Category

Utilities Sector

Brief Utlilities: Beijing Jingneng Clean Energy’s Potential Privatisation Bid and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Beijing Jingneng Clean Energy’s Potential Privatisation Bid
  2. Beijing Jingneng (579 HK): The Latest Clean Energy Privatisation?
  3. (Mostly) Asia M&A: June 2020 Roundup
  4. GULF: Upside from Investment in INTUCH
  5. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call

1. Beijing Jingneng Clean Energy’s Potential Privatisation Bid

Val

Beijing Jingneng Clean Energy (579 HK)/BJCE is the largest gas-fired heat and power supplier in Beijing and the leading wind power operator in China. On 6 July, it announced a possible privatisation bid from Beijing Energy Holding through a conditional voluntary cash general offer. Beijing Energy Holding and concert parties have a combined 71.40% stake (100% of domestic shares and 16.7% of H-shares). This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huadian Fuxin Energy Corp (816 HK),  Huaneng Renewables Corp H (958 HK) and CP Clean Energy and the potential privatisation of CGN New Energy Holdings (1811 HK).

The offer if forthcoming could lead to the privatisation and delisting of BJCE. As the potential privatisation is structured as a conditional voluntary cash general offer, the two key conditions will be the approval by at least 75% disinterested H-shareholders (<10% of all disinterested H-shareholders rejection) and a minimum tendering acceptance condition. While the details and terms of the possible offer remain under wraps, we estimate a privatisation price of around HK$2.56 per share. 

2. Beijing Jingneng (579 HK): The Latest Clean Energy Privatisation?

Image 13411387621593827706009

Beijing Jingneng Clean Energy (579 HK), an SOE utility, was suspended Friday morning pursuant to the Code on Takeovers and Mergers. Should an Offer be tabled, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in a little over a year – and sixth in which interested parties have been circling:

An Offer, should one unfold, would continue a clear directive to privatise clean energy plays. Now is the time to run a ruler over other peers, in addition to other SOE-controlled entities, potentially subject to a delisting proposal.

As always, more below the fold.

3. (Mostly) Asia M&A: June 2020 Roundup

Image 54895522921593479397888

For the month of June, 20 new deals were discussed on Smartkarma with an overall announced deal size of ~US$12bn.

Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow up discussions, or simply click on the insight link(s) below the name.

New Deals

Industry

Size (US$bn)

Type

Premium

Australia

Cardinal Resources (CDV AU) Mining0.2Off-market75%
Shandong’s Competing Offer For Cardinal
Cassini Resources (CZI AU) Mining0.1Scheme31%
Uniti/OptiComm: High-Fibre Diet
Cromwell Property (CMW AU) Property0.5Partial3.4%
Cromwell/ARA: A Festering Relationship
Onevue Holdings (OVH AU) Software0.1Scheme66.7%
OneVue-Iress: Australian Deal Trading Wide
Infigen Energy (IFN AU) Energy0.6Off-market45.8%

Infigen Energy Deal – Interesting Optionality

Infigen Gets Iberdrola As Overbidder.

Infigen’s White Knight on a Charger

OptiComm Ltd (OPC AU) Fibre network0.4Scheme3.6%
Uniti/OptiComm: High-Fibre Diet

 

China

Kingswood Enterprise  (600255 CH) Copper Alloy0.1Partial13%
Kingswood Enterprise (600255 CH): Partial Offer. Read more: https://skr.ma/NdWia

 

Hong Kong

Golden Meditech Holdings (801 HK) Hospitals0.1Scheme42%
Golden Meditech (801 HK): Prescription Renewal 
Huadian Fuxin Energy Corp (816 HK) Clean Energy1.0Merger by Absorption65.6%
Huadian Fuxin (816 HK) Becomes The Latest Clean Energy Takeover Play
Jinmao Hotel & Jinmao (China) (6139 HK) Hotels0.4Scheme30.4%
Jinmao Hotel (6139 HK): Priced To Check Out
Skyworth Group Limited (751 HK) Electronics0.2Partial32%
Skyworth (751 HK)’s Partial Buyback.

 

India

Adani Power Ltd (ADANI IN) Energy0.4DelistingN/A
Adani Power – The Next Delisting/Exit Offer?
Hexaware Technologies (HEXW IN) Info tech0.5DelistingN/A
Hexaware Delisting Proposal – This Could Go Higher
Hexaware:  Dips and Doodles in the Delisting Proposal Process
 
Japan
LIXIL VIVA (3564 JP) Houseware0.5Tender Offer0.5%
Lixil Viva (3564 JP) Takeout Tender Offer

Singapore

Accordia Golf Trust (AGT SP) Golf courses0.4Asset sale/divestment20%
Accordia Golf Trust Buyout… A Gimme But….
Perennial Real Estate Holdings (PREH SP) Real estate1.1Conditional Offer37.7%
Perennial Takeover – Disappointing Precedents Suggest “Fair” Even if Not Really

 

US

China Distance Education (ADR) (DL US) Online Education0.2Non-binding25.8%
China Distance Education (DL US): Takeover Proposal by the Founders

 

Europe

Masmovil Ibercom (MAS SM) Telco3.3Tender Offer20.1%
Masmovil: Target Shareholders Looking for a Bump
Mediawan (MDW FP) Media0.4Tender Offer42%
Mediawan Tender Offer: Trading Close to Terms
NetEnt AB (NETB SS) Casino2.0Public takeover43%
NetEnt-Evolution: Are People Betting on an Overbid?
Source: Smartkarma Insights
Because Indian delisting offers are what they are, Adani and Hexaware have no offer premium. They will be reverse book builds. Adani “price” of INR 33.82 is the floor price. It is a legal minimum which must be declared. It is not the price of the offer and nobody expects it there.

The average premium for the new deals announced in June was ~33% and the YTD average premium for all deals discussed on Smartkarma is 32%.  The average for all deals discussed on Smartkarma in 2019 (145 deals all-in) was 31.5%.


The charts below provide some colour of deals YTD discussed on Smartkarma.


Brief Summary of News in June of Arb Situations On Smartkarma’s Radar

(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation. Where a new insight was written on these names in June, I’ve included a link, in bold, to that insight in italics.)

