Link Shares Jump 27% on Pacific Equity, Carlyle Group Takeover Proposal

Link Administration Holdings Ltd, an Australia-based provider of services in superannuation administration industry, said it has received a conditional A$2.76 billion proposal from a consortium comprising Pacific Equity Partners, Carlyle Group to acquire 100% of the stake, sending its shares up 27% to A$5.1 on Monday.

The non-binding offer of A$5.20 a share is at a 30.3% premium to the shareholder registry firm’s last closing price and has the support of Perpetual Ltd, which owns 9.7% of the company, Reuters reported.

The Link Group Board will consider the Proposal, including obtaining advice from its financial and legal advisers. Shareholders do not need to take any action in relation to the Proposal. It should be noted that there is no certainty that the discussions with the Consortium will result in any transaction, the company said.

Link Group has appointed Macquarie Capital and UBS as its financial advisers and Herbert Smith Freehills as its legal adviser.

At the time of writing, Link Administration’s shares traded 24.56% higher at A$4.97 on Monday; however, the stock is down over 15% so far this year.

Link Administration stock forecast and Analyst views

The seven analysts offering 12-month price targets for Link Administration Holdings Ltd have a median target of A$4.38, with a high estimate of A$5.10 and a low estimate of A$3.40, according to FT.

Morgan Stanley target price is A$3.55 with a high of A$5.35 under a bull scenario and A$1.5 under the worst-case scenario. Morgan Stanley said DCF weighted 10% bull, 60% base, 30% bear – skew reflects headwinds in Super business, risks of further margin and operational headwinds in Fund Admin, PES not building sufficient scale in the near term. Key assumptions: 11.5% cost of equity, 3% terminal growth.

“The offer values Link Administration (LNK) at 30% premium to last close and implies 24.5x / 19.3x P/E on FY21E / FY22E on our forecasts. The offer is a ~20% discount to LNK’s IPO price of A$6.37 and a ~15% discount to LNK’s ~A$6 share price just prior to the 1H20 result and pre COVID. Perpetual holds ~9.65% of LNK and has stated it intends to vote in favour of the offer of at least A$5.20. We currently value LNK at A$3.40 in our blended price target. In our SOTP valuation, we value LNK’s stake in PEXA at A$1.54 EV per share. Our bull case valuation for LNK is A$5.35. We note LNK has a new CEO assuming the role on November 2, 2020. LNK is also in the process of acquiring the PES loan management business, with that deal under review by the Irish regulator,” said Andrei Stadnik, equity analysts at Morgan Stanley.

“We think the consensus is missing the multi-year headwinds in Super. Valuation looks too high vs peers. Gearing is above the target, though PEXA distribution proceeds could help. Fund admin growth is likely to take longer but retains potential. UK mortgage servicing is slower than the U.S. Asset and non-performing loan servicing remain a longer-term growth option,” Stadnik added.

Upside and Downside Risks

Upside: 1) Share gain in Super admin market or benefits from fund consolidation. 2) Stronger growth in UK mortgage servicing/EU asset servicing. 3) Earlier or larger than expected PEXA distribution proceeds. – highlighted by Morgan Stanley.

Downside: 1) Major fund admin client contracts not renewed or outsourcing scope is narrowed. 2) Acceleration of Super account consolidation. 3) ERS results in significant account inactivation. 4) Adverse FCA findings re Woodford.

LINK/USD – Key Inflection Points

In these situations, markets will deceptively reward ineffective behavior (chasing) which can lead to a false sense of confidence. If you are in this coin, the best thing to do is reduce risk by taking partial profits until this thing produces a clear sell signal. If you are not in it, the best thing to do is WAIT for a retrace to the next support level.

Some key inflection points to consider: The 18 level is a proportional projection measured from the March low. Not only is it a psychological whole number, it is a location where the probability of selling activity is high. Even though there is no sell signal in place, this is the highest risk/lowest probability location to put on a new position. Buying into a potential top automatically puts you into a weak psychological position that often leads to exiting for a loss at the worst possible location (the low of the next support).

The 14.50 area is a minor support level as evidenced by the recent price activity in the area. A sharp retrace can find some support here, but it is important to WAIT for reversal structure in order to justify risk, because IF this level is cleared, the next inflection point is 11.50 followed by the 8.50 area. Can price retrace this far? It is possible, but the idea is to WAIT for such an opportunity, IF the market produces one. If not, the best thing to do is find a better opportunity in terms of reward/risk.

The herd mentality lures novice traders over and over again and is part of the market process. In order to win, you must not only be aware of it, but you must also know how to capitalize on it which requires counter intuitive thinking.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Marc Principato CMT, Executive Director at Greenbridgeinvesting.com.

Bitcoin Cash, Litecoin and Ripple Daily Analysis – 04/01/18

Bitcoin Cash in Reverse

Things were looking upbeat for Bitcoin Cash through the early part of the day on Wednesday, only for things to go into reverse by the middle of the day, with investors quick to lock in profits as it hit a New Year high of $2,775.

Bitcoin futures continue to do the damage to the Bitcoin clan and things are no better in the early part of today, with the Bitcoin Cash slide in full swing since yesterday’s high.

At the time of writing, Bitcoin Cash was down 6.33% to $2,396.9 and, while Bitcoin Cash futures are sitting above Bitcoin’s current value, there are just some better choices in the cryptomarkets, with Ripple and Stella’s Lumens tearing the field apart.

With an intraday low of $2,284.0, Bitcoin Cash will need to make a move through to $2,450 levels to make a run at yesterday’s high, with any moves down below $2,350 likely to test $2,300 support levels. It’s looking a bit bearish this morning…

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Litecoin Follows Bitcoin into the Red

Things have not been going Litecoin’s way and Thursday’s declines could be the start of something more sinister for Litecoin and its investors.

At the time of writing, Litecoin was down 4.6% to 233.72, sitting just above an intraday low of $233.

Since the founder’s announcement to sell-off his Litecoins, there has been little to news to provide support to Litecoin, with a failure to break back to $300 since 23rd December leaving investors to consider alternative investment opportunities within the cryptomarkets.

Without any catalysts, we will expect Litecoin to continue to struggle and feel increasing peer group pressure from the likes of Lumens (XLM) and Ripple (XRP).

While there’s likely to be strong support at $230, any fall to sub-$230 levels could see Litecoin fall back to $220 levels, with Litecoin needing to make a move towards $250 for a run at this year’s high of $261.99.

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Litecoin Chart by Trading View

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Ripple is on a Mission

Ripple has taken the cryptoworld by storm since its mid-December move out of the $0.22 – $0.25 ranges, with gains of 58.8% in the first few days of the year alone. It’s been record highs on each day of trading this year and the daily gains have just been getting stronger for Ripple.

Following Wednesday’s 29.3% rally, Ripple is up 12.75% to $3.14 at the time of writing, with a new high of $3.25 this in the early part of the day.

For now it just looks as though Ripple can do no wrong and, with the momentum on its side, is hot on the heels of Bitcoin for the #1 spot in the cryptoworld.

It’s going to be tough to bet against Ripple if the gains in the last few weeks are anything to go by and with its blockchain technology the most likely to succeed in the adoption of blockchain technology, it’s going to be a HODL for Ripple investors who are no doubt enjoying the ride.

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