Equities. Commodities. Metals & Mining

Rahul Jain

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/arcelormittal-sa-8b816bb6-eb73-416f-a30a-56f93d1deb03" target="_blank" data-smartkarma-citation="entities:38577:1" rel="noopener">ArcelorMittal (MT US)</a> reported an EBITDA decline for the third year in a row to US$7b in CY24. Targets $0.4b/0.6b of $1.9bn of planned strategic EBITDA growth in 2025/2026.</li>
<li>Management has guided a slightly positive apparent global demand growth 2.5-3.5% ex China. Expects restocking demand in Europe. </li>
<li>Trades at 0.5x P/B vs 2-3x P/B for Indian steel mills <a href="https://www.smartkarma.com/entities/jsw-steel-ltd" target="_blank" data-smartkarma-citation="entities:18561:1" rel="noopener">JSW Steel Ltd (JSTL IN)</a> , <a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> , <a href="https://www.smartkarma.com/entities/jindal-steel-power-ltd" target="_blank" data-smartkarma-citation="entities:6614:1" rel="noopener">Jindal Steel &amp; Power (JSP IN)</a> </li>
</ul>



ArcelorMittal (MT US) reported an EBITDA decline for the third year in a row to US$7b in CY24. Targets $0.4b/0.6b of $1.9bn of planned strategic EBITDA growth in 2025/2026.
Management has guided a slightly positive apparent global demand growth 2.5-3.5% ex China. Expects restocking demand in Europe. 
Trades at 0.5x P/B vs 2-3x P/B for Indian steel mills JSW Steel Ltd (JSTL IN) , Tata Steel Ltd (TATA IN) , Jindal Steel &amp; Power (JSP IN) 


ArcelorMittal (MT US) Is Deep Discount to Indian Mills Warranted?

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On September 26, Nippon Steel's president affirmed the company's commitment to completing the <a href="https://www.smartkarma.com/entities/united-states-steel-corp" target="_blank" data-smartkarma-citation="entities:202:1" rel="noopener">United States Steel (X US)</a> acquisition by year-end, despite the CFIUS review being extended until December.</li>
<li>U.S. Steel, with an expected value of $45.19/share offers 27% upside potential. This discount, driven by acquisition/fundamental value, supports a buy recommendation thus, I would be long U.S. Steel.</li>
<li>If the deal were to succeed, the likelihood of it closing before the end of 2024 is low, primarily due to the complexities surrounding the American presidential elections.</li>
</ul>


On September 26, Nippon Steel's president affirmed the company's commitment to completing the United States Steel (X US) acquisition by year-end, despite the CFIUS review being extended until December.
U.S. Steel, with an expected value of $45.19/share offers 27% upside potential. This discount, driven by acquisition/fundamental value, supports a buy recommendation thus, I would be long U.S. Steel.
If the deal were to succeed, the likelihood of it closing before the end of 2024 is low, primarily due to the complexities surrounding the American presidential elections.


Nippon Steel/US Steel: Appealing Expected Value

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Recent developments have continued to reinforce our bullish outlook on global equities (MSCI ACWI).</li>
<li>There is no reason to fight this bullish trend, and we continue to expect more upside into the early part of 2024.</li>
<li>Upgrading Mexico to Overweight; Technology Remains Global Leadership; Actionable Themes: 44 individual stock buy recommendations within Technology, Services, Consumer Discretionary, Financials, and Materials</li>
</ul>


Recent developments have continued to reinforce our bullish outlook on global equities (MSCI ACWI).
There is no reason to fight this bullish trend, and we continue to expect more upside into the early part of 2024.
Upgrading Mexico to Overweight; Technology Remains Global Leadership; Actionable Themes: 44 individual stock buy recommendations within Technology, Services, Consumer Discretionary, Financials, and Materials


Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

Independent Research, Turtles all the way down

Turtles all the way down

Independent Research

Writing short articles about mis-priced boring stocks around the world.