Australia

Comments (with links to announcements & insights)

16 June: VRL has extended its exclusivity with BGH to the 30 June:

29 June: Apex had joined PEP/Elemental’s proposed Scheme.
Zenith Energy: PEP Cuts In OPTrust and ICG

China

Comments 

No June update

No June update

Hong Kong

Comments (with links to announcements & insights)

18 June: The Scheme Doc is now out, with the Court Meeting set for the 15 July, an indicative effective date of the 28 August, and payment on the 8 September. The IFA has opined the Offer is fair & reasonable.
Allied Props (56 HK)’s Scheme Document Despatched

29 June: An update to say there is no update.

15 June: This unconditional Offer was extended until the 29 June.
29 June: The Offer was extended until the 13 July.

16 June: In its monthly announcement in compliance with the Takeovers Code, Haier said the Offeror continues to explore a privatisation proposal.:

17 June. Offer closed.

18 June: Leyou has announced the “Potential Buyer” has commenced due diligence and “are in the course of discussing possible deal structures in respect of the New Possible Share Disposal“:

12 June. Deal approved. Shares have ceased trading

Done Deal As Li & Fung’s Offer Gets Up

16 June: The Scheme is approved. Timetable remains unchanged. Wharf and WREIC shares despatched on the 22 Jul, and first day of trading on the 23 Jul. Cheques to be despatched on the 3 August. 

Wheelock’s Scheme Approved

12 June: Bitauto announced it has entered into a definitive Merger Agreement with Tencent and Hammer at the previously-announced Offer price of US$16/ADS. 
Bitauto (BITA US): Done Deal. Keep An Eye on Yixin’s MGO

India

Comments (with links to announcements & insights)

19 June: According to SEBI’s weekly update on “PROCESSING STATUS OF DRAFT OFFER DOCUMENTS” (as on 12th June 2020), SEBI has sought clarification from the Merchant Banker (Nomura) regarding Carlyle’s Partial Tender Offer (PTO) for Sequent Scientific (SEQ IN). The PTO price is INR86.00. Sequent Scientific’s shares are currently trading at around INR88.25. 

4 June: Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW?
22 June: Vedanta Delisting Offer: Opportunities and Timing

25 June: Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing

25 June: Shareholders approved the Vedanta Ltd (VEDL IN) delisting offer process.
It was 85/15 for those who voted amongst institutional investors and 75/25 for in terms of non-insto public. 
26 June: VED has said that it is in the process of arranging financing for the delisting and expects the financing to be completed in the ‘coming weeks’, at which point Vedanta Ltd (VEDL IN) will apply to the stock exchanges for approval to proceed with the delisting process.

Indonesia

Comments (with links to insights)

No June update…. Waiting….. Waiting…. Waiting….

Japan

Comments (with links to announcements & insights)

Shareholder approval to delist on 26 June, Delisting 30 July
No June update
Tender Offer successful, early exit. Delisting 29 July
No June update
No June update
No June update
No June update

12 June: An Activist Appears in Nichii Gakkan (9792): Good!

19 June:Thinking Through Nichii Gakkan Tender Strategy

22 June: BCJ-44 (the Bain entity which will include the family) conducting the Tender Offer MBO on Nichii Gakkan Co (9792 JP)announced that it would extend the Tender Offer deadline from 22 June to 9 July. 

No June update
No June update
No June update

Malaysia

Comments (with links to announcements)

3 June: Tthe SC has declined TA Enterprise (the Offeror)’s application to withdraw:

New Zealand

Comments (with links to announcements and insights)

8 June: A shareholders meeting to vote on the litigation will be held on the 10 July.

Metlifecare: Preparing For A Protracted Legal Stoush

Philippines

Comments (with links)

24 June: KKR’s Tender Offer closed at noon. KKR acquired 11.9% Pro-ration is 100%.

Taiwan

Comments 

11 June: Taiwan Fair Trade Commission has asked for public submissions in their review of the Qisda deal for Alpha. Submission deadline is the 16th. 
23 June: Qisda Corp (2352 TT) announced that the deal for Alpha was extended to 23 July 2020 3:30pm. Still waiting on word whether the Tender Offer will be lowered by TWD 0.44 to account for the dividend which is expected but for which there is no record date.
No June update

Thailand

Comments (with links)

June 24: Bangkok Dusit Medical Services (BDMS TB) has scrapped its plan to take over Bumrungrad Hospital Pub Co (BH TB) and has no plans to do so in the future according to the Founder. 

4 June: Tender Offer doc out for  GOLD. The offer period is from 5 June to 8 August (45 biz days). Settlement is the 14 August.

Middle East

Comments (with links to announcements & insights)

4 June: DP World – Ticking Down To The Last Trade

17 June: And the trade is doneDP World (DPW DU) Scheme was sanctioned. 
Now you wait for your money. 

Europe

Comments (with links to announcements and insights)

No June update 

No June update

No June update 

4. GULF: Upside from Investment in INTUCH

P6

We revise up our target price to Bt45.4 (from previous Bt44.6)  incorporating the contribution of Bt0.9/sh from new investment in INTUCH. Our valuation is derived from sum-of-the-parts (SOTP) methodology, implying a 78x PE’21.

Story:

  • Positive view on GULF’s investment in INTUCH considering the short term value accretive investment strategy.
  • Upside of 0.9/sh from acquisition of 4.6% stake in INTUCH.

5. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call

Pb%20 %2028jun2020

China Gas Holdings (384 HK) reported a marginally behind result with a 11.7% increase in reported profit to HK$9.19bn, primarily due to the negative impact of the COVID-19 on gas sales growth. Full-year DPS of HK$0.50 represents a 27.6% payout ratio.

In terms of outlook, the company guided for good gas volume recovery in Apr-Jun, expansion of dollar margin, improvement in receivable recovery and LPG micro pipeline network as key initiative in FY20/21. However, our concerns are continued high gearing, downtrend on connection fees, possibly slow receivable recovery and uncertainties on LPG micro pipeline.

Despite undemanding valuations (12x PER and 3.3x P/B), we still prefer our top two picks as analysed in China Infrastructure Deep Dive: Gas Utilities H & A SharesENN Energy (2688 HK) and China Resources Gas (1193 HK)

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Brief Utlilities: Quiddity M&A: Australia Foreign Investment Reforms and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Quiddity M&A: Australia Foreign Investment Reforms
  2. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets

1. Quiddity M&A: Australia Foreign Investment Reforms

Image 54874371831591765670743

On the 5 June 2020, the Treasury of the Australian Government released a 34-page document titled Foreign investment reforms, outlining the “most comprehensive” reform to Australian foreign investment review framework since the Foreign Acquisition and Takeovers Act (FATA) was introduced in 1975.

The new powers afforded the government – a draft legislation for consultation will be released next month –  will primarily address:

  • A new national security test that will require foreign investors (government or private), to inform the Foreign Investment Review Board (FIRB) if they are preparing to acquire a direct interest in a “sensitive national security business.
  • Streamlining the approval processes for certain privately controlled institutional investment funds that hold purely passive foreign government funds, alongside private capital in non-sensitive sectors.
  • Stronger penalties and enforcement powers to ensure greater compliance.

This new draft legislation makes an important distinction between national security sensitive investments and others, and also makes a clear delineation between foreign government investment (FGI) which is passive and which is active.

It also may alleviate the burden on private equity firms as a result, but this proposed reform is clearly a framework for greater scrutiny on FGI and its strategic implications.

