Energy & Materials Sector

• For the month of March 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
• The average premium for the new transactions announced (or first discussed) in March was ~55%. The average premium YTD is ~39%.
• This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

• Goldman also highlights that cyclical risks from the business cycle are fading.
• An upswing in the global industrial cycle typically leads to broad metals upside over the next 12 months the investment bank added.
• According to data from PIERS, a trade flow analytics tool within S&P Global, Baltimore port held just 4% share of the total trade volumes on the East Coast compared with other major regional ports like New York, with a nearly 38% share according to S&P Global.

• Waaree Energies  is looking to raise up to US$400m in its upcoming India IPO.
• Waaree Energies is a solar PV module manufacturer in India with an aggregate installed capacity of 12 GW, as of Jun 2023. 
• In this note, we talk about the company’s past performance.

• Vitesse’s strategy is to compound cash flow derived from its diverse portfolio of oil-prone assets in the Bakken/Three Forks play to fund capital returns to shareholders and reinvest in the underlying asset base.
• Management’s preferred method for returning cash is through a sustainable fixed dividend, currently $2.00/share annualized.
• The dividend is sacrosanct and lies at the heart of management’s capital allocation model.

• Russia has pledged to cut oil output to 9 million barrels per day by June, potentially causing Brent oil prices to rise to $90 in April and above $100 in the future
• The US has the option to release up to 60 million barrels of crude oil from the Strategic Petroleum Reserve to mitigate the impact of high oil prices
• SPR inventories currently cover 188 days of net import demand for crude oil, suggesting that the reserve may not need to be as large as it once was and could be used for funding infrastructure and federal spending priorities

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Commercial Metals Company’s Q2’2024 earnings indicated a profitable yet relatively modest quarter.
• It reported net earnings of $85.8 million or $0.73 per diluted share on net sales of $1.8 billion.
• Excluding nonoperational items, adjusted earnings equated to $103.1 million or $0.88 per diluted share, with consolidated core EBITDA for the quarter representing $224.4 million.

• Riley’s asset base delivered 22% Y/Y organic growth in net operated oil production in FY23 from reinvesting about two-thirds of discretionary cash flow into the ground.
• Solid growth reflects the manageable capital intensity of the company’s conventional oil-producing assets in the Permian Basin.
• The midpoints of management’s FY24 capital and operating guidance imply that Riley expects to increase oil production ~10% Y/Y from a capital program that is ~10% lower than FY23.

• On the 6th Dec 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF). 
• A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag – this Offer looked done. Then ORG announced a possible competing proposal.
• Nearly four months have elapsed and details on ORG’s Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.

• There is a lot of excitement and uncertainty about the paint sector especially Asian Paints’ leadership in the broader market and among analysts.
• We interact with a couple of paint dealers across Delhi and Dimapur to gauge the sentiment on the ground.
• While there is no denying that Grasim Industries (GRASIM IN) poses a credible threat it might be too early to write off the market leader Asian Paints (APNT IN). 

• On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers) raised warnings about the viability of Kum Yang as a going concern. 
• The auditor also mentioned increasing probability of Chairman Ryu of Kum Yang potentially selling a portion of his shares to raise further capital.
• It is RARE for an auditor to raise concerns about a company’s viability of the entity as a going concern. This is likely to negatively impact Kum Yang’s share price. 

• Semen Indonesia (SMGR IJ) released a positive set of results in FY2023 despite a difficult operating environment and intense competition through increasing efficiencies linked to sustainability at the same time. 
• The company continues to work on improving production efficiency as well as distribution through greater digitalisation and is benefiting from synergies from Semen Baturaja.
• Increasing government infrastructure spending will help to drive growth in demand for bulk cement, especially from the new capital, with Semen Indonesia being a prime beneficiary. Valuations look attractive. 

• As of the week ending 15/March, crude inventories fell more than expected (2 million barrels vs 900k barrels expected) led by higher exports and refinery activity.
• Refineries operations have picked up faster than anticipated, with the utilization rate jumping from 80% in early February to nearly 88% by 15/Mar.
• OPEC members like Iraq, UAE, Gabon, and Kuwait, have exceeded their production quotas, raising concerns about adherence.

