Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>As discussed 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> exact;y three months ago, and <a href="https://www.smartkarma.com/insights/cba-announces-a-big-off-market-buyback-timing-and-past-cases" target="_blank" data-smartkarma-citation="insights:55903" rel="noopener">CBA Announces a BIG Off-Market Buyback - Timing and Past Cases</a>, I expected <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 a A$3.0bn off-market buyback as early as late August but probably in Q3 based on substantial outperformance vs expectations in the covid downturn, and excess capital and franking credits to return. In late August when they reported, Westpac said they had a common equity tier one ratio of 12% and would look to announce shareholder return measures when they reported annual results in November. </p><p>Today the bank announced full-year results (<a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f0snp1dwwjm.pdf" target="_blank" rel="noopener">announcement</a>, <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f0vnhjsjxrq.pdf" target="_blank" rel="noopener">slide deck</a>) and <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f15khpzd1kc.pdf" target="_blank" rel="noopener">announced</a> (<a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f13lszy0r13.pdf" target="_blank" rel="noopener">official notification</a>, <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f17j0x3j4cn.pdf" target="_blank" rel="noopener">flyer</a>) an Off-Market Buyback of A$3.5bn (and shareholder return of A$5.7bn including dividends) based on a CET ratio of 12.3%, which is well above the APRA's 10.5% level of "unquestionably strong." However, earnings were below expected as NIMs fell 9bp from 2.07% to 1.98% (two-thirds of which was due to competition and one-third due to different mortgage mix) and H2 costs were up as the bank fast-tracked investment to process mortgages faster and with lower cost going forward.  The bank still has higher costs than it wants and though it has shown a roadmap to getting there, it means spending money to do so.</p><p>The buyback is also probably a little smaller than many had expected. Expectations had increased as CBA had come out larger than the Street expected.</p><p>Shareholders eligible to participate are those who hold as of 8 November. The buyback will commence on 17 November and will go through 17 December. There is a website for this at <a href="http://www.westpac.com.au/buyback" target="_blank" rel="noopener">www.westpac.com.au/buyback</a>. The price will be at an 8-14% discount (at 1% intervals) to the reference Market Price which is calculated as 5-day VWAP in the last five days of the Offer Period, final day inclusive. </p><p>This will create a fair bit of interest, and a fair bit of participation. Some holders - most notably foreign holders - will not see the interest and they will simply be able to play the timing, or the impact of EPS accretion, and given the decent ongoing yield and the fact this remains a "restructuring play", there should be interest going forward.</p>

As discussed in Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows exact;y three months ago, and CBA Announces a BIG Off-Market Buyback - Timing and Past Cases, I expected Westpac Banking (WBC AU) to announce a A$3.0bn off-market buyback as early as late August but probably in Q3 based on substantial outperformance vs expectations in the covid downturn, and excess capital and franking credits to return. In late August when they reported, Westpac said they had a common equity tier one ratio of 12% and would look to announce shareholder return measures when they reported annual results in November. Today the bank announced full-year results (announcement, slide deck) and announced (official notification, flyer) an Off-Market Buyback of A$3.5bn (and shareholder return of A$5.7bn including dividends) based on a CET ratio of 12.3%, which is well above the APRA's 10.5% level of "unquestionably strong." However, earnings were below expected as NIMs fell 9bp from 2.07% to 1.98% (two-thirds of which was due to competition and one-third due to different mortgage mix) and H2 costs were up as the bank fast-tracked investment to process mortgages faster and with lower cost going forward.  The bank still has higher costs than it wants and though it has shown a roadmap to getting there, it means spending money to do so.The buyback is also probably a little smaller than many had expected. Expectations had increased as CBA had come out larger than the Street expected.Shareholders eligible to participate are those who hold as of 8 November. The buyback will commence on 17 November and will go through 17 December. There is a website for this at www.westpac.com.au/buyback. The price will be at an 8-14% discount (at 1% intervals) to the reference Market Price which is calculated as 5-day VWAP in the last five days of the Offer Period, final day inclusive. This will create a fair bit of interest, and a fair bit of participation. Some holders - most notably foreign holders - will not see the interest and they will simply be able to play the timing, or the impact of EPS accretion, and given the decent ongoing yield and the fact this remains a "restructuring play", there should be interest going forward.

Westpac (WBC AU) Announces a BIG Off-Market Buyback

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

APM Human Services / Equity Capital Markets

<p>APM, an international human services provider, aims to raise around US$730m via a mix of selling primary and secondary shares in its Australian IPO. APM runs 800 sites spanning 10 countries with its largest market being Australia. </p><p>In FY21, APM supported over one million individuals which included 600,000 jobseekers; 180,000 people with disabilities; 100,000 people with mental health needs; 50,000 offenders and ex-offenders; and 30,000 veterans. APM’s main services include: Employment services, Health and Wellbeing, Communities and Assessment and Disability and Aged care support services. </p><p>Its revenue grew by 49% YoY in FY20 and was up another 28% in FY21 and is expected to grow by 31% in FY22. Its EBITDA and NPATA growth have been even stronger with EBITDA growing at 50%+ each year while NPATA has more than doubled in each of the past two years. Going forward, APM expects its revenue to grow by 31% YoY in FY22, with services margin growing by 27.7% YoY, EBITDA by 26% and NPATA by 20.7% YoY.</p><p>However, most of the past growth has been driven by M&amp;A and the company hasn’t been very forthcoming with data disclosures. Moreover, both of its largest contracts are due for an overhaul in 2022-23 which could impact its earnings.</p>

