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Equities Wrap 12 June 2018

Our market is expected to open 0.4% higher

Aurizon holdings (AZJ): Queensland Treasurer Jackie Trad said the escalating dispute between listed rail company Aurizon, the state regulator and big coal miners would not have a material impact on the state’s coffers when the budget is handed down. It is expected to result in 20 million less tonnes of coal being exported a year;

Calix: The company behind technology that not only hopes to extend the life of a Tesla car battery but can improve prawn production and stop sewers stinking and corroding is pulling the trigger on an initial public offering. Street Talk understands Calix will begin a non-deal roadshow on Tuesday as it moves to drum up support for an IPO, which will value the company at $65 million. Shaw and Partners and Foster Stockbroking are joint lead managers on the mooted float. The march towards the ASX comes after a pre-IPO raising in February, which brought Alex Waislitz’s Thorney Technologies on to the register;

Mineral Deposits (MDL): Eramet’s path towards control of Mineral Deposits Limited has become more complicated, with a newly formed alliance of shareholders hinting the French miner will need to consult with the target’s board of directors and offer closer to $2 per share to win support. The alliance between Farjoy Pty Ltd and Dr Harry Hirschowitz could prove strategically important if Eramet is successful in taking control of MDL, as the alliance controls enough shares to prevent the French miner from reaching the 90 per cent threshold for compulsory acquisition of remaining shares;

Sino Gas & Energy holdings (SEH): Sino Gas & Energy’s suitor Lone Star made three earlier takeover proposals at lower prices before securing the backing of the target’s board for its $530 million deal, giving grounds for what chief executive Glenn Corrie says is growing support for the offer from investors. The US private equity giant first made a takeover proposal to Sino, Australia’s only indigenous gas producer in China, in December at 17¢ a share. That was increased to 21¢, then to 23¢ in April, before due diligence in the data room from which the agreed 25¢-a-share offer emerged. Significant shareholders Fidelity, Commonwealth Bank of Australia and IOOF are all said to be in favour of the 25¢-per-share cash offer, despite the price appearing a relatively small premium to recent trading. Between them, the three represent about 21 per cent of the register;

Tamawood (TWD): The effects of the banking royal commission are hitting home building, with Tamawood cutting its profit outlook for the year by almost 9 per cent, saying credit delays were holding back construction starts. Brisbane-based Tamawood on Friday said net profit after tax for the year to June would be down about $800,000 – an 8.8 per cent decline on the $9.1 million figure it reported last year – with more than half of that the result of delays in construction resulting from customers who couldn’t get confirmation of bank loan approvals;

Telstra (TLS):
Telstra must clearly lay out whether it is focused on long-term earnings or maximising short-term dividends at its coming strategy day, Citi analysts say. The telco will update investors next Wednesday on how it will tackle increasing competition and shrinking margins on fixed and mobile products. Telstra’s long-loved dividend is expected to be one of the items on the table being discussed by the board, as well as a potential drastic plan to split the company in two; one retail and one wholesale business, as revealed by The Australian Financial Review in May;

Toys ‘R’ Us: Hopes are fading for a rescue of Toys ‘R’ Us in Australia after a new report showed creditors outweighed assets fourfold. Toys ‘R’ Us (Australia) owed $94.9 million to unsecured creditors when it went into voluntary administration last month, but the realisable value of its assets was just $22.8 million, according to a report lodged with the corporate regulator on Friday. Assets included $47.5 million of stock, which was estimated to have a realisable value of just $15 million, and cash of $6.7 million;

Viva Energy (VVR): It’s a big week for Viva Energy which carries the hopes of a hefty IPO pipeline heading into the second half of the year. It is understood Viva Energy’s three joint lead managers kicked off a corner stone process late last week, asking some of the big domestic funds to think about piling into the company’s mooted $2billion initial public offering ahead of the prospectus lodgment. Sources said Viva Energy and its brokers were seeking cornerstone backers at about 7-times EBITDA, based on 2019 earnings which are expected at $634 million on UBS numbers. Such a deal would value Viva at about $4.5 billion;

Westpac (WBC); Prospa: Westpac Banking Corp has ended its referral relationship with Prospa. After Prospa indefinitely postponed its ASX listing last week amid questions on whether its loan contracts breached new laws, the online business lender faces more intense competition from big banks who are developing new products to lend more to small business without requiring residential property to be pledged as security. ‘‘We did not continue our contract with Prospa because we are working on developing our own products that will satisfy more of our customers’ needs,’’ a Westpac spokesperson told The Australian Financial Review.