Ann: Acquisition and Equity Raising Investor Pack, page-59

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Adimadis

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19/07/22

11:47

Post #: 62605755
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Originally posted by Red Dirt Dan: ↑

The transaction is expected to be neutral to EPS and return on equity (ROE) pre synergies, with low-single-digital EPS accretion on a full run-rate synergies basis. Ok, by no means perfect in the fact that...
1) ANZ will not be able to realise synergies until after Year 3 so a bit of a concern but so what..
2) the deal still needs Australian Competition and Consumer Commission (ACCC) and other regulatory approvals..im not so sure ACCC will even allow it
3) ANZ will be raising capital at 0.9x net tangible asset (NTA) value to acquire a regional bank at cost equivalent to 1.3x NTA; 4) integration costs are relatively front-end-loaded.

That said, I think im the only one in the forum that sees some strategic merit to the deal,

1) it should provide ANZ with better earnings balance, geographical mix, and greater franking capacity
2) SUN's bank is relatively high quality for a regional bank
3) the disclosed synergies are quite high as a percentage of the acquired cost base.

Separately, ANZ released a trading update with third-quarter FY22 net interest margin (NIM) running ahead of our second-half forecast, albeit there was a smaller rebound from the markets division.
On balance, I don’t see the deal as a catalyst to close the valuation gap to peers, although ANZ is trading at net tangible asset (NTA) value based on the latest closing price and there is some evidence of an improved operational performance which is why im averaging down as much as I can where ever I can at any price until such time.

Based on your numbers the whole fiasco is representing a P/E ratio of 13.8x pre synergies (or 9.3x post synergies) and a 1.3x price to NTA multiple. ANZ guided to cost synergies of $260m (35% of Suncorp’s cost base), albeit these are not expected to be fully realised until six years post-deal completion and im not having a go at you I think your numbers were great...which prompted me to respond...not that anybody cares but never the less...it is a forum.

Integration costs look high at 2.6x annual cost synergies, although management believe these are likely to be conservative.
ANZ’s 3Q22 up date was generally positive, with even growth of 6% currency adjusted on a 1H22 quarterly average.
Underlying NIM at +6bp was running ahead of most analysts forecast which is not saying so much, having benefitted from stronger New Zealand and US policy rates, which moved ahead of the Reserve Bank Australia (RBA) cash rate.
Asset quality remains very benign, while capital was a little softer than we expected due to very strong loan growth in June.
Earnings changes are immaterial changes to most forecasts for ANZ to reflect the 3Q22 trading update.
So would it be fair to say with your numbers have modelled the impact of the capital raising ?
Are you suggesting an EPS bet by 1% in FY22, 3% in FY23 and 5% in FY24.

I think there will be strong participation in the rights issue given although pin the tail on the donkey fair enough but...
1) the raising is being conducted at 0.9x NTA
2) the trading update was largely positive in my view but I seem to be a minority in this forum
3) Relief that ANZ is not proceeding with an acquisition of MYOB....admittedly I thought access to 600,000 was possibly a good idea but you never buy from a barbarian !!!
Although the transaction is unlikely to significantly close the valuation discount to peers apart from the loan book to NAB is closing in, I think it might even be bigger though im up for a belting from some HC antagonists on that number...

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"2) the deal still needs Australian Competition and Consumer Commission (ACCC) and other regulatory approvals..im not so sure ACCC will even allow it"

Why would ACCC block this deal, if they allowed NAB takeover of Citi?

ANZ Price at posting: $21.64 Sentiment: Hold Disclosure: Held
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Ann: Acquisition and Equity Raising Investor Pack, page-59

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