Energy & Materials Sector

• TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.
• Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.
• Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.

• Back on the 1st November, Nikolai Levitskii, Russian iron-ore play IRC (1029 HK)‘s chairman and largest shareholder, acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
• The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing. At the first close, he held 35.77% (5.16% had tendered). 
• The current spread is 9.2%. MIC, with 16.67% of shares out, has yet to tender. Nor do I expect them to. Plus IRC is on the OFAC sanction list. Avoid.

• Growth is expected to be fueled by robust performance in international markets. Management expects revenue growth for 2023 to cross 15% YoY.
• Pretax operating margins in Q42023 to get a boost from higher year-end digital sales and seasonal product and equipment sales.
• The analyst consensus on the stock’s growth is overwhelmingly bullish given the expectation of strong growth in international and offshore segments.

• Ocean Power Technologies, Inc. (OPT) substantially completed its research and development (R&D) phase and has witnessed meaningful progress in orders, pipeline, and backlog across its business.
• Additionally, the company has reallocated headcount toward execution and commercialization to bolster its next phase of evolution.
• OPT’s cutting-edge suite of products provides comfort against macro headwinds and also positions the company for commercial success and profitability in 2025.

• Pulsar Helium is raising C$4.255 mm of new equity through a placement of 18.5 mm new unit at a price of C$0.23 per unit.
• Each unit consists of one share and one warrant with a strike price of C$0.36 per share. The warrants have a duration of 24 months.
• The proceeds of the raise will allow the company to fund the well test of the high impact Jetstream#1 appraisal well scheduled to spud in February at the Topaz project in Minnesota. 

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.

• Tata Steel Thailand

• The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
• We currently see 3 migrations from MidCap to LargeCap, 3 new adds to LargeCap, 6 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
• Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

• The Perico-1 exploration well at CPO-5 encountered hydrocarbons in the Barco (Guadalupe) formation.
• The well is currently producing 650 bbl/d of 14 deg API oil with 8% water cut.
• This is an important well that confirms the extension of the Llanos-34 Guadalupe play into CPO-5 and is probably derisking further prospects.

• The recently completed GH 14-06 #3 Upper Selma Chalk well at Gwinville has delivered average natural gas flow rate in excess of 6.5 mmcf/d over the first days of production.
• By comparison, the 18-10#2 Upper Selma Chalk well completed in 1Q23 had an IP rate of only 3.3 mmcf/d.
• The three wells that are awaiting completion include the first two Lower Selma Chalk laterals, along with the second City Bank lateral.

• Geopolitical risk has driven a resurgence in gold with price 1.5% higher following heightened tensions in the middle-east. 
• In a soft-landing scenario in 2024, gold faces downside risk from investor rotation to other assets.  
• Options metrics point to bullish positioning in gold, central bank demand remains a strong driver in H2 2023.

• In the evolving landscape of isotope production, ASP Isotopes stands poised for significant growth.
• With production scalability and a substantial interest backlog, ASP Isotopes is on the cusp of substantial free cash flow realization in 2024.
• Currently undervalued, the stock presents a rare opportunity for early investors to capitalize on ASP Isotopes’ anticipated market ascendancy and potential to redefine secure isotope supply chains globally.

• FY23 production was 6,508 boe/d, which is the middle of the production guidance of 6.35-6.75 mboe/d.
• This includes 5,127 boe/d for Vietnam (guidance of 5.0-5.3 mboe/d) and 1,381 boe/d in Egypt (guidance of 1.35-1.45 mbbl/d).
• While the production guidance is below our expectations of 6.8 mboe/d, the net capex forecast is also below our numbers (US$30 mm).

• 4Q23 production was 19,165 bbl/d (we expected ~21,300 boe/d) with minimal production at Wassana and declining production at Jasmine only partially offset by growing production at Nong Yao.
• The capex programme includes US$50 mm for Jasmine and US$47 mm for the new Nong Yao C development.
• YE23 net cash and YE24 net cash forecast Valeura held ~US$150.9 mm in net cash at YE23.

• With over 80% of the review period complete, there could be 26 adds/deletes across the S&P/ASX family of indices in March.
• The largest flow will be on Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
• There will be 1.2-38 days of ADV to buy in the inclusions while the impact on the deletions will range between 1-21 days of ADV.

• Conditions in the Energy Industry Continue To Worsen The quarterly Dallas Fed Energy Survey highlighted that business uncertainty is worsening again.
• It seems like the past two quarterly reports were only outliers – the trend remains worsening business conditions for gas and oil companies.
• The conflict in the Red Sea started to impact shipping rates. But as we wrote over the past couple of weeks, it is not substantially higher

• Wouldn’t the shareholders of Mitsubishi Chemical want to either TOB for the growth of the subsidiary or invest the cash from the sale of shares in a value-generating business?
• It’s difficult to exclude the influence of the parent company in business decisions that impact significantly on the parent’s earnings and shareholding. Is continued parent-subsidiary listing desirable for subsidiary’s shareholders?
• The management of Nippon Sanso wants to continue the parent-subsidiary listing, but their small shareholding may make it difficult to manage the company from the same perspective as the shareholders.

