Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [&amp; affiliates]) has <a href="http://www.asx.com.au/asxpdf/20170515/pdf/43j81hwvsxdhch.pdf" target="_blank">issued</a> a revised indicative proposal for 100% of <a href="https://www.smartkarma.com/entities/8996" target="_blank" data-smartkarma-citation="entities:8996:1">Fairfax Media Ltd (FXJ AU)</a> at A$1.20/share, less any dividends proposed or paid after 14 May 2017.The revised offer compares to the indicative <a href="http://www.asx.com.au/asxpdf/20170508/pdf/43j2zgsf5mgk1q.pdf" target="_blank">proposal</a> last week which involved paying cash for <a href="http://www.domain.com.au/group/" target="_blank">Domain</a> and FXJ's mastheads and leaving FXJ shareholders with regional newspapers, radio ops and other less-than-exciting businesses.  That clunky, inter-conditional proposal appears to have a faced a tepid reception from shareholders which TPG has swiftly (attempted) to remedy with a full cash offer.Below the fold, for subscribers, is a recap of the revised offer and comments on how it may be received.

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [&amp; affiliates]) has issued a revised indicative proposal for 100% of Fairfax Media Ltd (FXJ AU) at A$1.20/share, less any dividends proposed or paid after 14 May 2017.The revised offer compares to the indicative proposal last week which involved paying cash for Domain and FXJ's mastheads and leaving FXJ shareholders with regional newspapers, radio ops and other less-than-exciting businesses.  That clunky, inter-conditional proposal appears to have a faced a tepid reception from shareholders which TPG has swiftly (attempted) to remedy with a full cash offer.Below the fold, for subscribers, is a recap of the revised offer and comments on how it may be received.

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

At the beginning of 2005, I returned to my hometown of San Diego, CA, to take a job as an analyst at a hedge fund based there. Residents were in the thrall of an unprecedented housing boom, fueled by unsustainably easy credit terms and years of strong price increases. Worsening measures of affordability and slowing sales volume should have signaled an imminent end to the housing party, but as is often the case, those invested in extending the boom found many reasons why this particular property cycle was different from the ones that preceded it. Waiting in line at a bagel shop one Saturday morning shortly after my return to San Diego, I overheard a young woman say to her husband, "...but even in a downturn, home prices don't actually, like, go down, do they?"Indeed, it was more than a year before median price increases first slowed to single digits, then began to show modest Y/Y declines. However, by the middle of 2007 buyers had disappeared and median prices were falling by 10-20% Y/Y (or more), in many cases wiping out altogether the equity of homebuyers who'd purchased during the final boom years. We all know how the rest of this ugly story played out.Recent news of slowing price increases (even scattered price declines) in some markets in the Western US, combined with slowing sales volume and worsening affordability all remind me of my first months back in San Diego in 2005, when there were clear signs of a coming slowdown many participants chose to ignore. Although we certainly do not expect a repeat of the Global Financial Crisis, it does seem highly likely that many US housing markets are peaking. It follows that overall spending on housing related goods and services will slow in the medium-term, as well.Investors who share our negative view on US housing may wish to establish short positions in names exposed to US housing activity. In our view, window treatment maker <a href="https://www.smartkarma.com/entities/20646" target="_blank" data-smartkarma-citation="entities:20646:1">Nien Made Enterprise Co Ltd (8464 TT)</a> is vulnerable to a slowdown in US home improvement spending, and analysts' expectations for 2016 and 2017 revenue and EPS growth appear overly optimistic. Power tool manufacturer <a href="https://www.smartkarma.com/entities/4561" target="_blank" data-smartkarma-citation="entities:4561:1">Techtronic Industries Co. Ltd. (669 HK)</a>, which derives over 40% of revenues from a major US home improvement chain, is another name that would likely see slower sales as a result of slower housing activity in the US in 2017.

At the beginning of 2005, I returned to my hometown of San Diego, CA, to take a job as an analyst at a hedge fund based there. Residents were in the thrall of an unprecedented housing boom, fueled by unsustainably easy credit terms and years of strong price increases. Worsening measures of affordability and slowing sales volume should have signaled an imminent end to the housing party, but as is often the case, those invested in extending the boom found many reasons why this particular property cycle was different from the ones that preceded it. Waiting in line at a bagel shop one Saturday morning shortly after my return to San Diego, I overheard a young woman say to her husband, "...but even in a downturn, home prices don't actually, like, go down, do they?"Indeed, it was more than a year before median price increases first slowed to single digits, then began to show modest Y/Y declines. However, by the middle of 2007 buyers had disappeared and median prices were falling by 10-20% Y/Y (or more), in many cases wiping out altogether the equity of homebuyers who'd purchased during the final boom years. We all know how the rest of this ugly story played out.Recent news of slowing price increases (even scattered price declines) in some markets in the Western US, combined with slowing sales volume and worsening affordability all remind me of my first months back in San Diego in 2005, when there were clear signs of a coming slowdown many participants chose to ignore. Although we certainly do not expect a repeat of the Global Financial Crisis, it does seem highly likely that many US housing markets are peaking. It follows that overall spending on housing related goods and services will slow in the medium-term, as well.Investors who share our negative view on US housing may wish to establish short positions in names exposed to US housing activity. In our view, window treatment maker Nien Made Enterprise Co Ltd (8464 TT) is vulnerable to a slowdown in US home improvement spending, and analysts' expectations for 2016 and 2017 revenue and EPS growth appear overly optimistic. Power tool manufacturer Techtronic Industries Co. Ltd. (669 HK), which derives over 40% of revenues from a major US home improvement chain, is another name that would likely see slower sales as a result of slower housing activity in the US in 2017.

It's Starting to Feel a Bit Like San Diego Circa 2005...Time to Short Asian Home Improvement Names?

United States

Zillow Group, Inc. provides e-commerce services. The Company provides information about homes, real estate listings, and mortgages through their website and mobile applications. Zillow serves homeowners, buyers, sellers, renters, and real estate professionals throughout the United States.

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Zillow Group Inc A (ZG US)

Fairfax – New Offer for New Media

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [& affiliates]) has issued a revised indicative proposal for...

David Blennerhassett

It's Starting to Feel a Bit Like San Diego Circa 2005...Time to Short Asian Home Improvement Names?

At the beginning of 2005, I returned to my hometown of San Diego, CA, to take a job as an analyst at a hedge fund based there. Residents were in...

Daniel Hellberg

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