Further comments below the fold …

For more on M&A in Australia, please see the Quiddity Australia M&A Guide 2019 which is part of a series including… 2019 insights on JapanTaiwanIndia, Singapore, Hong Kong, Indonesia, Thailand, Korea, and the Philippines designed to be used as references. Updated versions will be made available from time to time, and can be found by searching for “Quiddity M&A Guide” (or clicking that link).

2. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets

Image 54531659541591661382475

Infratil Ltd (IFT NZ) is looking to raise US$197m (A$300m) in its fully underwritten institutional placement to strengthen its balance sheet.

In this note, we will look at the placement details, impact of the equity raise, and pipeline assets. We will also run the deal through our framework. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets

1. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets

Image 54531659541591661382475

Infratil Ltd (IFT NZ) is looking to raise US$197m (A$300m) in its fully underwritten institutional placement to strengthen its balance sheet.

In this note, we will look at the placement details, impact of the equity raise, and pipeline assets. We will also run the deal through our framework. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: Beijing Jingneng (579 HK): The Latest Clean Energy Privatisation? and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Beijing Jingneng (579 HK): The Latest Clean Energy Privatisation?
  2. (Mostly) Asia M&A: June 2020 Roundup
  3. GULF: Upside from Investment in INTUCH
  4. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call
  5. ACE: Great Growth Opportunities, but the Stock Is Overpriced

1. Beijing Jingneng (579 HK): The Latest Clean Energy Privatisation?

Image 35011733021593918082118

Beijing Jingneng Clean Energy (579 HK), an SOE utility, was suspended Friday morning pursuant to the Code on Takeovers and Mergers. Should an Offer be tabled, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in a little over a year – and sixth in which interested parties have been circling:

An Offer, should one unfold, would continue a clear directive to privatise clean energy plays. Now is the time to run a ruler over other peers, in addition to other SOE-controlled entities, potentially subject to a delisting proposal.

As always, more below the fold.

2. (Mostly) Asia M&A: June 2020 Roundup

Image 54895522921593479397888

For the month of June, 20 new deals were discussed on Smartkarma with an overall announced deal size of ~US$12bn.

Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow up discussions, or simply click on the insight link(s) below the name.

New Deals

Industry

Size (US$bn)

Type

Premium

Australia

Cardinal Resources (CDV AU) Mining0.2Off-market75%
Shandong’s Competing Offer For Cardinal
Cassini Resources (CZI AU) Mining0.1Scheme31%
Uniti/OptiComm: High-Fibre Diet
Cromwell Property (CMW AU) Property0.5Partial3.4%
Cromwell/ARA: A Festering Relationship
Onevue Holdings (OVH AU) Software0.1Scheme66.7%
OneVue-Iress: Australian Deal Trading Wide
Infigen Energy (IFN AU) Energy0.6Off-market45.8%

Infigen Energy Deal – Interesting Optionality

Infigen Gets Iberdrola As Overbidder.

Infigen’s White Knight on a Charger

OptiComm Ltd (OPC AU) Fibre network0.4Scheme3.6%
Uniti/OptiComm: High-Fibre Diet

 

China

Kingswood Enterprise  (600255 CH) Copper Alloy0.1Partial13%
Kingswood Enterprise (600255 CH): Partial Offer. Read more: https://skr.ma/NdWia

 

Hong Kong

Golden Meditech Holdings (801 HK) Hospitals0.1Scheme42%
Golden Meditech (801 HK): Prescription Renewal 
Huadian Fuxin Energy Corp (816 HK) Clean Energy1.0Merger by Absorption65.6%
Huadian Fuxin (816 HK) Becomes The Latest Clean Energy Takeover Play
Jinmao Hotel & Jinmao (China) (6139 HK) Hotels0.4Scheme30.4%
Jinmao Hotel (6139 HK): Priced To Check Out
Skyworth Group Limited (751 HK) Electronics0.2Partial32%
Skyworth (751 HK)’s Partial Buyback.

 

India

Adani Power Ltd (ADANI IN) Energy0.4DelistingN/A
Adani Power – The Next Delisting/Exit Offer?
Hexaware Technologies (HEXW IN) Info tech0.5DelistingN/A
Hexaware Delisting Proposal – This Could Go Higher
Hexaware:  Dips and Doodles in the Delisting Proposal Process
 
Japan
LIXIL VIVA (3564 JP) Houseware0.5Tender Offer0.5%
Lixil Viva (3564 JP) Takeout Tender Offer

Singapore

Accordia Golf Trust (AGT SP) Golf courses0.4Asset sale/divestment20%
Accordia Golf Trust Buyout… A Gimme But….
Perennial Real Estate Holdings (PREH SP) Real estate1.1Conditional Offer37.7%
Perennial Takeover – Disappointing Precedents Suggest “Fair” Even if Not Really

 

US

China Distance Education (ADR) (DL US) Online Education0.2Non-binding25.8%
China Distance Education (DL US): Takeover Proposal by the Founders

 

Europe

Masmovil Ibercom (MAS SM) Telco3.3Tender Offer20.1%
Masmovil: Target Shareholders Looking for a Bump
Mediawan (MDW FP) Media0.4Tender Offer42%
Mediawan Tender Offer: Trading Close to Terms
NetEnt AB (NETB SS) Casino2.0Public takeover43%
NetEnt-Evolution: Are People Betting on an Overbid?
Source: Smartkarma Insights
Because Indian delisting offers are what they are, Adani and Hexaware have no offer premium. They will be reverse book builds. Adani “price” of INR 33.82 is the floor price. It is a legal minimum which must be declared. It is not the price of the offer and nobody expects it there.

The average premium for the new deals announced in June was ~33% and the YTD average premium for all deals discussed on Smartkarma is 32%.  The average for all deals discussed on Smartkarma in 2019 (145 deals all-in) was 31.5%.


The charts below provide some colour of deals YTD discussed on Smartkarma.


Brief Summary of News in June of Arb Situations On Smartkarma’s Radar

(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation. Where a new insight was written on these names in June, I’ve included a link, in bold, to that insight in italics.)

Australia

Comments (with links to announcements & insights)

16 June: VRL has extended its exclusivity with BGH to the 30 June:

29 June: Apex had joined PEP/Elemental’s proposed Scheme.
Zenith Energy: PEP Cuts In OPTrust and ICG

China

Comments 

No June update

No June update

Hong Kong

Comments (with links to announcements & insights)

18 June: The Scheme Doc is now out, with the Court Meeting set for the 15 July, an indicative effective date of the 28 August, and payment on the 8 September. The IFA has opined the Offer is fair & reasonable.
Allied Props (56 HK)’s Scheme Document Despatched

29 June: An update to say there is no update.

15 June: This unconditional Offer was extended until the 29 June.
29 June: The Offer was extended until the 13 July.

16 June: In its monthly announcement in compliance with the Takeovers Code, Haier said the Offeror continues to explore a privatisation proposal.:

17 June. Offer closed.

18 June: Leyou has announced the “Potential Buyer” has commenced due diligence and “are in the course of discussing possible deal structures in respect of the New Possible Share Disposal“:

12 June. Deal approved. Shares have ceased trading

Done Deal As Li & Fung’s Offer Gets Up

16 June: The Scheme is approved. Timetable remains unchanged. Wharf and WREIC shares despatched on the 22 Jul, and first day of trading on the 23 Jul. Cheques to be despatched on the 3 August. 

