In this briefing:
- Eagle Hospitality Trust IPO Trading Update – Even Though the Yield Looks Enticing Concerns Remain
- WHO Officially Decides Gaming Addiction Disorder as A “Disease” – Impact on the Nexon Sale?
- May Departs Unlamented: The Trouble Starts Now, with Real Brexiteers Likely in Charge
- UK: Consumers Keep Outspending Peers
- China Housing: Highlights From the ‘Baywatch’ Report On The Greater Bay Area (GBA)
1. Eagle Hospitality Trust IPO Trading Update – Even Though the Yield Looks Enticing Concerns Remain
Eagle Hospitality Trust (EHT SP) (EHT) raised around US$565m via its IPO on SGX. The initial portfolio will comprise of 18 hotels in the US with an overall valuation of US$1.27bn.
I covered the company’s background and other fundamental aspects in my earlier insights:
- Eagle Hospitality Trust IPO – Lacks Financial History. Largest Asset Needs US$235m+ Worth of Repairs
- Eagle Hospitality Trust IPO – Lower Flow Through to Distribution Income Vs ARA US Hospitality
- Eagle Hospitality Trust IPO Quick Take – Revised Terms Do Little to Address Fundamental Concerns
In this insight, I will re-visit some of the deal dynamics and provide a table with implied valuations at different share prices.
The World Health Organization (WHO) finally made its long-awaited decision on officially classifying game addiction disorder as a disease on May 25th. In June 2018, the WHO already included gaming disorder on the “11th revision of its international classification of diseases.” The WHO has been reviewing this issue for nearly 11 months and it finally made its decision on classifying it as an official disease.
Will this issue become a “deal breaker” for the Nexon sale? No, we do not believe that WHO finally deciding that gaming disorder is a disease will serve as a deal breaker. Nonetheless, we believe that it will have a negative impact on the game industry as a whole and will be an important factor that could bring down the potential purchase price.
Three Key Issues of WHO’s decision to Classify Gaming Addiction as Disease to the Nexon Sale:
- How much has the market already taken this into account?
- Gaming taxes?
- Greater negative perception of gaming
Theresa May’s prime ministership has come to an ignominious end, with her last throw of the dice — a revised version of her Withdrawal Agreement that she wanted to present to the Commons with many elements favoured by Labour — drawing a complete blank. Her revised draft had included the possibility of a Second Referendum (a no-no to Brexiteers) but mainly entailed elements of a permanent Customs Union. The hedged plan was quickly rejected by almost all those to whom it was aimed at appealing. Apart from ceremonial roles, May’s prime ministership is over: she will resign as Conservative Party leader on 7th June (a fortnight hence), following which the party will choose a new leader through a potentially lengthy process.
Boris Johnson is the favourite to become the UK’s next Prime Minister, with other Brexiteers (Dominic Raab and Michael Gove) seen as his most credible rivals. With the time-table requiring the negotiations with the EU to be completed well before the next Leave date of 31st October 2019, the probability of a No-Deal Brexit is high. The main problem arising from that will be the need for a new border between Northern Ireland and the Republic — something that is very unpopular in Northern Ireland, and will likely trigger demands for a referendum on Irish Re-unification (given that Northern Ireland voted to Remain in the EU, by a 56-44 margin). Scotland (another Remain region) too is likely to trigger moves to leave the UK if it is leaving the EU without a deal.
This is extremely negative news for Sterling and UK equities. The only slight hope for Sterling (GBP) is that no front-runner has won the Tory party leadership in the past 30 years. The downside is that, even if Boris fails again, most of the other alternatives are Brexiteers too. Remainers in the Conservative Party are too singed by Theresa May’s experience over the past 3 years to want to take up the poisoned chalice she is bequeathing. But amid the extreme uncertainty — and high probability of a No-Deal Brexit, with all the chaos that will engender — the GBP is a clear Sell.
- UK retail sales remained elevated in Apr-19 after surging in recent months. Annual growth was several tenths above expectations again. Payback towards the brisk underlying trend is still likely, though, not least because real wages have stalled.
- British consumers have matched their bullish expenditures abroad while visitors to the UK have maintained sterling spending levels, despite devaluation. Brexit uncertainty has not stopped UK households from outspending their global peers.
Following on from our original note on the Guangdong – Hong Kong – Macau Greater Bay Area (GBA) from the day of the blueprint announcement on February 18, we are presenting the highlights from our inaugural ‘Baywatch’ report focused on the housing markets on the mainland of the GBA. For the essentials on the GBA, see Bondcritic’s China’s Greater Bay Area: The Essential