 2 September at 7pm Australia time, the Marvelous Milton Merger Arb ratio was fixed, and just now it was <a href="https://www.asx.com.au/asxpdf/20210903/pdf/4504qbggnhgyc0.pdf" target="_blank" rel="noopener">announced</a>. </p><p>The ratio of <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> shares to <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> shares has been decided at 0.1863. Entitlements will be rounded up or down to the nearest share.</p><p>Those who have been following on my model would have the NAV at A$5.622 on 2 Sep at the close, or A$5.702/share including the A$0.08 of dividend which went ex- on August 31. That delivered me a number of 0.1864 but they started with A$5.70 rather than A$5.702.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/227/647/original/Screenshot+2021-09-03+at+12.18.13+PM.png?1630642709" class="editor-image img-responsive" data-smartkarma-image-id="227647"></figure></section><p>As reported in the <a href="https://www.afr.com/street-talk/milton-corp-s-4b-takeover-finds-proxy-firm-support-20210901-p58ntx" target="_blank" rel="noopener">AFR</a>, both major proxy services came out in favor of the deal saying advantages outweighed disadvantages, and noting the IE's "fair value" range said pricing was appropriate; in a good quote from the article, "there were no stones thrown", which usually results in an approval at the Scheme Meeting.</p><p>The schedule reported in the filing is unchanged from the schedule in the Scheme Booklet.</p><div>
<p>Today's announcement means the merger trade is "fixed" rather than floating and now the remaining "risks" are...</p>
<ul>
<li>a small and eminently arb-able risk arb spread (which is 3.56% less comms and borrow fees as I type (excluding any franking credit benefit)</li>
<li>the risk of whether this gets voted through at the Scheme Meeting on the 13th, and</li>
<li>the index impacts</li>
</ul>
<p>There is, as always, more below the fold.</p>
</div><hr><div><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 539pt;"><h2>History of Insights on the Situation</h2></td></tr>
<tr>
<td><strong>Date</strong></td>
<td><strong>Title</strong></td>
</tr>
<tr>
<td>22 Jun 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" rel="noopener">Milton Merger Is A Most Marvelous Arb</a></td>
</tr>
<tr>
<td>24 Jun 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-whsp-merger-index-implications-and-the-marvelous-arb" target="_blank" rel="noopener">Milton-WHSP Merger Index Implications and the Marvelous Arb</a></td>
</tr>
<tr>
<td>21 Jul 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-s-marvelous-arm-meanders-along-marvelously" target="_blank" rel="noopener">Milton’s Marvelous Arb Meanders Along... Marvelously</a></td>
</tr>
<tr>
<td>5 Aug 21</td>
<td><a href="https://www.smartkarma.com/insights/the-still-marvelous-milton-arb-confirms-its-schedule-much-marvelousness-to-come" target="_blank" rel="noopener">The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come</a></td>
</tr>
<tr>
<td>12 Aug 21</td>
<td><a href="https://www.smartkarma.com/insights/the-magnality-of-the-marvelous-milton-merger-makes-a-moribund-march-to-metaphysis-it-s-mirific" target="_blank" rel="noopener">The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)</a></td>
</tr>
<tr>
<td>25 Aug 21</td>
<td>
<a href="https://www.smartkarma.com/insights/marvelous-milton-making-its-move-new-30yr-highs-on-both-stocks" target="_blank" data-smartkarma-citation="insights:56651" rel="noopener">Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks</a> </td>
</tr>
</tbody>
</table></div><div><p></p></div>

On 2 September at 7pm Australia time, the Marvelous Milton Merger Arb ratio was fixed, and just now it was announced. The ratio of Milton Corp Ltd (MLT AU) shares to Washington H. Soul Pattinson and Co. Ltd (SOL AU) shares has been decided at 0.1863. Entitlements will be rounded up or down to the nearest share.Those who have been following on my model would have the NAV at A$5.622 on 2 Sep at the close, or A$5.702/share including the A$0.08 of dividend which went ex- on August 31. That delivered me a number of 0.1864 but they started with A$5.70 rather than A$5.702.As reported in the AFR, both major proxy services came out in favor of the deal saying advantages outweighed disadvantages, and noting the IE's "fair value" range said pricing was appropriate; in a good quote from the article, "there were no stones thrown", which usually results in an approval at the Scheme Meeting.The schedule reported in the filing is unchanged from the schedule in the Scheme Booklet.
Today's announcement means the merger trade is "fixed" rather than floating and now the remaining "risks" are...

a small and eminently arb-able risk arb spread (which is 3.56% less comms and borrow fees as I type (excluding any franking credit benefit)
the risk of whether this gets voted through at the Scheme Meeting on the 13th, and
the index impacts

There is, as always, more below the fold.