Wheelock’s Scheme Approved

12 June: Bitauto announced it has entered into a definitive Merger Agreement with Tencent and Hammer at the previously-announced Offer price of US$16/ADS. 
Bitauto (BITA US): Done Deal. Keep An Eye on Yixin’s MGO

India

Comments (with links to announcements & insights)

19 June: According to SEBI’s weekly update on “PROCESSING STATUS OF DRAFT OFFER DOCUMENTS” (as on 12th June 2020), SEBI has sought clarification from the Merchant Banker (Nomura) regarding Carlyle’s Partial Tender Offer (PTO) for Sequent Scientific (SEQ IN). The PTO price is INR86.00. Sequent Scientific’s shares are currently trading at around INR88.25. 

4 June: Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW?
22 June: Vedanta Delisting Offer: Opportunities and Timing

25 June: Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing

25 June: Shareholders approved the Vedanta Ltd (VEDL IN) delisting offer process.
It was 85/15 for those who voted amongst institutional investors and 75/25 for in terms of non-insto public. 
26 June: VED has said that it is in the process of arranging financing for the delisting and expects the financing to be completed in the ‘coming weeks’, at which point Vedanta Ltd (VEDL IN) will apply to the stock exchanges for approval to proceed with the delisting process.

Indonesia

Comments (with links to insights)

No June update…. Waiting….. Waiting…. Waiting….

Japan

Comments (with links to announcements & insights)

Shareholder approval to delist on 26 June, Delisting 30 July
No June update
Tender Offer successful, early exit. Delisting 29 July
No June update
No June update
No June update
No June update

12 June: An Activist Appears in Nichii Gakkan (9792): Good!

19 June:Thinking Through Nichii Gakkan Tender Strategy

22 June: BCJ-44 (the Bain entity which will include the family) conducting the Tender Offer MBO on Nichii Gakkan Co (9792 JP)announced that it would extend the Tender Offer deadline from 22 June to 9 July. 

No June update
No June update
No June update

Malaysia

Comments (with links to announcements)

3 June: Tthe SC has declined TA Enterprise (the Offeror)’s application to withdraw:

New Zealand

Comments (with links to announcements and insights)

8 June: A shareholders meeting to vote on the litigation will be held on the 10 July.

Metlifecare: Preparing For A Protracted Legal Stoush

Philippines

Comments (with links)

24 June: KKR’s Tender Offer closed at noon. KKR acquired 11.9% Pro-ration is 100%.

Taiwan

Comments 

11 June: Taiwan Fair Trade Commission has asked for public submissions in their review of the Qisda deal for Alpha. Submission deadline is the 16th. 
23 June: Qisda Corp (2352 TT) announced that the deal for Alpha was extended to 23 July 2020 3:30pm. Still waiting on word whether the Tender Offer will be lowered by TWD 0.44 to account for the dividend which is expected but for which there is no record date.
No June update

Thailand

Comments (with links)

June 24: Bangkok Dusit Medical Services (BDMS TB) has scrapped its plan to take over Bumrungrad Hospital Pub Co (BH TB) and has no plans to do so in the future according to the Founder. 

4 June: Tender Offer doc out for  GOLD. The offer period is from 5 June to 8 August (45 biz days). Settlement is the 14 August.

Middle East

Comments (with links to announcements & insights)

4 June: DP World – Ticking Down To The Last Trade

17 June: And the trade is doneDP World (DPW DU) Scheme was sanctioned. 
Now you wait for your money. 

Europe

Comments (with links to announcements and insights)

No June update 

No June update

No June update 

3. GULF: Upside from Investment in INTUCH

P6

We revise up our target price to Bt45.4 (from previous Bt44.6)  incorporating the contribution of Bt0.9/sh from new investment in INTUCH. Our valuation is derived from sum-of-the-parts (SOTP) methodology, implying a 78x PE’21.

Story:

  • Positive view on GULF’s investment in INTUCH considering the short term value accretive investment strategy.
  • Upside of 0.9/sh from acquisition of 4.6% stake in INTUCH.

4. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call

Pb%20 %2028jun2020

China Gas Holdings (384 HK) reported a marginally behind result with a 11.7% increase in reported profit to HK$9.19bn, primarily due to the negative impact of the COVID-19 on gas sales growth. Full-year DPS of HK$0.50 represents a 27.6% payout ratio.

In terms of outlook, the company guided for good gas volume recovery in Apr-Jun, expansion of dollar margin, improvement in receivable recovery and LPG micro pipeline network as key initiative in FY20/21. However, our concerns are continued high gearing, downtrend on connection fees, possibly slow receivable recovery and uncertainties on LPG micro pipeline.

Despite undemanding valuations (12x PER and 3.3x P/B), we still prefer our top two picks as analysed in China Infrastructure Deep Dive: Gas Utilities H & A SharesENN Energy (2688 HK) and China Resources Gas (1193 HK)

5. ACE: Great Growth Opportunities, but the Stock Is Overpriced

Slide6

We initiate coverage on ACE with a SELL recommendation based on a target price of Bt2.64, implying a downside of 36% from the current price. We derive the target price from a de-rating to a 25% premium to the sector PE ratio, meaning a 2020E 29.4x PE.

Investment thesis:

  • Power producer with high growth potential, but already priced in
  • Long-term contracts and supply control drive high profitability
  • Government driven demand can pose a risk

Risks: Adverse regulatory changes, reliance on a few customers, volatility in fuel prices, unexpected disruptions in production, delays in project execution, change in political leadership can sometimes impact companies.

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Brief Utlilities: Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets
  2. GULF: Fastest Growing Utility Player in Thailand

1. Infratil Placement – Better Balance Sheet Flexibility with Focus on Existing Assets

Image 54531659541591661382475

Infratil Ltd (IFT NZ) is looking to raise US$197m (A$300m) in its fully underwritten institutional placement to strengthen its balance sheet.

In this note, we will look at the placement details, impact of the equity raise, and pipeline assets. We will also run the deal through our framework. 

2. GULF: Fastest Growing Utility Player in Thailand

P1

We initiate coverage of GULF with a BUY rating, based on a 2021E target price of Bt44.6, derived from a sum-of-the-parts (SOTP) methodology. Our valuation implies 1.8x PEG for 2021E, lower than its World peers’ 2.1x PEG.

