Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Capital Markets

ZIM Integrated Shipping Services / Equity Capital Markets

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Israel's ZIM Integrated Shipping Services (proposed ticker ZIM US) has filed documents to launch an IPO in the US. Media reports have speculated the container shipping company hopes to raise at least US$100 mn in the deal; some reports say ZIM could try to raise US$300 mn or more.
The objective of this note is to provide some context for the company and the global container shipping industry. After all, it has been over two decades since a global container ship operator has traded in the US (<a href="https://www.smartkarma.com/entities/matson-inc" target="_blank" data-smartkarma-citation="entities:6335:1" rel="noopener">Matson Inc (MATX US)</a> focuses on niche domestic US markets, generally).
ZIM is a small player in global container shipping, and contrary to its claims the company mainly operates in highly competitive segments. Its "asset-light" model is unusual, but it represents a double-edged sword: chartering in the majority of its capacity offers flexibility, but it also means operating costs may rise in tandem with freight rates over the cycle, limiting margin expansion. 
Fortunately, Europe and Asia offer several direct comps for ZIM, including <a href="https://www.smartkarma.com/entities/ap-moeller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:22428:1" rel="noopener">AP Moeller - Maersk A/S (MAERSKB DC)</a> of Denmark and <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> of Taiwan. These two companies -- both of them far larger than ZIM, and more profitable over the cycle -- will serve as useful benchmarks once ZIM and its bankers announce details regarding deal size and pricing.




Israel's ZIM Integrated Shipping Services (proposed ticker ZIM US) has filed documents to launch an IPO in the US. Media reports have speculated the container shipping company hopes to raise at least US$100 mn in the deal; some reports say ZIM could try to raise US$300 mn or more.
The objective of this note is to provide some context for the company and the global container shipping industry. After all, it has been over two decades since a global container ship operator has traded in the US (Matson Inc (MATX US) focuses on niche domestic US markets, generally).
ZIM is a small player in global container shipping, and contrary to its claims the company mainly operates in highly competitive segments. Its "asset-light" model is unusual, but it represents a double-edged sword: chartering in the majority of its capacity offers flexibility, but it also means operating costs may rise in tandem with freight rates over the cycle, limiting margin expansion. 
Fortunately, Europe and Asia offer several direct comps for ZIM, including AP Moeller - Maersk A/S (MAERSKB DC) of Denmark and Evergreen Marine Corp (2603 TT) of Taiwan. These two companies -- both of them far larger than ZIM, and more profitable over the cycle -- will serve as useful benchmarks once ZIM and its bankers announce details regarding deal size and pricing. 

Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

Equity Bottom-Up

Our research suggests average container rates rose by 6% in September, boosted by improved Transpacific volumes. While inbound to US demand appears strong through October, estimates from the Port of LA suggest early November will see a modest YoY decline in throughput. 
Bunker (ship fuel) prices remain below year-ago levels and carrier profitability in Q3 (and early Q4) likely remains high compared to 2019. Germany's <a href="https://www.smartkarma.com/entities/hapag-lloyd-ag" target="_blank" data-smartkarma-citation="entities:21649:1" rel="noopener">Hapag-Lloyd AG (HLAG GR)</a> lifted full-year guidance this week, reflecting confidence in near-term market conditions. 
After almost tripling earlier in 2020 on a combination of strong demand and limited capacity, it appears air cargo pricing for key Asian carriers has moderated compared versus peak levels in Q2. 
While current conditions appear buoyant, we believe the sharpest YoY improvements in profitability for container carriers (and air cargo) are probably already behind us.

Our research suggests average container rates rose by 6% in September, boosted by improved Transpacific volumes. While inbound to US demand appears strong through October, estimates from the Port of LA suggest early November will see a modest YoY decline in throughput. 
Bunker (ship fuel) prices remain below year-ago levels and carrier profitability in Q3 (and early Q4) likely remains high compared to 2019. Germany's Hapag-Lloyd AG (HLAG GR) lifted full-year guidance this week, reflecting confidence in near-term market conditions. 
After almost tripling earlier in 2020 on a combination of strong demand and limited capacity, it appears air cargo pricing for key Asian carriers has moderated compared versus peak levels in Q2. 
While current conditions appear buoyant, we believe the sharpest YoY improvements in profitability for container carriers (and air cargo) are probably already behind us. 

TRACKING TRAFFIC/Containers & Air Cargo: Box Rates Firm | LA Down in Nov? | Air Cargo Pricing Eases

Q3 delivered marked underperformanceOur Q3-2020 Small-Mid Cap High-Risk list of stocks produced an average price increase of 0.3%. In comparison, the MSCI Asia Pacific Index posted an increase of 6.3% over the same period. 15 stocks appear in our Q4 2020 screen, versus 21 in Q3 2020. As we highlighted in the previous three quarters, we are specifically on the watch for the risk of deteriorating credit metrics during 2020. This screen presents names which are worthy of investigation as they present with fundamentals which are at risk.