<ul><li>Lately I have seen a lot of doomporn on Twitter about Europe. A lot of people seem to almost be excited about the energy predicament Europe is in.</li><li>So I thought I would write some anti-doom porn. And in doing so I actually became a bit more pessimistic LOL. At least for the next year or two.</li><li>Since there is no denying that the EU is in a bad spot as it imported 150 billion m3 of gas from Russia.</li></ul>

Lately I have seen a lot of doomporn on Twitter about Europe. A lot of people seem to almost be excited about the energy predicament Europe is in.So I thought I would write some anti-doom porn. And in doing so I actually became a bit more pessimistic LOL. At least for the next year or two.Since there is no denying that the EU is in a bad spot as it imported 150 billion m3 of gas from Russia.

The bid was saved at the eleventh hour. As per the <a href="https://www.naturgy.com/files/14102021_IP_resultado_OPA_EN.pdf" target="_blank" rel="noopener">CNMV release</a>, IFM achieves 10.83% of the capital of <a href="https://www.smartkarma.com/entities/naturgy-energy-group-sa" target="_blank" data-smartkarma-citation="entities:21271:1" rel="noopener">Naturgy Energy Group SA (NTGY SM)</a> in the takeover bid. The fund waives the minimum requirement of 17% and complete the deal. There is no apportionment.From the bid announcement, IFM was confident that the partial takeover bid would succeed with at least 17% of the share capital tendered, but IFM reserved one last wild card, lowering the threshold to 10% (imposed by the banks' syndicate as the minimum to grant the financing). Thus ends one of the most controversial deals in Spain in recent years. The interesting question is what is IFM seeking in Naturgy. To obtain a paltry 10.8% it would have been much cheaper buying the shares in the market.Naturgy reduces its weight in the Ibex-35 as a result of the offer. After reducing the free float, the Technical Advisory Committee (CAT) of the index decided yesterday that it will take 20% ​​of Naturgy's capital as a reference for calculating the weighting, instead of the current 40%. Naturgy ended the session yesterday in 14th place on the Ibex, with a weight of 1.90%, according to the report by Bolsas y Mercados Españoles (BME).The adjustment will take place today Friday 15 October, at the close of the session with effect next Monday, 18 October.The loss of weight of Naturgy in the Ibex-35 may cause some investors that replicate indices to sell shares to adjust to the new scenario. Although the battle that is now opening in the council could act as support for the shares.After the takeover results were announced, Naturgy's shares soared and closed at €24, 4.62% more than on the prior session, possibly due to the accelerated repurchase of shares by hedge funds short the stock. Meanwhile, La Caixa is likely to continue buying shares to strengthen its position (up to 29.9%).Sell on strength.<ul>
<li>I do not see potential for meaningful gains at the current prices. The shares closed on 15 October at €23 (with c. €88 mn traded), exceeding Capital IQ consensus TP of € 22.25;</li>
<li>Lower liquidity after the takeover bid, given that the free-float is reduced from the current 27% to 16%. Its weight in the Ibex-35 will be reduced from 1.9% nowadays to approximately 1%. Some investors that replicate indices to sell shares to adjust to the new scenario. Although the battle that is now opening in the council could act as support for the shares.</li>
<li>Dividend yield at current prices remains below 5%. There are other options in the sector with greater potential for revaluation, higher liquidity and higher dividend yield (such as <a href="https://www.smartkarma.com/entities/red-electrica-corp-sa" target="_blank" data-smartkarma-citation="entities:21291:1" rel="noopener">Red Electrica Corp SA (REE SM)</a> and <a href="https://www.smartkarma.com/entities/enagas-sa" target="_blank" data-smartkarma-citation="entities:21266:1" rel="noopener">Enagas SA (ENG SM)</a>).</li>
</ul>