The story:.

  • Steady EPS growth at 20% CAGR in 2020-24E, outperforming sector peers
  • Upside from overseas power-generation business expansion
  • New S curve from gas & infrastructure business
  • Topline growth outlook justifies valuation

Risks: 

  • New project delays and cost overruns
  • Foreign exchange rate fluctuations 

Background: GULF is a holding company with a portfolio of electricity, steam, chilled water and other businesses. Currently, GULF engages in electricity generation and sales with various national regulatory bodies and industrial users, both domestically and internationally, with a total 2.7 GWe (5.9GW gross) in operation. GULF’s power projects are spread over the IPP (50%), SPP (46%) and renewable (4%) segments and are of various types/sizes. Ninety-six percent of GULF’s operating projects are in Thailand with the remainder in Vietnam. The company’s other business interests include infrastructure projects in Thailand and natural gas trading businesses both domestically and abroad.

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Brief Utlilities: Zenith Energy: PEP Cuts In OPTrust and ICG and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Zenith Energy: PEP Cuts In OPTrust and ICG
  2. SET50 Rebalance Preview: The Final Cut

1. Zenith Energy: PEP Cuts In OPTrust and ICG

Image 20161009421590976986786

Back on the 6 March, remote power generator Zenith Energy Ltd (ZEN AU) announced an Offer, by way of a Scheme, from Elemental Infrastructure BidCo, a Pacific Equity Partners (PEP) entity, at $1.01/share in cash, a 45.3% premium to last close.  The Offer had been unanimously recommended by Zenith’s board of directors, and valued Zenith’s equity at ~A$150mn (US$98mn) and an enterprise value of ~$250mn.

On the 7 April, Zenith announced the Board intended to pay a A$0.13/share fully franked dividend, as part of the A$1.01 Scheme consideration. The special dividend was expected to be paid with an anticipated record date of the 25 June. I had earlier speculated a fully franked dividend of A$0.09/share, based on June 2019 franking credits.

On the 6 April, an initial substantial shareholder announcement (15.45%) was made by Apex Opportunities, an entity controlled by Infrastructure Specialist Asset Management, a trustee of Diversified Infrastructure Trust/Infrastructure Capital Group (ICG) and OPSEU Pension Plant Trust Fund (OPTrust). This stake was bumped to 17.61% on the 22 April.

On the 6 May, PEP noted Apex’s holding, and that it would be challenging to implement the Scheme if Apex were to vote against the resolutions. So PEP reached out to Apex such that Apex’s consortium members could take an equity position in the Elemental/PEP group holding structure. If an agreement could be reached, a revised proposal would be tabled.

And so it was on the 29 May, Zenith announced Apex had joined PEP/Elemental’s proposed Scheme. There are no other material changes to the Scheme implementation deed announced on the 6 March.

This Offer looked good to go back in March. With the revised proposal largely preserving the Scheme consideration and attached conditions, this deal is geared to get up, with an indicative completion mid-August. 

As always, more below the fold.

2. SET50 Rebalance Preview: The Final Cut

Image

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in June and the changes will be effective from 1 July 2020. Passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

We expect TTW Pcl (TTW TB) and Banpu Power PCL (BPP TB) will be included in the SET50 index replacing Banpu Public (BANPU TB) and WHA Corp Pcl (WHA TB).

This Insight covers the SET50 index methodology, our expected changes and the impact, the recent stock performance, and suggested trades for this rebalance.

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Brief Utlilities: (Mostly) Asia M&A: June 2020 Roundup and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. (Mostly) Asia M&A: June 2020 Roundup
  2. GULF: Upside from Investment in INTUCH
  3. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call
  4. ACE: Great Growth Opportunities, but the Stock Is Overpriced
  5. China Yangtze Power (600900 CH): Pre-GDR Initial Thoughts

1. (Mostly) Asia M&A: June 2020 Roundup

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For the month of June, 20 new deals were discussed on Smartkarma with an overall announced deal size of ~US$12bn.

Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow up discussions, or simply click on the insight link(s) below the name.

New Deals

Industry

Size (US$bn)

Type

Premium

Australia

Cardinal Resources (CDV AU) Mining0.2Off-market75%
Shandong’s Competing Offer For Cardinal
Cassini Resources (CZI AU) Mining0.1Scheme31%
Uniti/OptiComm: High-Fibre Diet
Cromwell Property (CMW AU) Property0.5Partial3.4%
Cromwell/ARA: A Festering Relationship
Onevue Holdings (OVH AU) Software0.1Scheme66.7%
OneVue-Iress: Australian Deal Trading Wide
Infigen Energy (IFN AU) Energy0.6Off-market45.8%

Infigen Energy Deal – Interesting Optionality

Infigen Gets Iberdrola As Overbidder.

Infigen’s White Knight on a Charger

OptiComm Ltd (OPC AU) Fibre network0.4Scheme3.6%
Uniti/OptiComm: High-Fibre Diet

 

China

Kingswood Enterprise  (600255 CH) Copper Alloy0.1Partial13%
Kingswood Enterprise (600255 CH): Partial Offer. Read more: https://skr.ma/NdWia

 

Hong Kong

Golden Meditech Holdings (801 HK) Hospitals0.1Scheme42%
Golden Meditech (801 HK): Prescription Renewal 
Huadian Fuxin Energy Corp (816 HK) Clean Energy1.0Merger by Absorption65.6%
Huadian Fuxin (816 HK) Becomes The Latest Clean Energy Takeover Play
Jinmao Hotel & Jinmao (China) (6139 HK) Hotels0.4Scheme30.4%
Jinmao Hotel (6139 HK): Priced To Check Out
Skyworth Group Limited (751 HK) Electronics0.2Partial32%
Skyworth (751 HK)’s Partial Buyback.

 

India

Adani Power Ltd (ADANI IN) Energy0.4DelistingN/A
Adani Power – The Next Delisting/Exit Offer?
Hexaware Technologies (HEXW IN) Info tech0.5DelistingN/A
Hexaware Delisting Proposal – This Could Go Higher
Hexaware:  Dips and Doodles in the Delisting Proposal Process
 
Japan
LIXIL VIVA (3564 JP) Houseware0.5Tender Offer0.5%
Lixil Viva (3564 JP) Takeout Tender Offer

Singapore

Accordia Golf Trust (AGT SP) Golf courses0.4Asset sale/divestment20%
Accordia Golf Trust Buyout… A Gimme But….
Perennial Real Estate Holdings (PREH SP) Real estate1.1Conditional Offer37.7%
Perennial Takeover – Disappointing Precedents Suggest “Fair” Even if Not Really

 

US

China Distance Education (ADR) (DL US) Online Education0.2Non-binding25.8%
China Distance Education (DL US): Takeover Proposal by the Founders

 

Europe

Masmovil Ibercom (MAS SM) Telco3.3Tender Offer20.1%
Masmovil: Target Shareholders Looking for a Bump
Mediawan (MDW FP) Media0.4Tender Offer42%
Mediawan Tender Offer: Trading Close to Terms
NetEnt AB (NETB SS) Casino2.0Public takeover43%
NetEnt-Evolution: Are People Betting on an Overbid?
Source: Smartkarma Insights
Because Indian delisting offers are what they are, Adani and Hexaware have no offer premium. They will be reverse book builds. Adani “price” of INR 33.82 is the floor price. It is a legal minimum which must be declared. It is not the price of the offer and nobody expects it there.