History of Insights on the Situation

Date
Title


22 Jun 21
Milton Merger Is A Most Marvelous Arb


24 Jun 21
Milton-WHSP Merger Index Implications and the Marvelous Arb


21 Jul 21
Milton’s Marvelous Arb Meanders Along... Marvelously


5 Aug 21
The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come


12 Aug 21
The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)


25 Aug 21

Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks 




Marvelous Milton Merger Mapping Mabbled: Ratio Done, Now For The Hard Part

Commonwealth Bank of Australia / Event-Driven

<p style="text-align: left;">In <a href="https://www.smartkarma.com/insights/aussie-bank-buyback-season-starts-expect-a-12-15bn-and-funky-flows" target="_blank" data-smartkarma-citation="insights:55301" rel="noopener">Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows</a> 10 days ago I wrote that I expected <a href="https://www.smartkarma.com/entities/commonwealth-bank-of-australia" target="_blank" data-smartkarma-citation="entities:14:1" rel="noopener">Commonwealth Bank of Australia (CBA AU)</a> to announce an off-market buyback A$5.0-6.0bn when it announced earnings on 11 August.</p><div class="content-highlight">
<p><strong>11 Aug 2021: CBA releases earnings</strong></p>
<ul>
<li>In its Q3 update <a href="https://www.asx.com.au/asxpdf/20210512/pdf/44wdznw579z8cv.pdf" target="_blank" rel="noopener">released</a> on 12 May, <a href="https://www.smartkarma.com/entities/commonwealth-bank-of-australia" target="_blank" data-smartkarma-citation="entities:14:1" rel="noopener">Commonwealth Bank of Australia (CBA AU)</a> announced a CET1 ratio of 12.7%.</li>
<li>In April CBA issued PERL capital notes to the tune of A$1.18bn which raised Tier1 by 26bp, and sold its Comminsure business which will also raise it slightly in CY21H2. It sold its wealth management business earlier. Given earnings are expected to be robust and more writebacks from provisions made last year could be in the offing, what was an excess capital position of A$10-11.5bn at end-March could be on the order of A$12.0-13.5bn at end-June.</li>
<li>Given the change in CBA's profile from multi-strat bank to more of a deposit-taking institution, and the notion it could get the second part (A$500mm) of the $1bn capital penalty APRA applied in 2019 (following a review of its governance, culture and accountability) following remediation, there is likely to be more flexibility to lower the CET1 ratio.</li>
<li>The 12 May statement said <em>"A strong surplus capital position creates flexibility for the board in its consideration of capital management initiatives. The timing and extent of any such initiatives is dependent upon a continued trend of domestic economic improvement, our ongoing assessment of portfolio credit quality, and regulatory guidance."</em>
</li>
<li><strong>CBA should be expected to be able to raise its dividend AND buy back shares. I would expect a buyback of A$5.0-6.0bn or about half the distance between its end-June CET1 and the "Unquestionably Strong" level.</strong></li>
<li><em><strong>Given CBA's franking credit position, and its history of having conducted off-market buybacks in the past, one should expect CBA's buyback to be an off-market buyback. </strong></em></li>
</ul>
</div><h3></h3><h2>Today's News</h2><p>This morning, Commonwealth Bank of Australia released its FY2021 Full Year Earnings (<a href="https://www.commbank.com.au/content/dam/commbank-assets/investors/docs/results/fy21/cba-fy21-profit-announcement.pdf" target="_blank" rel="noopener">statement</a>, <a href="https://www.commbank.com.au/content/dam/commbank-assets/investors/docs/results/fy21/cba-fy21-results-presentation.pdf" target="_blank" rel="noopener">presentation</a>, <a href="https://www.commbank.com.au/content/dam/commbank-assets/investors/docs/results/fy21/cba-fy21-basel-iii-pillar-3-disclosure.pdf" target="_blank" rel="noopener">capital adequacy</a>, and there is, of course, a <a href="https://edge.media-server.com/mmc/p/jwtuzfqm" target="_blank" rel="noopener">webcast</a>, which goes along with the <a href="https://www.commbank.com.au/about-us/investors/asx-announcements.html" target="_blank" rel="noopener">Annual Report</a>, <a href="https://www.commbank.com.au/about-us/investors/asx-announcements.html" target="_blank" rel="noopener">Corporate Governance Statement</a>, and an update on the <a href="https://www.commbank.com.au/about-us/investors/asx-announcements.html" target="_blank" rel="noopener">Prudential Inquiry Remedial Action Plan</a>).  </p><p>As expected, results were good. Statutory NPAT up 19.7%yoy, mostly due to lower loan impairments. Operating profit was up 1.7%. NIM was down slightly to 2.03% due to higher quality assets and CET1 capital came in at 13.1%.</p><p><em><strong>And as expected, the final dividend was hiked - A$2.00/share for Record Date 18 August - and a <a href="https://www.commbank.com.au/about-us/investors/asx-announcements.html" target="_blank" rel="noopener">large off-market buyback was announced</a>. </strong></em></p><h3>A$6.0bn. </h3><p style="text-align: left;">Also with a Record Date of 18 August. </p><p style="text-align: left;"></p><p style="text-align: left;"><em>This insight talks about how the flows, and the possibilities. It is a follow-on from <a href="https://www.smartkarma.com/insights/aussie-bank-buyback-season-starts-expect-a-12-15bn-and-funky-flows" target="_blank" data-smartkarma-citation="insights:55301" rel="noopener">Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows</a>. One should expect <a href="https://www.smartkarma.com/entities/westpac-banking-corp" target="_blank" data-smartkarma-citation="entities:444:1" rel="noopener">Westpac Banking (WBC AU)</a> to announce an off-market buyback when it reports on 19 August. There are two bits of more recent news which impact this. I had expected A$3.0bn or more. I might expect A$4.0bn but there is a wee cloud there.</em></p>

In Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows 10 days ago I wrote that I expected Commonwealth Bank of Australia (CBA AU) to announce an off-market buyback A$5.0-6.0bn when it announced earnings on 11 August.
11 Aug 2021: CBA releases earnings

In its Q3 update released on 12 May, Commonwealth Bank of Australia (CBA AU) announced a CET1 ratio of 12.7%.
In April CBA issued PERL capital notes to the tune of A$1.18bn which raised Tier1 by 26bp, and sold its Comminsure business which will also raise it slightly in CY21H2. It sold its wealth management business earlier. Given earnings are expected to be robust and more writebacks from provisions made last year could be in the offing, what was an excess capital position of A$10-11.5bn at end-March could be on the order of A$12.0-13.5bn at end-June.
Given the change in CBA's profile from multi-strat bank to more of a deposit-taking institution, and the notion it could get the second part (A$500mm) of the $1bn capital penalty APRA applied in 2019 (following a review of its governance, culture and accountability) following remediation, there is likely to be more flexibility to lower the CET1 ratio.
The 12 May statement said "A strong surplus capital position creates flexibility for the board in its consideration of capital management initiatives. The timing and extent of any such initiatives is dependent upon a continued trend of domestic economic improvement, our ongoing assessment of portfolio credit quality, and regulatory guidance."

CBA should be expected to be able to raise its dividend AND buy back shares. I would expect a buyback of A$5.0-6.0bn or about half the distance between its end-June CET1 and the "Unquestionably Strong" level.
Given CBA's franking credit position, and its history of having conducted off-market buybacks in the past, one should expect CBA's buyback to be an off-market buyback. 

Today's NewsThis morning, Commonwealth Bank of Australia released its FY2021 Full Year Earnings (statement, presentation, capital adequacy, and there is, of course, a webcast, which goes along with the Annual Report, Corporate Governance Statement, and an update on the Prudential Inquiry Remedial Action Plan).  As expected, results were good. Statutory NPAT up 19.7%yoy, mostly due to lower loan impairments. Operating profit was up 1.7%. NIM was down slightly to 2.03% due to higher quality assets and CET1 capital came in at 13.1%.And as expected, the final dividend was hiked - A$2.00/share for Record Date 18 August - and a large off-market buyback was announced. A$6.0bn. Also with a Record Date of 18 August. This insight talks about how the flows, and the possibilities. It is a follow-on from Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows. One should expect Westpac Banking (WBC AU) to announce an off-market buyback when it reports on 19 August. There are two bits of more recent news which impact this. I had expected A$3.0bn or more. I might expect A$4.0bn but there is a wee cloud there.

CBA Announces a BIG Off-Market Buyback - Timing and Past Cases

Australia

Westpac Banking Corporation offers general and savings banking services.  The Company provides investment portfolio management and advice, insurance services,  consumer finance, and money market services among other services.  Westpac Banking Corp. serves individuals, businesses, and corporations worldwide.

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Westpac Banking Corp Sp Adr (WBK US)

Transurban Retail Shortfall Quick Note

Transurban has almost raised around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement. In this note, we will talk about the...

Sumeet Singh

SG Lottery Pre-IPO - First Look at Possibly Australia’s Largest IPO in 2021

Scientific Games Corp A (SGMS US) aims to raise around US$3.7bn (A$5bn) via selling a majority of its stake in SG Lottery (SGL) in an Australian IPO.

Sumeet Singh

Transurban Entitlement and Shortfall - Well Flagged Deal for a Well Known Asset

Transurban aims to raise around US$3.2bn (A$4.2bn) via a mix of entitlement offer and private placement to AustralianSuper to fund the acquisition...

Sumeet Singh

Marvelous Milton Merger Mapping Mabbled: Ratio Done, Now For The Hard Part

Marvelous Milton Merger Mapping Mabbled. The ratio is settled at 0.1863 shares of WHSP for every share of Milton. Next is the index trade... But...

Travis Lundy

CBA Announces a BIG Off-Market Buyback - Timing and Past Cases

Commonwealth Bank of Australia today announced a BIG off-market buyback of A$6bn - at the upper end of my expected range. This deal will have super...

Travis Lundy

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