The bid was saved at the eleventh hour. As per the CNMV release, IFM achieves 10.83% of the capital of Naturgy Energy Group SA (NTGY SM) in the takeover bid. The fund waives the minimum requirement of 17% and complete the deal. There is no apportionment.From the bid announcement, IFM was confident that the partial takeover bid would succeed with at least 17% of the share capital tendered, but IFM reserved one last wild card, lowering the threshold to 10% (imposed by the banks' syndicate as the minimum to grant the financing). Thus ends one of the most controversial deals in Spain in recent years. The interesting question is what is IFM seeking in Naturgy. To obtain a paltry 10.8% it would have been much cheaper buying the shares in the market.Naturgy reduces its weight in the Ibex-35 as a result of the offer. After reducing the free float, the Technical Advisory Committee (CAT) of the index decided yesterday that it will take 20% ​​of Naturgy's capital as a reference for calculating the weighting, instead of the current 40%. Naturgy ended the session yesterday in 14th place on the Ibex, with a weight of 1.90%, according to the report by Bolsas y Mercados Españoles (BME).The adjustment will take place today Friday 15 October, at the close of the session with effect next Monday, 18 October.The loss of weight of Naturgy in the Ibex-35 may cause some investors that replicate indices to sell shares to adjust to the new scenario. Although the battle that is now opening in the council could act as support for the shares.After the takeover results were announced, Naturgy's shares soared and closed at €24, 4.62% more than on the prior session, possibly due to the accelerated repurchase of shares by hedge funds short the stock. Meanwhile, La Caixa is likely to continue buying shares to strengthen its position (up to 29.9%).Sell on strength.
I do not see potential for meaningful gains at the current prices. The shares closed on 15 October at €23 (with c. €88 mn traded), exceeding Capital IQ consensus TP of € 22.25;
Lower liquidity after the takeover bid, given that the free-float is reduced from the current 27% to 16%. Its weight in the Ibex-35 will be reduced from 1.9% nowadays to approximately 1%. Some investors that replicate indices to sell shares to adjust to the new scenario. Although the battle that is now opening in the council could act as support for the shares.
Dividend yield at current prices remains below 5%. There are other options in the sector with greater potential for revaluation, higher liquidity and higher dividend yield (such as Red Electrica Corp SA (REE SM) and Enagas SA (ENG SM)).


IFM/Naturgy: Tender Results & Ibex-35 Index Implications

Luxembourg

ArcelorMittal produces steel. The Company manufactures cold rolled, electrogalvanized and coated steels, slabs, bars, and wire rods. ArcelorMittal serves customers worldwide.

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ArcelorMittal (MT NA)

ArcelorMittal (MT US) Is Deep Discount to Indian Mills Warranted?

ArcelorMittal reports EBITDA decline for third year, targets strategic growth in 2025/2026. Expects positive global demand growth and trades at...

Rahul Jain

Nippon Steel/US Steel: Appealing Expected Value

Nippon Steel remains committed to acquiring U.S. Steel despite CFIUS review extension, offering 27% upside potential. Deal may not close before...

Jesus Rodriguez Aguilar

Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

Upgrading Mexico $EWW to Overweight; Bullish Outlook Intact on $ACWI; Technology Remains Global Leadership. 44 individual buys highlighted in Tech,...

Vermilion Research

Europe will be fine

Lately I have seen a lot of doomporn on Twitter about Europe. A lot of people seem to almost be excited about the energy predicament Europe is in.

Turtles all the way down

IFM/Naturgy: Tender Results & Ibex-35 Index Implications

IFM achieves 10.8%. Sell on strength on less potential for meaningful gains at current prices, lower liquidity and weight in the Ibex-35 will be...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ArcelorMittal (MT US) Is Deep Discount to Indian Mills Warranted?

​ArcelorMittal reports EBITDA decline for third year, targets strategic growth in 2025/2026. Expects positive global demand growth and trades at...

Rahul Jain

Nippon Steel/US Steel: Appealing Expected Value

​Nippon Steel remains committed to acquiring U.S. Steel despite CFIUS review extension, offering 27% upside potential. Deal may not close before...

Jesus Rodriguez Aguilar

Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

Upgrading Mexico $EWW to Overweight; Bullish Outlook Intact on $ACWI; Technology Remains Global Leadership. 44 individual buys highlighted in Tech,...

Vermilion Research

Europe will be fine

Lately I have seen a lot of doomporn on Twitter about Europe. A lot of people seem to almost be excited about the energy predicament Europe is in.

Turtles all the way down

IFM/Naturgy: Tender Results & Ibex-35 Index Implications

IFM achieves 10.8%. Sell on strength on less potential for meaningful gains at current prices, lower liquidity and weight in the Ibex-35 will be...

Jesus Rodriguez Aguilar

ArcelorMittal reports EBITDA decline for third year, targets strategic growth in 2025/2026. Expects positive global demand growth and trades at...

Nippon Steel remains committed to acquiring U.S. Steel despite CFIUS review extension, offering 27% upside potential. Deal may not close before...