The average premium for the new deals announced in June was ~33% and the YTD average premium for all deals discussed on Smartkarma is 32%.  The average for all deals discussed on Smartkarma in 2019 (145 deals all-in) was 31.5%.


The charts below provide some colour of deals YTD discussed on Smartkarma.


Brief Summary of News in June of Arb Situations On Smartkarma’s Radar

(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation. Where a new insight was written on these names in June, I’ve included a link, in bold, to that insight in italics.)

Australia

Comments (with links to announcements & insights)

16 June: VRL has extended its exclusivity with BGH to the 30 June:

29 June: Apex had joined PEP/Elemental’s proposed Scheme.
Zenith Energy: PEP Cuts In OPTrust and ICG

China

Comments 

No June update

No June update

Hong Kong

Comments (with links to announcements & insights)

18 June: The Scheme Doc is now out, with the Court Meeting set for the 15 July, an indicative effective date of the 28 August, and payment on the 8 September. The IFA has opined the Offer is fair & reasonable.
Allied Props (56 HK)’s Scheme Document Despatched

29 June: An update to say there is no update.

15 June: This unconditional Offer was extended until the 29 June.
29 June: The Offer was extended until the 13 July.

16 June: In its monthly announcement in compliance with the Takeovers Code, Haier said the Offeror continues to explore a privatisation proposal.:

17 June. Offer closed.

18 June: Leyou has announced the “Potential Buyer” has commenced due diligence and “are in the course of discussing possible deal structures in respect of the New Possible Share Disposal“:

12 June. Deal approved. Shares have ceased trading

Done Deal As Li & Fung’s Offer Gets Up

16 June: The Scheme is approved. Timetable remains unchanged. Wharf and WREIC shares despatched on the 22 Jul, and first day of trading on the 23 Jul. Cheques to be despatched on the 3 August. 

Wheelock’s Scheme Approved

12 June: Bitauto announced it has entered into a definitive Merger Agreement with Tencent and Hammer at the previously-announced Offer price of US$16/ADS. 
Bitauto (BITA US): Done Deal. Keep An Eye on Yixin’s MGO

India

Comments (with links to announcements & insights)

19 June: According to SEBI’s weekly update on “PROCESSING STATUS OF DRAFT OFFER DOCUMENTS” (as on 12th June 2020), SEBI has sought clarification from the Merchant Banker (Nomura) regarding Carlyle’s Partial Tender Offer (PTO) for Sequent Scientific (SEQ IN). The PTO price is INR86.00. Sequent Scientific’s shares are currently trading at around INR88.25. 

4 June: Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW?
22 June: Vedanta Delisting Offer: Opportunities and Timing

25 June: Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing

25 June: Shareholders approved the Vedanta Ltd (VEDL IN) delisting offer process.
It was 85/15 for those who voted amongst institutional investors and 75/25 for in terms of non-insto public. 
26 June: VED has said that it is in the process of arranging financing for the delisting and expects the financing to be completed in the ‘coming weeks’, at which point Vedanta Ltd (VEDL IN) will apply to the stock exchanges for approval to proceed with the delisting process.

Indonesia

Comments (with links to insights)

No June update…. Waiting….. Waiting…. Waiting….

Japan

Comments (with links to announcements & insights)

Shareholder approval to delist on 26 June, Delisting 30 July
No June update
Tender Offer successful, early exit. Delisting 29 July
No June update
No June update
No June update
No June update

12 June: An Activist Appears in Nichii Gakkan (9792): Good!

19 June:Thinking Through Nichii Gakkan Tender Strategy

22 June: BCJ-44 (the Bain entity which will include the family) conducting the Tender Offer MBO on Nichii Gakkan Co (9792 JP)announced that it would extend the Tender Offer deadline from 22 June to 9 July. 

No June update
No June update
No June update

Malaysia

Comments (with links to announcements)

3 June: Tthe SC has declined TA Enterprise (the Offeror)’s application to withdraw:

New Zealand

Comments (with links to announcements and insights)

8 June: A shareholders meeting to vote on the litigation will be held on the 10 July.

Metlifecare: Preparing For A Protracted Legal Stoush

Philippines

Comments (with links)

24 June: KKR’s Tender Offer closed at noon. KKR acquired 11.9% Pro-ration is 100%.

Taiwan

Comments 

11 June: Taiwan Fair Trade Commission has asked for public submissions in their review of the Qisda deal for Alpha. Submission deadline is the 16th. 
23 June: Qisda Corp (2352 TT) announced that the deal for Alpha was extended to 23 July 2020 3:30pm. Still waiting on word whether the Tender Offer will be lowered by TWD 0.44 to account for the dividend which is expected but for which there is no record date.
No June update

Thailand

Comments (with links)

June 24: Bangkok Dusit Medical Services (BDMS TB) has scrapped its plan to take over Bumrungrad Hospital Pub Co (BH TB) and has no plans to do so in the future according to the Founder. 

4 June: Tender Offer doc out for  GOLD. The offer period is from 5 June to 8 August (45 biz days). Settlement is the 14 August.

Middle East

Comments (with links to announcements & insights)

4 June: DP World – Ticking Down To The Last Trade

17 June: And the trade is doneDP World (DPW DU) Scheme was sanctioned. 
Now you wait for your money. 

Europe

Comments (with links to announcements and insights)

No June update 

No June update

No June update 

2. GULF: Upside from Investment in INTUCH

P6

We revise up our target price to Bt45.4 (from previous Bt44.6)  incorporating the contribution of Bt0.9/sh from new investment in INTUCH. Our valuation is derived from sum-of-the-parts (SOTP) methodology, implying a 78x PE’21.

Story:

  • Positive view on GULF’s investment in INTUCH considering the short term value accretive investment strategy.
  • Upside of 0.9/sh from acquisition of 4.6% stake in INTUCH.

3. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call

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China Gas Holdings (384 HK) reported a marginally behind result with a 11.7% increase in reported profit to HK$9.19bn, primarily due to the negative impact of the COVID-19 on gas sales growth. Full-year DPS of HK$0.50 represents a 27.6% payout ratio.

