Australia

• Genex Power Ltd (GNX AU) has entered a transaction implementation deed with Electric Power Development C (9513 JP) for a scheme (A$0.275) and an off-market takeover offer (A$0.270). 
• Skip could vote against the scheme due to the low 10% premium to its 2022 offer and Genex’s operational capacity rising by 2.7x by the end of 2024.
• The likely scenario is that J-POWER succeeds with its takeover offer. At the last close, the gross spread of the scheme and takeover offer was 3.8% and 1.9%, respectively.   

• The Ansarada Group Ltd (AND AU) IE considers Datasite’s A$2.50 scheme offer fair and reasonable. However, the inter-conditional carve-out transaction is NOT fair but reasonable. 
• ACCC clearance (findings on 6 June) is a prerequisite for FIRB approval (scheme condition). As Datasite has a limited Australian presence, ACCC approval should be forthcoming. 
• The offer is attractive, with no vocal shareholder opposition. At the last close and for the 1 July payment, the gross/annualised spread was 2.5%/12.2%.

• On the 4 March, Genex Power (GNX AU) announced an A$0.275/share NBIO from Electric Power (9513 JP) (J-Power), by way of a Scheme, in tandem with an off-market A$0.27/share Offer.
• Due diligence was afforded. Exclusivity was extended twice, before a firm offer was inked at the same terms on the 12th April.  The Scheme meeting is expected mid-July; implementation late-July.
• And Scott Farquhar’s Skip Enterprises, which holds 19.9% in Genex, and who had previously pitched a A$0.25/share NBIO in 2022? No word. And no irrevocable. 

EML Payments has entered into an agreement to settle all the outstanding deferred consideration payments relating to the acquisition of Prepaid Financial Services Group (PFS) for £15.0m/A$28.8m, which represents a £7.9m/A$15.2m discount to the originally agreed amount. This agreement concludes all outstanding actual and potential liabilities relating to the PFS acquisition in 2020. Combined with the agreed sale of Sentenial for A$54m, this substantially strengthens EML’s balance sheet and simplifies the group’s structure.

• After Boral (BLD AU) rejected Seven Group (SVW AU)‘s cash/scrip Offer, Seven slammed the Independent Expert’s report, calling the Target Statement “unbalanced, selective and risks fundamentally misleading Boral minority shareholders“.
• Seven has now waived certain tendering thresholds, increasing the cash terms to A$1.70/share from A$1.50/share. Boral will also pay a fully-franked dividend of A$0.26/share, providing A$0.11/share of franking credits. 
• The IE now considers the Offer to be reasonable. Boral’s board recommends shareholders to accept. This is done.

• With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
• The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
• There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

• Investics Research will initiate coverage of the materials sector in April 2024, starting with iron ore and then gold, coal, and steel in subsequent months (in that order).
• The areas of coverage on asset classes will encompass the underlying commodity and the associated equities. 
• Areas of differentiation would include in-depth coverage of all equities (small/mid and large cap) and actionable tactical ideas on the commodity.

• Azure Minerals (AZS AU) shareholders have overwhelmingly approved the dual-track bid from Sociedad Quimica y Minera de Chile (SQM US) and Hancock. The scheme offer is A$3.70 per share.
• The shares fell 7%, seemingly due to concerns about FIRB approval sparked by FIRB’s request for an extension on 3 April and today’s AFR article on China’s Australian lithium holdings. 
• FIRB approval should be forthcoming due to Tianqi Lithium (9696 HK) small indirect interest in Andover, Lithium Power International (LPI AU) precedent, and SQM and Tianqi’s strained relationship. 

• Ansell Ltd (ANN AU) is looking to raise US$262m in its primary follow-on to partially fund its acquisition of KCPPE.
• Despite the firm having been on an acquisition spree, it remains uncertain to us if the market has been factoring in such a large one. 
• The deal would be a large one to digest, representing 52.5 days of the stock’s three month ADV.

• Interview discusses the offtake agreement and opportunity to expand beyond the current arrangement, the $20m capital raised and outlook for future funding needs, update on strategic equity/debt in the US and milestones to expect over the next six months.

• The Permanent Production Facility (PPF), with a capacity of 3,000 bbl/d of liquids, has been commissioned and the Anshof-3 well has recommenced production at a rate of 134 bbl/d with no water.
• The operation has been undertaken in line with expectations and within budget.
• The oil production rate at Anshof-3 is 16% above the rate prior to shut-in.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors, developing a critical metals alloy powder manufacturing facility in Tennessee, USA. The company has secured a binding offtake agreement for the supply of C103 additive manufacturing powder, a key milestone in the development of its critical metals powder manufacturing presence in the US. Concurrently, Amaero has raised $20m by way of a placement to institutional investors, which the company anticipates will be the last equity capital raise in the Australian market.
• Going forward, Amaero says it intends to seek equity capital from strategic US investors.
• We continue to incorporate Amaero’s guidance that it expects to report an EBITDA loss of $14m in CY2024 and to break-even in CY2025.