• YE23 2P reserves were estimated at 11.8 mmboe, including 0.7 mmboe for Canada and 4.6 mmboe non-core, leaving 6.5 mmboe for the company’s core Colombian assets.
• This compares with 2.1 mmbbl at YE23 plus 3.9 mmbbl for Carrizales Norte reported in September for a total of 6 mmbbl.
• Adding back 0.6 mmbbl (net) produced at Tapir in 2023 suggests that Arrow has added 1.1 mmbbl at its core Colombian assets since the latest reserve reports (September 2023 for Carrizales Norte and YE23 for the other assets).

• 4Q23 results highlight careful cash management.
• TMC reported 4Q23 results, including a significant decline in Y/Y Exportation and Evaluation expenses, which benefited from the non-recurrence of a 2022 pilot project collection campaign, as well as lower SG&A expenses ($6.5 million versus $7 million in the year-ago period).
• Use of cash for operating activities also declined from $19.8 million to $15.2 million and overall quarterly operating loss was narrowed from $111.3 million in 4Q22 to $33.2 million in the reported quarter, demonstrating management’s careful use of cash and a steady SG&A burn rate.

• Rajshree Polypack (“RPPL”) reported a robust Q3FY24 led by strong volume growth of 29%+ YoY. EBITDA margin also expanded leading to EBITDA growth of 35%+ YoY.
• Export business continues to grow steadily with quarterly run-rate now at INR 10cr. This suggests that on an annualized basis, exports could be INR 40cr vs INR 30cr guided earlier.
• Injection molding business is doing well and has reached optimum capacity utilization. RPPL is exploring to expand this capacity and is also expecting it to become profitable from next quarter.

• In October 2023, Zephyr announced the acquisition of at least a 75% WI in the Salt Wash field, located ~3 miles to the south of the Paradox project.
• Salt Wash has a 15 feet oil rim, above which is an inert gas cap (~500 feet of gas column) which consists of ~72% nitrogen, 22% hydrocarbon gases, and 1.4% to 1.7% helium content.
• The field was abandoned in 2014 after having produced 1.65 mmbbl of oil and 11.7 bcf of natural gas.

• FY23 production and YE23 net debt had already been reported.
• Pharos has re-iterated its FY24 guidance of 5.2-6.5 mboe/d (3.9-5.0 mboe/d in Vietnam plus 1.3-1.5 mbbl/d in Egypt) with net capex of US$27.1 mm.
• In 2H24, Pharos plans to commence a two well drilling programme at TGT (Vietnam) and to start the development of NBS SW (Egypt).

• FY23 production, YE23 net cash and YE23 reserves and resources had been reported previously.
• The FY24 production guidance of 21.5-24.5 mbbl/d with US$205-235 mm opex and US$135-155 mm capex has been re-iterated.
• Current production continues to be high, with average production for the first half of March of ~23,000 bbl/d, including ~7.9 mbbl/d for Jasmine, 7.2 mbbl/d for Nong Yao, 2.9 bbl/d for Manora and 4.9 mbbl/d for Wassana.

• This is our first report on building and wooden products producer, Boise Cascade.
• The company, which operates in the building materials and wood products sectors, reported full-year net income of $483.7 million or $12.12 per diluted share on sales of $6.8 billion.
• This showcase of profitability came along with successful execution of the company’s growth strategy with a mix of organic and acquisition initiatives.

• The final documents for the Joint Operating agreement (JOA) for the Venus-Block P Plan of Development have now been signed by all the partners.
• The JOA has also been approved by the EG government.
• The Block P PSC is for 25 years from the date of approval.

• HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024. 
• The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won. 
• A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).

• Kunlun Energy (135 HK)‘s 2.2% drop in core earnings in FY23 is distorted by the expiry of exploration rights of oilfield projects. All other segments have done well.  
• FY24 outlook is positive – reduction in E&P distortion, addition of more city gas projects, higher utilisation of LNG plants and terminals, and optimisation of gas pricing mechanism.
• Net cash of Rmb20.4bn equals 29% of market capitalisation, providing room for a higher dividend payout. A re-inclusion into the HSI is not totally out of the cards.

• In its 19th March Target Statement, Boral (BLD AU) rejected Seven Group Holdings (SVW AU) cash/scrip Offer after the independent expert (IE) concluded the Offer was neither fair nor reasonable.
• In its updated Bidder’s Statement, Seven slammed the IE report and its conclusions, calling the Target Statement “unbalanced, selective and risks fundamentally misleading Boral minority shareholders“.
• Of interest: the IE’s maximum value for Seven’s Offer is just 1.7% below its fair valuation range. Including a control premium. Yet Seven obtained control of Boral in July 2021. 