In terms of outlook, the company guided for good gas volume recovery in Apr-Jun, expansion of dollar margin, improvement in receivable recovery and LPG micro pipeline network as key initiative in FY20/21. However, our concerns are continued high gearing, downtrend on connection fees, possibly slow receivable recovery and uncertainties on LPG micro pipeline.

Despite undemanding valuations (12x PER and 3.3x P/B), we still prefer our top two picks as analysed in China Infrastructure Deep Dive: Gas Utilities H & A SharesENN Energy (2688 HK) and China Resources Gas (1193 HK)

4. ACE: Great Growth Opportunities, but the Stock Is Overpriced

Slide6

We initiate coverage on ACE with a SELL recommendation based on a target price of Bt2.64, implying a downside of 36% from the current price. We derive the target price from a de-rating to a 25% premium to the sector PE ratio, meaning a 2020E 29.4x PE.

Investment thesis:

  • Power producer with high growth potential, but already priced in
  • Long-term contracts and supply control drive high profitability
  • Government driven demand can pose a risk

Risks: Adverse regulatory changes, reliance on a few customers, volatility in fuel prices, unexpected disruptions in production, delays in project execution, change in political leadership can sometimes impact companies.

5. China Yangtze Power (600900 CH): Pre-GDR Initial Thoughts

Power

China Yangtze Power Co, Ltd. (600900 CH) (CYPC), the world’s largest hydropower company, will put forward its GDR issuance proposal for shareholder voting in an EGM on 30 Jun. We take a look on this proposal which may raise up to ~US$3.3bn based on the current share price. We believe the key merits for CYPC are: 1.) largest hydropower company globally with protected franchise; 2.) benefit from government’s clean energy initiatives; 3.) track record of stable earnings; and 4.) solid support from parent company.

Key risks, however, are: 1.) CYPC relies on one single type of generation mode; 2.) capex on acquisitions may further elevate gearing; 3.) slowdown in power demand; and 4.) overseas investment risks. The stock now trades on 17.9x FY20F PER, not excessive relative to the 5-year range of 13-27x, and upside will come from further asset injections from parent China Three Gorges Corporation (CTG).

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Brief Utlilities: Zenith Energy: PEP Cuts In OPTrust and ICG and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Zenith Energy: PEP Cuts In OPTrust and ICG
  2. SET50 Rebalance Preview: The Final Cut
  3. Adani Power Delisting – Going Off The Grid

1. Zenith Energy: PEP Cuts In OPTrust and ICG

Image 20161009421590976986786

Back on the 6 March, remote power generator Zenith Energy Ltd (ZEN AU) announced an Offer, by way of a Scheme, from Elemental Infrastructure BidCo, a Pacific Equity Partners (PEP) entity, at $1.01/share in cash, a 45.3% premium to last close.  The Offer had been unanimously recommended by Zenith’s board of directors, and valued Zenith’s equity at ~A$150mn (US$98mn) and an enterprise value of ~$250mn.

On the 7 April, Zenith announced the Board intended to pay a A$0.13/share fully franked dividend, as part of the A$1.01 Scheme consideration. The special dividend was expected to be paid with an anticipated record date of the 25 June. I had earlier speculated a fully franked dividend of A$0.09/share, based on June 2019 franking credits.

On the 6 April, an initial substantial shareholder announcement (15.45%) was made by Apex Opportunities, an entity controlled by Infrastructure Specialist Asset Management, a trustee of Diversified Infrastructure Trust/Infrastructure Capital Group (ICG) and OPSEU Pension Plant Trust Fund (OPTrust). This stake was bumped to 17.61% on the 22 April.

On the 6 May, PEP noted Apex’s holding, and that it would be challenging to implement the Scheme if Apex were to vote against the resolutions. So PEP reached out to Apex such that Apex’s consortium members could take an equity position in the Elemental/PEP group holding structure. If an agreement could be reached, a revised proposal would be tabled.

And so it was on the 29 May, Zenith announced Apex had joined PEP/Elemental’s proposed Scheme. There are no other material changes to the Scheme implementation deed announced on the 6 March.

This Offer looked good to go back in March. With the revised proposal largely preserving the Scheme consideration and attached conditions, this deal is geared to get up, with an indicative completion mid-August. 

As always, more below the fold.

2. SET50 Rebalance Preview: The Final Cut

Image

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in June and the changes will be effective from 1 July 2020. Passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

We expect TTW Pcl (TTW TB) and Banpu Power PCL (BPP TB) will be included in the SET50 index replacing Banpu Public (BANPU TB) and WHA Corp Pcl (WHA TB).

This Insight covers the SET50 index methodology, our expected changes and the impact, the recent stock performance, and suggested trades for this rebalance.

3. Adani Power Delisting – Going Off The Grid

Image

On 29 May, post India market close, Adani Power Ltd (ADANI IN) informed the Exchanges that Adani Properties Private Limited (a member of the Promoter Group) had expressed its intention to acquire all shares of Adani Power Ltd (ADANI IN) held by the public shareholders and, if successful, delist the company from the Stock Exchanges.

The Promoter Group holds 74.97% of the equity share capital of the company with the public shareholders holding the remaining 25.03%. However, the public shareholders may not really be ‘public’ after all. The same shareholder names appear in a lot of Adani group companies leading us to believe that there is more than meets the eye.

The floor price (VWAP over the last 60 trading days prior to the company announcement of the delisting) works out to INR 33.8078 and is at a premium to the stock price over the last month but at a big discount to longer term prices and VWAPs.

We feel that the Promoter Group has this almost sewn up and there will not be a massive premium to the current market price. Investors can buy stock up to INR 36-38 per share expecting to tender their shares around the INR 42-44 per share range.

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Brief Utlilities: SET50 Rebalance Preview: The Final Cut and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. SET50 Rebalance Preview: The Final Cut
  2. Adani Power Delisting – Going Off The Grid
  3. Adani Power – The Next Delisting/Exit Offer?

1. SET50 Rebalance Preview: The Final Cut

Image

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in June and the changes will be effective from 1 July 2020. Passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

We expect TTW Pcl (TTW TB) and Banpu Power PCL (BPP TB) will be included in the SET50 index replacing Banpu Public (BANPU TB) and WHA Corp Pcl (WHA TB).

This Insight covers the SET50 index methodology, our expected changes and the impact, the recent stock performance, and suggested trades for this rebalance.

2. Adani Power Delisting – Going Off The Grid

Image

On 29 May, post India market close, Adani Power Ltd (ADANI IN) informed the Exchanges that Adani Properties Private Limited (a member of the Promoter Group) had expressed its intention to acquire all shares of Adani Power Ltd (ADANI IN) held by the public shareholders and, if successful, delist the company from the Stock Exchanges.