• Fluence Corporation (ASX:FLC) provides water and wastewater treatment, and reuse solutions, for the municipal, commercial, and industrial markets worldwide.
• The company has a proven suite of products and expertise, both proprietary and otherwise, which it has used to deliver more than 850 projects globally.
• After some historical missteps, FLC has now been completely rejuvenated through the appointment of a highly regarded and proven US-based management team and reinvigorated board.

• On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“. 
• Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
• A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

• Discussion on progress of Beetaloo project and update on FID, discussion on outlook for gas supply in east coast Australia, comments on recent substantial shareholder notice from Sheffield Resources.

• Cochlear Ltd (COH AU) shares rallied 30%+ over the last six months. Shares are trading at NTM P/E of 51.3x, versus other Australia-listed medical devices companies’ P/E of 23–32x.
• The underlying business strength depicted by strong financial performance and guidance raise, and superior product offerings justify the pricey valuation.
• Cochlear lifted FY24 net profit guidance to A$385–400M (+26–31% YoY) from A$355–375M. The company expects FY24 cochlear implant volume growth of 10–15% YoY.

• The Discounts to NAV of covered holdcos mainly widened during March. Discounts to NAV: C.F.Alba, 47.3% (vs. 47.1%); GBL, 38.15 (vs. 37.7%); Heineken Holding, 16.7% (vs. 16.5%); 
• Industrivärden C, 1.4% (vs. 4.4%); Investor B, 6.1% (vs. 5.6%); Porsche Automobile Holding, 45.4% (vs. 43.7%). Rio DLC spread tightened to 24.9% (vs. 25.6%), and on 26 March reached 27.7%.
• What seems interesting: listed assets vs. Industrivärden C and the Rio DLC (long RIO LN/short RIO AU).

• Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
• Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
• The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.

• Perth-Based shipbuilder Austal Ltd (ASB AU) has confirmed a A$2.825/share non-binding indicative proposal, by way of a Scheme, from Hanwha Ocean (042660 KS). That’s a 28.4% premium to last close.
• Austal designs and builds defence vessels for the Australian and US navies. Austal believes Hanwha is unlikely to secure necessary approvals from the Australian and US governments. 
• Hanwha considers this view to be baseless, that it is a credible buyer, and its capabilities and investment are aligned with government objectives in Australia, the US and South Korea.

• It is not only NPLs that we must worry about for banks, but also loans that can turn NPL amidst a worsening economic backdrop
• CBA’s past due loans but not impaired are up 43% in past two years and this bucket of loans is now 2.6x NPLs compared with 1.9x NPLs recently
• Australia shows surging insolvencies across many sectors through 17 March 2024 and this can mean past due loans are more prone to migrating to turn NPL

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Hongqiao
• Nickel Industries

• On the 22 December 2023, drugs maker/packager group Probiotec Ltd (PBP AU) entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
• Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). An interim dividend of A$0.035/share was also added (now gone ex).
• The Scheme Booklet is now out. The Scheme Meeting will be held on the 29th May. The IE says terms are fair. I agree. Trading wide. Gross spread is 4.9%.

• The Probiotec Ltd (PBP AU) IE considers Pyridam Farma (PYFA IJ)’s A$3.00 offer fair and reasonable as it is within its A$2.79-A$3.28 per share valuation range.
• The scheme remains conditional on shareholders’ (Probiotec and Pyridam), FIRB, and OJK approvals. Probiotec can also pay a permitted dividend of up to A$0.04 per share.
• The gross spread of 4.9% (6.3% including dividends) reflects doubts about Pyridam’s funding credibility, as Pyridam’s market cap is 16% of Probiotec’s implied by the offer.

Recce Pharmaceuticals recently received A$11.18m as an R&D advance credit through an arrangement with Endpoints Capital for the R&D tax credit rebates that Recce expects to receive for FY23/FY24 and FY25. We believe this non-dilutive source of funding should extend Recce’s operating runway into FY25. Recce is also continuing to advance its intravenous (IV) R327 formulation in its ongoing Phase I/II study in healthy volunteers, having recently started the 20-minute (3,000mg) dosing cohort. We have made minor adjustments to our valuation and we now obtain a risk-adjusted net present value (rNPV) of A$644.4m (or A$3.16/share), versus A$652.6m previously.