• The logging program has confirmed open fracture networks and vuggy porosity (matrix porosity) essential for well productivity coincident with hydrocarbon shows between 1346 m and 1702 m measured depth.
• This represents 356 m of gross interval across three interpreted lithological sequences.
• This compares with only 115 m of liquids-rich gas shows announced previously.

• The macroeconomic conditions continue to pose as a tailwind for Ecovyst (ECVT) with commodity prices holding and the USA’s GDP expected to remain positive in 2024
• ECVT faced several challenges in 2023 that should be a non-factor in 2024’s financial results. ECVT has already set expectations for a soft first half of the year
• The scheduled maintenance cycle at oil refineries played a role in ECVT’s fourth quarter results and how ECVT is projecting 2024 to pan out

• The interpretation of the wireline logs at the Jetstream #1 well at the Topaz helium project suggests a predominantly gas saturated interval between 1,650-2,200 feet containing discrete zones with productive permeability.
• Drilling observations and log data interpretation suggest the presence of permeable zones in the form of fracture and/or vuggy porosity.
• Good permeability is very important for flow rate.

Quadrise continues to advance towards commercial revenues for its innovative fuel and biofuel technologies, with each of its projects approaching key milestones in 2024. Preparatory steps for the MSC Shipmanagement (MSC) fuel trials are now complete and fuel supply agreements are nearing finalisation. Quadrise will achieve its first licensing revenues on the successful completion of Valkor’s project financing (timing uncertain). Quadrise also successfully concluded its Morocco trial, paving the way for commercial negotiations. According to management’s guidance, the potential Valkor revenue, the £1.5m gross proceeds raised in March 2024 and the £1.7m of cash (at end-December 2023) will provide Quadrise the necessary working capital resources to 31 March 2025. By then, the Morocco and Utah projects should be generating commercial revenue and the trial with MSC will be near completion.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Hongqiao
• Delta Dunia Makmur

• Healthy sales volume (up by 9% YoY to 512,205 MT) drive revenues in Q3FY24
• EBITDA per ton remain subdued, but expected to steadily gather strength
• Acquisitions coupled with ramp up of existing capacity will help take the growth story forward

• Healthy sales volume (up by 9% YoY to 512,205 MT) drive revenues in Q3FY24
• EBITDA per ton remain subdued, but expected to steadily gather strength
• Acquisitions coupled with ramp up of existing capacity will help take the growth story forward

• I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals were discussed this week on Smartkarma: IntelliCentrics Global Holding (6819 HK) disposal/winding-up/special dividend arb; and Chilled & Frozen Logistics Holdings (9099 JP)‘s hostile Offer.
• Key updates took place on: Boral Ltd (BLD AU), Orecorp Ltd (ORR AU), Link Administration (LNK AU), and JSR Corp (4185 JP).

• Jindal Steel & Power (JSP IN)  has been engaging in high related party transactions with few promoter entities and the engagement is increasing year on year.
• The company still faces pain in its foreign mining operations especially Australia. A large amount of loans has been impaired and written off lately.
• The company also sees high churn in board of directors. However, on the flipside, the deleverage is visible and overall balance sheet health has improved.

• The bullish outlook for global equities (MSCI ACWI) that we initiated in early November 2023 remains intact; continue to ride this trend higher.
• Many of the heavily-weighted countries in terms of global market capitalization (U.S., Europe, Japan) are extended; we’d welcome some consolidation, though it may come from higher levels.
• Ultimately, market dynamics remain healthy, and we would treat pullbacks as buying opportunities. Downgrading India to market weight. Actionable Themes: Global Materials, Energy, Consumer Discretionary, and Industrials

• Petróleo Brasileiro S.A., also known as Petrobras, showcased strong financial results in the earnings call transcript for Q4 2023, despite an adverse external environment.
• The company presented the second highest economic and financial results in its history in terms of EBITDA, operational cash flow, free cash flow, and net profit.
• These outcomes were combined with numerous record achievements across its operations, including oil and gas production levels, refinement levels, and increased energy efficiency.

• This is our first report on mining player, Wheaton Precious Metals’ (WPM).
• The company’s recent fourth quarter and full year 2023 earnings exhibited a positive business outlook along with certain challenges.
• During the year, the company achieved solid financial performance by meeting its production guidance of 620,000 gold equivalent ounces (GEO’s).