• This is a special, one-time report Callon Petroleum, currently exploring a sale, which presents a nuanced investment opportunity with several critical factors to consider.
• The company has demonstrated consistent financial performance, notably its 14th consecutive quarter of adjusted free cash flow generation, which is being strategically used for debt reduction and share repurchases.
• This fiscal prudence, coupled with a clear focus on cost reduction and operational efficiency, positions Callon well in the competitive energy sector.

Following a successful proof of concept, Nanoco recently announced a new joint development agreement (JDA) with its existing European customer, now confirmed as STMicroelectronics. This milestone further validates Nanoco’s smart materials capabilities, building on the first commercial orders for first-generation materials shipped in late 2023 and the expanded partnership with its Asian customer. With an improved financial position, Nanoco has been able to proactively invest in accelerating the development of new materials and services. The non-licence fee income and additional test material sales from the JDA help de-risk our FY24 revenue forecasts. Securing collaborations like this JDA will be key for Nanoco to continue scaling commercial production and delivering on management’s goal of becoming self-financing in CY25.

• Irc Ltd (1029 HK) notes that the offeror (Nikolai Levitskii) and acceptances reached 35.77% at the first closing date, materially short of the 50% minimum acceptance condition. 
• The offeror has extended the closing date by 39 days (30 business days) to 20 February, the last day the offer can become or be declared unconditional. 
• The rise in iron ore prices and a light offer pose challenges. The risk/reward profile is unfavourable as the upside (5.4% spread) outweighs the downside (20.5% to the undistributed price).

• The Scheme Meeting for PSP’s acquisition of Costa Group Holdings (CGC AU) will be held on 30 January and Costa Group could stop trading after the close on 8 February.
• Strike Energy (STX AU), SiteMinder (SDR AU) and Audinate (AD8 AU) are potential inclusions to the S&P/ASX 200 (AS51 INDEX) at an ad hoc rebalance.
• For the stocks that are not added at the ad hoc rebalance, there is a very high probability of S&P/ASX 200 (AS51 INDEX) inclusion at the March rebalance.

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.

• Innergex Renewable Energy
• Vedanta Resources

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Amer Sports (AS US), Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
• Event-Driven developments – Fuji Soft Inc (9749 JP), T&K Toka Co Ltd (4636 JP), Taisho Pharmaceutical Holdin (4581 JP), Irc Ltd (1029 HK), Weiqiao Textile Co (2698 HK). 

• On the 27 Dec, to circumvent Perseus (PRU AU)‘s 19.9% dissenting vote, Orecorp (ORR AU) and Silvercorp (SVM CN) agreed to an off-market takeover, on the same terms. 
• That Offer – A$0.19 in cash and 0.0967 new Silvercorp shares – opened on the 3 January.
• Silvercorp paid ~A$0.51/share, on-market, just prior to the Offer. OreCorp is currently trading ~A$0.51-$0.52/share. Is there any legal obligation to set a minimum floor price of A$0.51/share?

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess West China Cement’s ESG as “Adequate”, in line with its “Adequate” Environmental and Governance scores. That said, the company’s Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Ball Corporation delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
• In the third quarter, they improved operational efficiencies and successful measures to counter inflationary costs.
• Notably, they navigated through a $14 million operating earnings headwind from the Russian sale and $43 million higher interest expense.

• Gold continued to rise in December, gaining 1.3% on the month and closed out 2023 up 13% to $2,062/oz.
• Sentiment Update Gold closed out the year up 13% at $2,062/oz, marking an all-time high in December at $2,135/oz.
• Uranium posted yet another month of positive gains, ending the month up 12% at $91.0/lb and closing the year up 89%.

• Corteva delivered a disappointing result with below-par revenues and on-par earnings.
• Despite a 1% year-to-date sales decrease, pricing gains globally, especially in Seed and Crop Protection, contributed to a 9% increase in global pricing.
• On the other hand, Crop Protection net sales declined by 10%, with a 12% drop in organic sales due to pricing gains being overshadowed by lower volumes.

• EDG reported assay results for two diamond drill holes at the Imperial Zone, intersecting wider than expected mineralized zones.
• The 2023 drill program has concluded with 5,301m completed across 22 drill holes, assays remain outstanding for 7 holes.
• This morning, Endurance Gold Corp. (EDG:TSXV) announced assay results for two drill holes at the Imperial Zone.

