Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

<ul><li>Caterpillar had a strong quarterly result but the impact of inflationary pressures played spoilsport against the company’s margins.</li><li>Despite delivering an all-around beat backed by a robust demand for its equipment, particularly in the construction and mining industries, the company witnessed a margin contraction on account of rising commodity prices.</li><li>The management openly communicated that it might expect a further margin contraction in the third quarter of the year.</li></ul>

Caterpillar had a strong quarterly result but the impact of inflationary pressures played spoilsport against the company’s margins.Despite delivering an all-around beat backed by a robust demand for its equipment, particularly in the construction and mining industries, the company witnessed a margin contraction on account of rising commodity prices.The management openly communicated that it might expect a further margin contraction in the third quarter of the year.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Seven Group Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a> aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide more financing flexibility. The stock has done well over the past few years but is now trading close to its all time highs.

Seven Group Holdings (SVW AU) aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide more financing flexibility. The stock has done well over the past few years but is now trading close to its all time highs. 

Seven Group Holdings Placement - Good Track Record but Still a Large Deal to Digest

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>In the first week of 2021, TMI's machinery sentiment indicators hit their highest levels since pre-pandemic readings, attributed to recent bullish commentary from the likes of Sany Heavy, Hengli Hydraulic, Zoomlion and the CCMA (China Construction Machinery Association); the indicators have been strongly correlated with <a href="https://www.smartkarma.com/entities/caterpillar-inc" target="_blank" data-smartkarma-citation="entities:697:1" rel="noopener">Caterpillar Inc (CAT US)</a> , <a href="https://www.smartkarma.com/entities/komatsu-ltd" target="_blank" data-smartkarma-citation="entities:8416:1" rel="noopener">Komatsu Ltd (6301 JP)</a> &amp; <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry H (1157 HK) </a> with a slight lead</li>
<li>On Friday, Komatsu reported Komtrax equipment utilization data for December, highlighting sharply stronger average hours of machinery use Y/Y comps in key jurisdictions</li>
<li>The CCMA recently pointed out that Chinese OEMs expect 2021 demand to range from high single-digits to 15% Y/Y while the association expects a range of 8-10% supported by continued robust infrastructure FAI</li>
<li>Komatsu's European data indicates potential positive surprise with a second month of +4% Y/Y growth, despite weaker EU Construction PMI readings throughout Q4</li>
<li>US data also highlights a first positive utilization comp in over a year, despite still-tentative construction spending data and slippage in the ABI index</li>
<li>Japanese machinery utilization also bounced back in December to its best Y/Y comp in more than a year, with elevated public sector construction in progress and a potential inflection in housing starts</li>
<li>Given such a robust starting point for 2021, markets are more likely to look through seasonal air pockets going into Spring</li>
</ul>


In the first week of 2021, TMI's machinery sentiment indicators hit their highest levels since pre-pandemic readings, attributed to recent bullish commentary from the likes of Sany Heavy, Hengli Hydraulic, Zoomlion and the CCMA (China Construction Machinery Association); the indicators have been strongly correlated with Caterpillar Inc (CAT US) , Komatsu Ltd (6301 JP) &amp; Zoomlion Heavy Industry H (1157 HK)  with a slight lead
On Friday, Komatsu reported Komtrax equipment utilization data for December, highlighting sharply stronger average hours of machinery use Y/Y comps in key jurisdictions
The CCMA recently pointed out that Chinese OEMs expect 2021 demand to range from high single-digits to 15% Y/Y while the association expects a range of 8-10% supported by continued robust infrastructure FAI
Komatsu's European data indicates potential positive surprise with a second month of +4% Y/Y growth, despite weaker EU Construction PMI readings throughout Q4
US data also highlights a first positive utilization comp in over a year, despite still-tentative construction spending data and slippage in the ABI index
Japanese machinery utilization also bounced back in December to its best Y/Y comp in more than a year, with elevated public sector construction in progress and a potential inflection in housing starts
Given such a robust starting point for 2021, markets are more likely to look through seasonal air pockets going into Spring


TMI Snapshot: Machinery Sentiment at Pre-COVID High as Komtrax Data Shows Synchronized Global Surge

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

Hyundai Construction Equipment / Event-Driven

It was announced on 10 December that Hyundai Heavy Industries Group has been selected as the <a href="https://finance.naver.com/news/news_read.nhn?article_id=0004805146&amp;office_id=018&amp;mode=LSS2D&amp;type=0&amp;section_id=101&amp;section_id2=258&amp;section_id3=&amp;date=20201210&amp;page=2" target="_blank" rel="noopener">preferred bidder</a> to acquire the 35.4% controlling stake of <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS), </a>held by <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>. Doosan Infracore currently has a market cap of 1.9 trillion won. Hence, a 35.4% stake in the company would be worth 663 billion won. It has been reported that the consortium led by Hyundai Heavy Industries and KDB Investment bid about 900 billion won for Doosan Infracore. Hence, the potential acquisition price would be about 36% premium to current price of Doosan Infracore (8,670 won). The final acquisition price is not yet determined so this is subject to change. <div class="content-highlight">In our view, there may be a bigger positive impact on Hyundai Construction Equipment if the HHI Group ends up acquiring Doosan Infracore. There are two major reasons. First, there are expected to some synergies between Doosan Infracore and Hyundai Construction Equipment that could have a bigger positive impact on Hyundai Construction Equipment. Second, the valuation gap between Doosan Infracore and Hyundai Construction Equipment may be reduced.</div>