APM, an international human services provider, aims to raise around US$730m via a mix of selling primary and secondary shares in its Australian IPO. APM runs 800 sites spanning 10 countries with its largest market being Australia. In FY21, APM supported over one million individuals which included 600,000 jobseekers; 180,000 people with disabilities; 100,000 people with mental health needs; 50,000 offenders and ex-offenders; and 30,000 veterans. APM’s main services include: Employment services, Health and Wellbeing, Communities and Assessment and Disability and Aged care support services. Its revenue grew by 49% YoY in FY20 and was up another 28% in FY21 and is expected to grow by 31% in FY22. Its EBITDA and NPATA growth have been even stronger with EBITDA growing at 50%+ each year while NPATA has more than doubled in each of the past two years. Going forward, APM expects its revenue to grow by 31% YoY in FY22, with services margin growing by 27.7% YoY, EBITDA by 26% and NPATA by 20.7% YoY.However, most of the past growth has been driven by M&amp;A and the company hasn’t been very forthcoming with data disclosures. Moreover, both of its largest contracts are due for an overhaul in 2022-23 which could impact its earnings.

APM Human Services IPO - Strong past Growth but Has Ample Unhappy Employees and Clients

<p><a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a> aims to raise around US$1bn (A$1.3bn) via a renounceable entitlement offer to partly fund its acquisition of <a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a> for a total enterprise value of around A$5bn.</p><p>Past deals undertaken by Aristocrat have generally done well and the stock has a good track record. In this note, we will talk about the deal dynamics and run the deal through our ECM framework.</p>

Aristocrat Leisure (ALL AU) aims to raise around US$1bn (A$1.3bn) via a renounceable entitlement offer to partly fund its acquisition of Playtech Plc (PTEC LN) for a total enterprise value of around A$5bn.Past deals undertaken by Aristocrat have generally done well and the stock has a good track record. In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Aristocrat Leisure's Playtech Acquisition, Entitlement and Shortfall

<p>Vulcan Steel Limited (Vulcan), a pure-play value-added steel distributor and processor, aims to raise around US$273m (A$371m) in its Australia and NZ IPO.</p><p>Vulcan operates as a link between steel producers and bulk traders, and end-users. It has a network of 29 operating sites, 16 in Australia and 13 in New Zealand, through which it services over 7,000 customers, as of Jun 21. </p><p>Vulcan distributes steel products, including carbon steel, stainless steel and engineering steel to a diversified customer base including customers in engineering, manufacturing, fabricating, transport, mining and other segments. It also provides value-added processing services for steel coils, steel plates, stainless steel and engineering steel.</p><p>The company has put in a steady performance, especially in FY21 with margins hitting recent highs, and expects it to continue in FY22. However, its suppliers, the steel manufacturers, are trading at much cheaper valuation and analysts are building in a decline in their earnings for FY23 as they expect earnings to decline along with steel prices.</p>

Vulcan Steel Limited (Vulcan), a pure-play value-added steel distributor and processor, aims to raise around US$273m (A$371m) in its Australia and NZ IPO.Vulcan operates as a link between steel producers and bulk traders, and end-users. It has a network of 29 operating sites, 16 in Australia and 13 in New Zealand, through which it services over 7,000 customers, as of Jun 21. Vulcan distributes steel products, including carbon steel, stainless steel and engineering steel to a diversified customer base including customers in engineering, manufacturing, fabricating, transport, mining and other segments. It also provides value-added processing services for steel coils, steel plates, stainless steel and engineering steel.The company has put in a steady performance, especially in FY21 with margins hitting recent highs, and expects it to continue in FY22. However, its suppliers, the steel manufacturers, are trading at much cheaper valuation and analysts are building in a decline in their earnings for FY23 as they expect earnings to decline along with steel prices.

Vulcan Steel Limited IPO - Past Performance Looks Fine but Margins Might Be at Cyclical Highs

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



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 (WBC AU)

Westpac (WBC AU) Announces a BIG Off-Market Buyback

Westpac had OK not great earnings and announced a large off-market buyback to return capital and franking credits. Both earnings and buyback seem...

Travis Lundy

APM Human Services IPO - Strong past Growth but Has Ample Unhappy Employees and Clients

APM, an international human services provider, aims to raise around US$730m in its Australian IPO. APM runs 800 sites spanning 10 countries with...

Sumeet Singh

Aristocrat Leisure's Playtech Acquisition, Entitlement and Shortfall

Aristocrat Leisure (ALL AU) aims to raise around US$1bn via a renounceable entitlement offer to partly fund its acquisition of Playtech Plc (PTEC...

Sumeet Singh

Vulcan Steel Limited IPO - Past Performance Looks Fine but Margins Might Be at Cyclical Highs

Vulcan Steel Limited, a pure-play value-added steel distributor and processor, aims to raise around US$273m (A$371m) in its Australia and NZ IPO.

Sumeet Singh

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

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