• EDG reported assay results for the last seven diamond drill holes of the 2023 drill campaign from the Eagle and Crown Zones.
• This morning, Endurance Gold Corp. (EDG:TSXV) announced the final set of assay results for the 2023 drilling season.
• The results were for the final seven holes drilled at the Eagle and Crown Zones, returning high-grade intersections, notably 5.80 g/t Au over 23.0m, including 8.52 g/t Au over 12.7m and five high-grade vein intercepts, one with visible gold.

• This is a special one-time report on Equitrans Midstream Corporation.
• A significant factor in Equitrans’ future is the completion of the Mountain Valley Pipeline (MVP) project, now expected in the first quarter of 2024.
• The MVP, with an increased budget of $7.2 billion, is critical for Equitrans, offering potential revenue streams once operational.

• Today’s results highlight the existence of other high-grade gold targets nearby the existing resources which could be important in providing low-cost high-grade mill feed in the early years of an operation.
• This morning, Omai Gold Mines Corp. (OMG:TSXV, OMGGF:OTC) announced the completion of its 2023 Omai Project drill campaign and drill results for two additional holes completed on the nearby SP and BBH exploration targets.
• One of the two exploration holes, which tested a historical high-grade target at SP, intersected two high-grade gold zones of 7.69 g/t Au over 9.5m and 3.42 g/t Au over 15.0m.

• Packaging Corporation of America delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus in earnings.
• The company announced a third-quarter net income of $183 million, reflecting a decrease compared to the third quarter of 2022, when net income stood at $266 million.
• The management’s cost-effective approach to containerboard supply and demand management included idling the Wallula mill, resulting in market-related downtime of approximately 174,000 tonnes.

• In this note, we will take a look at the Asia Pacific IPO pipeline for 2024, following up with India after having looked at Hong Kong earlier.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

• Despite supply cuts by OPEC members the EIA expects supply to outpace demand for most of 2024 and 2025.
• The agency forecasts the average spot price of WTI and Brent to decline in 2024 and 2025.
• Concerns of tepid global demand and inventory build-up grow as short positions in the crude oil options market jump.

Key points (machine generated)

• Italmobiliare, an Italian investment company, has seen exceptional performance with a 26% portfolio internal rate of return since a new strategy and management team took over five years ago.
• Despite its strong track record, the company’s stock price is undervalued by over 50% compared to its net asset value.
• Insiders are showing confidence in the company’s future prospects by aggressively purchasing shares, suggesting potential future growth.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• In August when Bain announced that it would launch a Tender Offer for T&K Toka Co Ltd (4636 JP) I suggested in my first piece it was the wrong price. 
• I suggested it needed another ¥1,000 added onto the price. If the ¥1,300 price Dalton initially indicated seemed low to T&K TOKA, another ¥100 doesn’t seem right.
• It took time. Now it looks like a tender offer launch is imminent. The stock has traded through terms for almost 5 months, but not by a lot.

• T&K Toka Co Ltd (4636 JP) notes that Bain expects to satisfy the pre-condition and launch the JPY1,400 tender offer by mid-January. 
• The shares have, on average, traded 1.9% above the offer due to Dalton’s stakebuilding. Bain has three options – unchanged terms, allowing Dalton to roll over its shares, or bumping. 
• Bain is likely to bump as satisfying the minimum acceptance condition is challenging. A revised offer price of around JPY1,500 is possible.  

• Shougang Fushan Resources (639 HK) energy, a pure play on high coking coal prices, now trades at 5.7x FY24 PE (1.5x EV-EBITDA), assuming 2,200 RMB/ton prices (vs spot 2500). 
• The company has ~7.5 bn HKD of net cash (on H12023), representing 50% of the market cap despite conducting a recent buyback of 5% and paying all its outstanding dividends/taxes. 
• With an 80% payout, we can also expect a dividend yield of 14% for FY24 if prices average 2200 RMB/ton.  

• Rain Industries is an Indian small-cap company (~$660M) that manufactures 2 carbon-based inputs for Aluminium Industry (10% of global market share).

• It also has a cement & value-added chemical business

• The Company is ignored by market likely due to its ‘commodity’ nature, debt on their balance sheet and small market cap which drives most investors away. 

NioCorp is developing the Elk Creek mine in Nebraska, which currently hosts the second largest ‘indicated’ or better rare earth resource in the US and, once in production (potentially in FY27), will be North America’s only mine producing niobium, scandium, titanium and rare earths (all of which the US define as ‘critical’). A definitive feasibility study (DFS) on the project in June 2022 calculated a pre-tax internal rate of return (IRR) of 29.2% and a post-tax net present value (NPV8) of US$2,350m, or US$70.51 per existing share in issue, to which NioCorp’s shares are currently trading at a 95.6% discount. However, the project now appears poised for a material change in product mix to improve its economics and reduce its previous, heavy reliance on scandium revenue.

Edison Investment Research is terminating coverage on Kinarus Therapeutics (KNRS), Numis Corporation (NUM), EMIS Group (EMIS), Pixium Vision (PIX) and Treatt (TET). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via website