It was announced on 10 December that Hyundai Heavy Industries Group has been selected as the preferred bidder to acquire the 35.4% controlling stake of Doosan Infracore (042670 KS), held by Doosan Heavy Industries &amp; Construction (034020 KS). Doosan Infracore currently has a market cap of 1.9 trillion won. Hence, a 35.4% stake in the company would be worth 663 billion won. It has been reported that the consortium led by Hyundai Heavy Industries and KDB Investment bid about 900 billion won for Doosan Infracore. Hence, the potential acquisition price would be about 36% premium to current price of Doosan Infracore (8,670 won). The final acquisition price is not yet determined so this is subject to change. In our view, there may be a bigger positive impact on Hyundai Construction Equipment if the HHI Group ends up acquiring Doosan Infracore. There are two major reasons. First, there are expected to some synergies between Doosan Infracore and Hyundai Construction Equipment that could have a bigger positive impact on Hyundai Construction Equipment. Second, the valuation gap between Doosan Infracore and Hyundai Construction Equipment may be reduced.

Korea M&A Spotlight: HHI Group Selected As Preferred Bidder for Doosan Infracore

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

After an underperforming 1H20, <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a> has rapidly caught up with the industry in its unit sales performance. Sales of wheel loaders and excavators for 10M20 now achieved a 5% and 14% growth, respectively, compared with -2.6% and -11.2% respectively in 1H20, suggesting powerful pick-up in the last several months. Growth in products including forklifts and road rollers has also boosted all product categories to positive growth in 10M20.We forecast 2H20 core earnings will grow 20.5% YoY (vs. -6.4% YoY in 1H20), but its share price now only trades on 0.8x P/B, exactly at historical average. Such multiple looks low relative to a projected ROE of 19%, the highest in the last five years. We also see its Rmb0.61/share of net cash (or 32% of share price) comfortably sustaining its 54% payout ratio, leading to an attractive 11.5% dividend yield.

After an underperforming 1H20, Lonking Holdings (3339 HK) has rapidly caught up with the industry in its unit sales performance. Sales of wheel loaders and excavators for 10M20 now achieved a 5% and 14% growth, respectively, compared with -2.6% and -11.2% respectively in 1H20, suggesting powerful pick-up in the last several months. Growth in products including forklifts and road rollers has also boosted all product categories to positive growth in 10M20.We forecast 2H20 core earnings will grow 20.5% YoY (vs. -6.4% YoY in 1H20), but its share price now only trades on 0.8x P/B, exactly at historical average. Such multiple looks low relative to a projected ROE of 19%, the highest in the last five years. We also see its Rmb0.61/share of net cash (or 32% of share price) comfortably sustaining its 54% payout ratio, leading to an attractive 11.5% dividend yield.  

Lonking (3339 HK): Rapid Catch-Up in Unit Sales, Further Backed by Attractive Yield

United States

Caterpillar Inc. designs, manufactures and markets construction, mining and forestry machinery. The Company also manufactures engines  and other related parts for its equipment, and offers financing and insurance. Caterpillar distributes its products through a worldwide organization of dealers.

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Caterpillar Inc (CAT US)

Caterpillar Inc - Investment Thesis

Caterpillar had a strong quarterly result but the impact of inflationary pressures played spoilsport against the company’s margins. Despite...

Baptista Research

Seven Group Holdings Placement - Good Track Record but Still a Large Deal to Digest

Seven Group Holdings (SVW AU) aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide...

Sumeet Singh

TMI Snapshot: Machinery Sentiment at Pre-COVID High as Komtrax Data Shows Synchronized Global Surge

TMI's Machinery Sentiment Indicators are now back to pre-pandemic levels, while Komatsu's Friday release of Komtrax machinery utilization hours...

Elan Gore

Korea M&A Spotlight: HHI Group Selected As Preferred Bidder for Doosan Infracore

It was announced on 10 December that Hyundai Heavy Industries Group has been selected as the preferred bidder to acquire the 35.4% controlling...

Douglas Kim

Lonking (3339 HK): Rapid Catch-Up in Unit Sales, Further Backed by Attractive Yield

Lonking has a rapid leap in unit sales in Sep and Oct, driving positive growth across all product categories in 10M20, vs. declines in 1H20. ROE of...

Osbert Tang, CFA

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