Energy & Materials Sector

• Our base case valuation for Ecopro Materials is implied price per share of 40,325 won per share, which is within the IPO price range of 36,200 won to 46,000 won.
• Given the lack of upside relative to the IPO price range, we have a negative view of this IPO. 
• Ecopro Materials is engaged in the business of manufacturing and selling high-nickel precursors, one of the key materials for high-nickel anode materials for secondary batteries.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess SierraCol’s ESG as “Adequate”, in line with the Environmental, Social and Governance pillars. Disclosure is “Adequate” and Controversies are “Immaterial”.
• SierraCol has an “Adequate” Environmental score, mainly owing to the targets set for all key environmental factors.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Vedanta Resources
2. Tata Steel Ltd
3. JSW Steel Ltd
4. China Jinmao Holdings
5. Geely Auto

and more…

• China Petroleum & Chemical Corp., the state-owned energy giant known as Sinopec, is making a bigger push into a renewable energy generated by heat within the earth as the country looks to diversify its sources of green energy.
• Sinopec’s push could serve as a catalyst for fast-tracking the exploration and use of geothermal energy, and spur the development of related technologies in the country, experts said.
• The company said on social media on Sept. 14 that it was expecting a “major development” in its geothermal heating segment and that it was on track to expand its service to more than 60 cities in over 10 regions in China by the end of the year.

• The return of higher crude oil prices could result in Texas Pacific Land (TPL) reporting higher than expected revenue in the third and fourth quarters of 2023
• TPL does not hedge its exposure to energy prices, which would have an outsize benefit when prices move higher like they have in the third quarter
• Crude oil production has been rising even though total rig count has also declined from levels reached earlier in the year

• Celanese Corporation’s results were a major disappointment as it failed to meet the revenue expectations as well as earnings expectations of Wall Street.
• Additionally, $150 million in M&M synergies, aided by the first-quarter SAP integration, are anticipated to enhance cost savings.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Hunt Oil’s ESG as “Adequate”, in line with its Social and Governance scores. However, the Environmental pillar is “Weak”. Controversies are “Immaterial” but Disclosure is “Weak”.
• Hunt Oil Company of Peru LLC, Sucursal del Peru (HOCP) is a wholly owned, indirect subsidiary of Hunt Oil Company, one of the largest privately owned hydrocarbon companies in the US.

• Taiwan Cement (1101 TT) is looking to raise US$400m in its upcoming global depository receipts (GDRs) offering. Included is another planned raising of US$500m via convertible bonds.
• Similar to previous GDR listings, the deal is a long drawn out process with TC requiring multiple approvals, and thus providing ample time for investors to position for the raising. 
• As of last close, the amount of shares to be offered under the equity component is around 388m shares, or 19.5 days of three month ADV. 

• Ecopro Materials will benefit from passive flows generated by being a part of the battery-themed ETFs in the Korean local ETF market. And this will create noteworthy flow instances.
• There will be a total of six flow events occurring consecutively from March to June next year. For all except for K-New Deal, there is a high likelihood of inclusion
• In particular, it appears that we should target the rebalancing trading of the TIGER Secondary Cell ETF, which occurs on the second Thursday of April next year.

• EcoPro Materials (ECO123 KS) is looking to raise up to US$500m in its Korean IPO. 
• Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries. 
• Ecopro Materials’ revenue has grown by more than three times over the track record period.  However, its parent company Ecopro and sister company Ecopro BM have been mired in controversy.

• In a surprise development, UnionBank of the Philippines (UBP PM) will be deleted from the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and replaced with Nickel Asia (NIKL PM). 
• There will be a BIG impact on both stocks as a result of the change with passive trackers need to trade in excess of 30 days ADV.
• Expect both stocks to move today and then continue that move for the next few days till the changes are implemented.

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.

• Vedanta Resources

• Taking into account the investment by JAPEX to secure 49.9% of Longboat Norge, Longboat plc holds £10.9 mm in cash.
• This includes £5.3 mm representing Longboat’s share of the cash in Longboat Norge (50.1% of £10.6 mm).
• Overall, we forecast that Longboat plc will hold ~£4 mm in cash at YE23.