Q3 delivered marked underperformanceOur Q3-2020 Small-Mid Cap High-Risk list of stocks produced an average price increase of 0.3%. In comparison, the MSCI Asia Pacific Index posted an increase of 6.3% over the same period. 15 stocks appear in our Q4 2020 screen, versus 21 in Q3 2020. As we highlighted in the previous three quarters, we are specifically on the watch for the risk of deteriorating credit metrics during 2020. This screen presents names which are worthy of investigation as they present with fundamentals which are at risk.

Screening the Silk Road: Q4 2020 High Risk Names to Avoid

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

• BEST &amp; WORST •Our best and worst pair from yesterday is <a href="https://www.smartkarma.com/entities/hirose-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:13513:1" rel="noopener">Hirose Electric (6806 JP)</a> with a 41% upward revision to interim operating income, and leisure and travel conglomerate <a href="https://www.smartkarma.com/entities/seibu-holdings-inc" target="_blank" data-smartkarma-citation="entities:458:1" rel="noopener">Seibu (9024 JP)</a> which revised down both for the interim and full-year, the latter scoring a maximum negative -30.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/651/original/2020-09-25_06-15-33.png?1600982296" class="editor-image img-responsive" data-smartkarma-image-id="161651"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/652/original/2020-09-25_06-14-28.png?1600982419" class="editor-image img-responsive" data-smartkarma-image-id="161652"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>DAILY STATS <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/650/original/2020-09-25_06-07-47.png?1600981686" class="editor-image img-responsive" data-smartkarma-image-id="161650"></figure><a href="https://www.smartkarma.com/entities/oracle-corp-japan" target="_blank" data-smartkarma-citation="entities:16787:1" rel="noopener">Oracle Japan (4716 JP)</a>- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/653/original/2020-09-25_06-29-09.png?1600982967" class="editor-image img-responsive" data-smartkarma-image-id="161653"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/654/original/2020-09-25_06-28-42.png?1600983014" class="editor-image img-responsive" data-smartkarma-image-id="161654"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/655/original/2020-09-25_06-33-14.png?1600983265" class="editor-image img-responsive" data-smartkarma-image-id="161655"></figure><hr><div>
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -
</div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative</li>
<li>Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative</li>
<li>Average Forecast/Revision Score Change: -11.2 points</li>
</ul></div>

• BEST &amp; WORST •Our best and worst pair from yesterday is Hirose Electric (6806 JP) with a 41% upward revision to interim operating income, and leisure and travel conglomerate Seibu (9024 JP) which revised down both for the interim and full-year, the latter scoring a maximum negative -30.Source for all charts &amp; tables: Japan AnalyticsDAILY STATS Oracle Japan (4716 JP)- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -

Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative
Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative
Average Forecast/Revision Score Change: -11.2 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

Japan

Mitsui O.S.K. Lines, Ltd. provides marine transportation, warehousing, and cargo handling services.  The Company operates container ship, specialized carrier, oil tankers, and ferry.  Items transported include coal, iron ore, grain, logs, aluminum, cement, industrial salt, copper ore, wood chips, paper products, chemical products, gasoline and other petroleum products, LPG, and other cargoes.

Price Gauge
52-week Range	0.00 - 0.00
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Mitsui O.S.K. Lines (9104 JP)

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. 25 stocks...

David Lepper

Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

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Container volumes and pricing firmed in September, and fuel prices remain relatively low, but trading conditions are unlikely to improve much from...

Tracking Traffic

Screening the Silk Road: Q4 2020 High Risk Names to Avoid

Our Q3 screen delivered 600bps of under performance. With volatility is set to increase as we head into H1 2020, which stocks are most at risk in...

David Lepper

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. 25 stocks...

David Lepper

Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

ZIM is pursuing an IPO in the US as the container shipping cycle is approaching a peak. In this note we attempt to give investors context that...

Tracking Traffic

TRACKING TRAFFIC/Containers & Air Cargo: Box Rates Firm | LA Down in Nov? | Air Cargo Pricing Eases

Container volumes and pricing firmed in September, and fuel prices remain relatively low, but trading conditions are unlikely to improve much from...

Tracking Traffic

Screening the Silk Road: Q4 2020 High Risk Names to Avoid

Our Q3 screen delivered 600bps of under performance. With volatility is set to increase as we head into H1 2020, which stocks are most at risk in...

David Lepper

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu