Daily Consumer: ASIC Review of Allocation in Equity Raising – Some Truths, Some Half-Truths – No Improvements and more

In this briefing:

1. ASIC Review of Allocation in Equity Raising – Some Truths, Some Half-Truths – No Improvements
2. StubWorld: Time For A BGF Setup? An Unlikely Boost for Kingboard
3. M1 Ltd (M1 SP): Take the Offer, Axiata Unlikely to Start a Bidding War
4. Nissan: Overlooked Personnel Moves Suggest the Alliance Will Not Survive Long Term
5. China East Education (中国东方教育) Pre-IPO – The Company Known for Its Culinary School

1. ASIC Review of Allocation in Equity Raising – Some Truths, Some Half-Truths – No Improvements

Over 2017-18, the Australian Securities & Investments Commission (ASIC) undertook a review of allocation in equity raising transactions. The review involved large and mid-sized licensees (brokers), Issuers, International investors and other international regulators. The results of the review were published by ASIC in Dec 2018. This insight highlights some of the key findings.

It’s good to see that some of the standard practices of banks allocating more to existing clients and participants of earlier deals have at least been acknowledged. Even though some institutional investors have outright labelled the allocation process as a “black box”, ASIC doesn’t seem to want to do much about it.

The area where ASIC is more concerned is the messaging to investors which highlights the different definitions of “well-covered” across banks. Although, the banks seem to have mislead the regulator on interpretation of “real-demand” with ECM bankers saying that all orders are taken at face-value. That raises a whole new level of questions on the messaging around demand for the deal.

2. StubWorld: Time For A BGF Setup? An Unlikely Boost for Kingboard

This week in StubWorld …

• With concerns over its tender offer for BGF Retail (282330 KS) now behind it, now may be the time for a BGF Co Ltd (027410 KS) setup.
• Kingboard Chemical (148 HK) gets a boost after buying properties from its major shareholder, however, the implied yield is uninspiring.

Preceding my comments on BGF and KBC are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % – of at least 20%.

3. M1 Ltd (M1 SP): Take the Offer, Axiata Unlikely to Start a Bidding War

M1 Ltd (M1 SP), the third largest telecom operator in Singapore, is subject to a bid. On 7 January 2019, Konnectivity launched a voluntary conditional offer (VGO) at S$2.06 cash per share. Konnectivity is jointly owned by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP).

4. Nissan: Overlooked Personnel Moves Suggest the Alliance Will Not Survive Long Term

While most news coverage is intensely focused on former Chairman Carlos Ghosn’s first public statements, defence strategy and Japan’s rather arcane justice system, we believe that news regarding the sudden “leave” of two Nissan executives is worth paying attention to as it may have ramifications for the fate of the alliance overall. We discuss the details below.

5. China East Education (中国东方教育) Pre-IPO – The Company Known for Its Culinary School

China Xinhua Education (2779 HK) listed in Q1 of 2018 and we wrote in our insight that the founder had vocational schools that have been separated from China Xinhua that seemed to be his prized asset. Fast forward to December 2018, the prized asset has finally filed its draft prospectus under the entity China East Education (CEE HK) and it is looking to raise US$400m in its IPO.

In this insight, we will analyze the company’s financial and operating performance, compare it to listed education companies, and provide some questions we have for management.