• What you need to know about the SG market #whatstrending feat. #whatstrending is a new series addressing some of the most trending questions/topics on the markets for investors.
• Global oil demand growth expected to exceed supply growth in 2023 What are companies that have benefitted from higher oil prices?.

• Ball Corporation delivered mixed results for the previous quarter, with revenues below analyst expectations but on-par earnings.
• The year 2023 presented challenges for Ball Corporation, as comparable diluted earnings per share declined to $0.61 from $0.82 in 2022.
• Net comparable earnings also decreased in the second quarter, driven by higher interest expenses, the impact of the Russian business sale in 2022, lower volumes, and increased corporate costs.

• ConocoPhillips delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• The company executed several significant agreements and acquisitions, including purchasing the remaining 50% of Surmont, a valuable asset expected to contribute substantial free cash flow.
• Despite commodity price volatility, the company delivered an underlying solid performance, achieving significant global and Lower 48 production and raising yearly production guidance.

• International Flavors & Fragrances’ results were a major disappointment as the company failed to meet Wall Street’s revenue and earnings expectations.
• The performance in the Scent and Pharma segment was robust, with solid pricing and productivity gains.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• EcoPro Materials (ECO123 KS) was founded in 2017 and specializes in manufacturing cathode material precursors, a core material for lithium secondary cells.
• EcoPro Materials (ECO123 KS) could raise between US$387m-US$492m, valuing the company between US$1.9bn-US$2.42bn. Float will depend on voluntary lock-ups and allocation to strategic investors.
• Inclusion in global indices is likely to take place between February to June, while the highest probability of Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion is in December 2024.

• In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the SE600 and EURSTX Indices for the December 2023 Rebalance.
• There could be up to seven index changes in the run up to the December 2023 rebalance.
• This includes a couple of intra-review index changes that could be triggered by the Dechra Pharmaceuticals (DPH LN) and Chr Hansen Holding A/S (CHR DC) takeover situations.

• Portfolio company, H2U announced strong results from durability tests on a new iridium-free catalyst which demonstrated a lifetime of over 25,000 hours (vs. 1,000-1,500 for current iridium-free catalysts).
• JEV’s EU partner, Exogen signed an MOU with leading green hydrogen supplier, Lhyfe SA which will supply hydrogen to Exogen’s hydrogen steam plant (which includes the DCC boiler).
• HT obtained a new patent for the DCC boiler in the U.S

• Pulsar has signed a rig contract with Capstar drilling to drill a high impact appraisal well at Topaz.
• The well will twin an existing well than encountered and flowed helium at high rate (10.5% helium concentration).
• The program is for one well, with the option to drill a second well at the company’s option.

• The indicative price band is ₩36,200 to ₩46,000. Accordingly, the market capitalization implied by the price band is ₩2.68T to ₩3.40T.
• The concern arises as to whether Ecopro Materials can consistently deliver a level of profitability that justifies receiving an equivalent valuation multiple to that of Ecopro BM.
• The timing of this IPO coincides with the ongoing valuation correction in the local battery sector, making the valuation issue the most critical point to watch in this IPO.

• Ecopro Materials is getting ready to complete its IPO in KOSPI in November 2023. The IPO price range is from 36,200 won to 46,000 won. 
• The IPO offering amount is from 524 billion won to 666 billion won. The expected IPO market cap is from 2.7 trillion won to 3.4 trillion won.
• The bankers used four companies including CNGR, Posco Future M (003670 KS), L&F, and Cosmo AM&T (005070 KS) as comps for Ecopro Materials.

• EOG Resources, Inc. managed to surpass the revenue and earnings expectations of Wall Street.
• This quarter, they emphasized improved drilling performance in the South Powder River Basin, Mowry, and Ohio Utica Combo plays.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

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.

• Indika Energy
• Tata Steel Thailand

• The Newmont (NEM US) CDI selldown on 15 December will have to be bought by active shareholders, not passive; a relatively large reverse funding trade on the ASX rebal.
• Naspers (NPN SJ)/Prosus NV (PRX NA)‘s CEO steps down. However, operations/investments, and the ongoing tweaking of the organizational structure with respect to Tencent (700 HK), should continue unabated. 
• Activist shareholders and Toshiba Corp (6502 JP) stuck with each other for years. The takeover allows both sides to escape their mutual bearhug,

• Barito Renewables (2306028D IJ) is looking to raise around US$228m in its Indonesian IPO.
• Barito Renewables (BR) is Indonesia’s largest geothermal power producer, and the third-largest globally by installed capacity, as per the firm.
• In our previous note, we covered the company’s performance. In this note, we will undertake a quick peer comparison and share our thoughts on valuation.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Greentown China
3. China Vanke
4. First Pacific Co
5. JSW Infrastructure

and more…

• In addition to full market cap and trading value, float-adjusted market cap will be added as a quantitative screening tool. 
• Regarding extreme price increases, KRX plans to utilize the deviation between the average daily market capitalizations for two, three, and six months leading up to the screening base date.
• We should consider designing trading setups that target stocks with relatively low free-float rates and high price volatility in recent months.

• Barito Renewables (2306028D IJ) is looking to raise around US$228m in its Indonesian IPO. 
• Barito Renewables (BR) is Indonesia’s largest geothermal power producer, and the third-largest globally by installed capacity, as per the firm. 
• Its revenue has been primarily driven by electricity and steam sales to PLN as PGE’s exclusive contractor and its profitability has been on the rise over the track record period.

• Freeport-McMoRan Inc. delivered a mixed result in the recent quarter, with revenues above market expectations, but it failed to surpass the analyst consensus regarding earnings.
• Despite this setback, Freeport-McMoRan outperformed expectations, achieving a lower-than-expected unit net cash cost of 47 per pound.
• This, combined with solid copper prices, resulted in robust margins and an impressive EBITDA of 14 billion.

• In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the December 2023 Rebalance.
• There could be a couple of intra-review changes in the next 2-3 months but the intra-review replacement names could depend on the timing of these changes.
• Separately, I see one regular ADD and DELETE for F250 in December 2023 but many names are close to the border and index change expectations could change if prices fluctuate.

• Cleveland-Cliffs Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
• Cleveland produced its best free cash flow quarter since 2021, with $756 million.
• The richer mix had an offsetting effect in Q2 on expenses, as Cleveland’s unit costs were unchanged from the previous quarter.

• RPM International Inc. delivered a positive result and managed an all-around beat in the last quarter.
• Net sales for the Construction Products Group reached $748 million, a small increase over the same period the previous year.
• The consumer group increased sales by 4.9% to $716.4 million in the quarter.

• Trigon announced drill results from Kombat at the East 400 area, with a highlight of 4.2% Cu over 13m.
• This morning, Trigon Metals Inc. (TM:TSXV) announced confirmation drill results at the Kombat Mine in Namibia.
• The drill results reported today have extended the known mineralization and mineable tonnage in the East 400 area (Figure 1).

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 Jinmao Holdings
• China Vanke
• Greentown China
• Vedanta Resources

• Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
• More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun. 
• There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

• The recent share price pullback sees PTT PCL (PTT TB) trading below its long-term averages, and with respect to peers. 
• Preceding my comments on PTT are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the December 2023 Rebalance.
• There could be up to five ASX 200 changes including the intra-review changes that could potentially be triggered by M&A events.
• There are also couple of possibly large reverse funding flow scenarios involving Newcrest Mining (NCM AU) and Allkem Ltd (AKE AU).

• ECVT has faced two maintenance challenges this year that should be out of the way by the time the Company reports third quarter results.
• Third quarter sales could remain subdued from the maintenance downtime but should rebound in the fourth quarter with demand for ecoservices remaining elevated
• ECVT’s stock has suffered from a series of block sales and the business undergoing two unplanned maintenance downtimes this year

• Please note that this Market Update is only available in Chinese. 本地投资者也可以关注新加坡市场上的油气投资标的，近期它们的表现相当不俗，比如https://investors.sgx.com/securities/stocks?security=T13、https://investors.sgx.com/securities/stocks?security=5WH以及https://investors.sgx.com/securities/adrs?security=TPED等。 同时，在新加坡上市的https://investors.sgx.com/securities/adrs?security=TPED 的趋势和动能也在图表上表现出相当的强劲。.