The Promoter Group holds 74.97% of the equity share capital of the company with the public shareholders holding the remaining 25.03%. However, the public shareholders may not really be ‘public’ after all. The same shareholder names appear in a lot of Adani group companies leading us to believe that there is more than meets the eye.

The floor price (VWAP over the last 60 trading days prior to the company announcement of the delisting) works out to INR 33.8078 and is at a premium to the stock price over the last month but at a big discount to longer term prices and VWAPs.

We feel that the Promoter Group has this almost sewn up and there will not be a massive premium to the current market price. Investors can buy stock up to INR 36-38 per share expecting to tender their shares around the INR 42-44 per share range.

3. Adani Power – The Next Delisting/Exit Offer?

Screenshot%202020 05 30%20at%208.26.16%20pm

On Friday 29 May, late-ish in the afternoon, the Board of India’s largest private sector IPP, Adani Power Ltd (ADANI IN), released a statement that said the promoter group wanted to propose a Delisting Offer to the remaining 25.03% of the shareholder base not linked to the promoter group. 

The board meeting to consider the Delisting Proposal is on 3 June 2020.

This notice creates the reference date for the Floor Price, which I expect will be communicated shortly, but for which rough calculations are provided below. 

This is the first time that the Adani promoter group has sought to delist one of its many listed enterprises (which also include Adani Gas Ltd (ADGAS IN), Adani Transmission (ADANIT IN), Adani Ports & Special Economic Zone (ADSEZ IN), Adani Green Energy, and Adani Enterprises (ADE IN)).

This looks like a straightforward delisting offer situation of a widely-known stock. It may not be so straightforward. And that would have an effect on the likely Reverse Book Building process. 

As always, more below the fold.

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Brief Utlilities: GULF: Upside from Investment in INTUCH and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. GULF: Upside from Investment in INTUCH
  2. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call
  3. ACE: Great Growth Opportunities, but the Stock Is Overpriced
  4. China Yangtze Power (600900 CH): Pre-GDR Initial Thoughts
  5. Infigen’s White Knight on a Charger

1. GULF: Upside from Investment in INTUCH

P7

We revise up our target price to Bt45.4 (from previous Bt44.6)  incorporating the contribution of Bt0.9/sh from new investment in INTUCH. Our valuation is derived from sum-of-the-parts (SOTP) methodology, implying a 78x PE’21.

Story:

  • Positive view on GULF’s investment in INTUCH considering the short term value accretive investment strategy.
  • Upside of 0.9/sh from acquisition of 4.6% stake in INTUCH.

2. China Gas Holdings (384 HK): Key Takeaways from Post-Result Investor Call

Image 64146850441593339096546

China Gas Holdings (384 HK) reported a marginally behind result with a 11.7% increase in reported profit to HK$9.19bn, primarily due to the negative impact of the COVID-19 on gas sales growth. Full-year DPS of HK$0.50 represents a 27.6% payout ratio.

In terms of outlook, the company guided for good gas volume recovery in Apr-Jun, expansion of dollar margin, improvement in receivable recovery and LPG micro pipeline network as key initiative in FY20/21. However, our concerns are continued high gearing, downtrend on connection fees, possibly slow receivable recovery and uncertainties on LPG micro pipeline.

Despite undemanding valuations (12x PER and 3.3x P/B), we still prefer our top two picks as analysed in China Infrastructure Deep Dive: Gas Utilities H & A SharesENN Energy (2688 HK) and China Resources Gas (1193 HK)

3. ACE: Great Growth Opportunities, but the Stock Is Overpriced

Slide6

We initiate coverage on ACE with a SELL recommendation based on a target price of Bt2.64, implying a downside of 36% from the current price. We derive the target price from a de-rating to a 25% premium to the sector PE ratio, meaning a 2020E 29.4x PE.

Investment thesis:

  • Power producer with high growth potential, but already priced in
  • Long-term contracts and supply control drive high profitability
  • Government driven demand can pose a risk

Risks: Adverse regulatory changes, reliance on a few customers, volatility in fuel prices, unexpected disruptions in production, delays in project execution, change in political leadership can sometimes impact companies.

4. China Yangtze Power (600900 CH): Pre-GDR Initial Thoughts

Power

China Yangtze Power Co, Ltd. (600900 CH) (CYPC), the world’s largest hydropower company, will put forward its GDR issuance proposal for shareholder voting in an EGM on 30 Jun. We take a look on this proposal which may raise up to ~US$3.3bn based on the current share price. We believe the key merits for CYPC are: 1.) largest hydropower company globally with protected franchise; 2.) benefit from government’s clean energy initiatives; 3.) track record of stable earnings; and 4.) solid support from parent company.

Key risks, however, are: 1.) CYPC relies on one single type of generation mode; 2.) capex on acquisitions may further elevate gearing; 3.) slowdown in power demand; and 4.) overseas investment risks. The stock now trades on 17.9x FY20F PER, not excessive relative to the 5-year range of 13-27x, and upside will come from further asset injections from parent China Three Gorges Corporation (CTG).

5. Infigen’s White Knight on a Charger

Spanish renewables juggernaut Iberdrola SA (IBE SM) has launched a friendly white knight takeover bid for the Australian renewables company Infigen Energy (IFN AU) , valued at AUD 840.6 million (EUR 510 million), or AUD 0.86 per stapled security, 9.6x EV/2021e EBITDA (Capital IQ consensus).

  • Infigen is trading at AUD 0.88-0.90 (a three-year high), as the market attaches some probability to an improved bid, with 26.3 million shares traded in the last session vs. a 30-day average of 8.2 mn shares.

The offer is superior to that of Ayala, with just a minimum acceptance condition (50% plus one stapled security, on a fully diluted basis). The TCI Funds have agreed to sell 20% of Infigen stapled securities to Iberdrola, subject to FIRB’s approval and the offer being declared unconditional.

Iberdrola should have no problem to finance the bid from available cash & equivalent balances (EUR 2,868 million at 31 March 2020).

Iberdrola has the unanimous backing of the Board of Infigen “in the absence of a superior offer”. Infigen Energy had previously received an AUD777m offer from UAC Energy, a fully-owned subsidiary of Philippines-based conglomerate Ayala. The Board dubbed that offer as “opportunistic” and “highly conditional”. (See Infigen Energy’s Off-Market Takeover Offer ).  Infigen Energy’s Board has unanimously recommended shareholders to reject UAC Energy’s offer.

Iberdrola has the right to match any rival bid, therefore any competing bid will have to offer a significantly higher price.

There is a break fee of 1% of the offer, i.e. AUD 8.4 million (EUR 5.1 million). The offer is not subject to further due diligence or refinancing.

Iberdrola (S&P BBB+, stable) has the firepower to acquire Infigen and even increase the bid, although the interloper risk seems low.

While the offer from Iberdrola may not be overly generous, in my view, it is certain to complete and it is difficult to think of a competing bid.

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