Energy & Materials Sector

• After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held. 
• The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 
• The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.

• Rio Tinto Ltd (RIO AU) invited the investing community to Mongolia in early July.
• During the briefing comments were made regarding its position in Entree Resources (ETG CN) which makes us believe a deal is imminent. These comments were later deleted from its transcript.
• We expect newsflow around Rio/Entree’s future relationship before arbitration starts in April 2024.

• In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in December 2023.
• Based on the latest available data, I expect one ADD and one DEL for HSCEI in December 2023. 
• There is more than one potential ADD in the top 40 according to my estimates but recent history tells us some of these names are not “index-provider-friendly.“

• Over the last two weeks we discussed expectations for an oversold bounce; the bounce has continued. We believe it is possible we’ve seen the lows for this pause/pullback on SPX.
• We see low probability of a meaningful correction if SPX is above 4300-4325 (1.5-year support), but would not be surprised to see another month+ of consolidation between 4325 and 4600.
• Shorter-Term, as long as 4460 short-term support holds, we expect a test of 4600. Today we highlight several buys within Energy.

• Shiva Pharmachem Limited (9155347Z IN) is looking to raise around US$110m in its upcoming India IPO. The bookrunners on the deal are JM Financial and Kotak.
• Shiva PharmaChem (SP) is a manufacturer in the Indian specialty chemicals business. 
• As per Frost & Sullivan (F&S), the firm is the largest manufacturer of acid and alkyl chlorides by volume in CY22 in India and a key player globally.

• Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering. 
• ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
• This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

• There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
• That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
• There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

• JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
• The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
• Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

• Orora Ltd (ORA AU) is looking to raise A$1,345m (~US$870m) via a primary placement and an entitlement offer to partially fund its acquisition of Saverglass.
• While the exact size/target of an acquisition wasn’t explicitly mentioned earlier, the firm had discussed its potential use of M&A to grow its North American/Europe regions. 
• Including the entitlement offer, the deal would represent 212 days of three month ADV and add 58.9% to the firm’s total shares outstanding.

• EDG reported assay results for three drill holes, two at the Eagle Zone and one at the previously undrilled Crown target.
• This morning, Endurance Gold Corporation (EDG:TSXV) announced assay results for three drill holes, two at the Eagle Zone and the first drill hole completed at the Crown target. 
• Hole-071 is the first drill hole completed in the Crown area and intersected the northwest extension of the Eagle Zone with 3.81 g/t Au over 3.4m.

• Liontown Resources (LTR AU) has received a revised non-binding privatisation proposal from Albemarle Corp (ALB US) at A$3.00 per share, a 20.0% premium to the previously rejected offer of A$2.50.
• The revised offer is attractive compared to the Kathleen Valley Lithium Project’s NPV range, peer multiples and historical share prices. The offer price is final, barring a superior proposal.
• Liontown has granted Albemarle a limited period of exclusive due diligence. The Board intends to recommend a binding proposal at A$3.00 per share. The retail vote could be a risk.

• Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
• The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
• The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.

• The S&P/ASX 200 INDEX has been stuck in the 7000-7600 range for the past 2 years, with a brief dive to 6500 during the summer of 2022. 
• If we consider the bottom at 6411 in October 2022, the index may have started to build an uptrend since then, but failed repeatedly to breach past the 7600 barrier.
• After a brief correction in August 2023, the index is currently rising, but soon it will encounter WEEKLY resistance that could hamper its chances of breaking out of its range.

Alphamin Resources (AFM) offers rare exposure to a metal (tin) that both Rio Tinto and the MIT regard as the most likely to benefit from the electrification of the world economy. Having successfully ramped up its Mpama North mine at Bisie in the Democratic Republic of the Congo in 2019–20, when the tin price was enjoying one of its biggest bull markets in decades, AFM is now in a net cash position and is paying dividends at the same time as developing a second mine (Mpama South).

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.

• West China Cement

• Carlyle Group is buying Seiko Pmc Corp (4963 JP) from 54+% owner Dic Corp (4631 JP) and minorities in a Tender Offer with optical premium of 89%. 
• It looks good, takes advantage of tax code particularities, and the nature of the company disguises some value. Shareholder structure means this is basically a done deal before it starts.
• With minimal foreign active investor ownership, and significant crossholder, ESOP, and director ownership, only a bit of retail actually needs to tender to make this successful.

• There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
• There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
• On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

• The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
• Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
• Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

• Seiko Pmc Corp (4963 JP) has recommended Carlyle Group / (CG US)’s tender offer of JPY1,070 per share, an 88.7% premium to the undisturbed price.
• Dic Corp (4631 JP) will not tender but vote for the share consolidation at the EGM. Post consolidation, DIC will sell its 54.51% stake to Carlyle at JPY799 per share.
• Achieving the minimum ownership ratio (12.16%) requires a 26.7% acceptance rate, which is doable as the offer is attractive. The tender offer runs from 4 September to 17 October. 

• 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 – Doosan Robotics (454910 KS), ARM Holdings (1822695D US), Integral Corporation (5842 JP) and S.F. Holding (002352 CH) IPOs.
• Event-Driven developments – JSR Corp (4185 JP), Seiko Pmc Corp (4963 JP), Eoflow (294090 KS), ENM Holdings (128 HK), Shougang Fushan Resources (639 HK), Costa Group Holdings (CGC AU).  

• We think Kunlun Energy (135 HK) will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.
• It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. 
• Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.

• Back on the 28 March, Liontown Resources (LTR AU) rejected the third proposal of $2.50/share from Albemarle (ALB US), the world’s largest lithium producer, citing terms were opportunistic.
• Then everything went quiet. There appeared to be an interested party building a stake ~$2.75/share, but nothing concrete emerged. 
• Now Albemarle has returned with a revised indicative proposal of $3.00/share – best and final. Due diligence has been granted. The board is supportive if terms are firmed.

• The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
• There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
• Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

• The September 2023 review results for ASX indices were announced after the close on Friday 1st September 2023. 
• There will be 15 ADD names and 15 DELETE names across ASX 100, ASX 200, and ASX 300. Collectively, the ADDs could see one-way flow of roughly US$450mn. 
• Many names have a significant number of days to trade. Some of these names have seen a spike in short interest recently. This should be an interesting flow event.

• Korea’s local market is perceiving the present HMG investment as a crucial indicator, signaling the initiation of an intense proxy battle for Korea Zinc.
• Given the relatively constrained nature of the neutral minority stakes, falling below 30%, there is considerable attention on the potential for a immediate-term share buying race.
• This is expected to trigger momentum trading flows directed at Korea Zinc. Such a scenario might lead the stock price to venture into an overshooting zone.

• Ecolab delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• The company’s effective execution and easing inflationary pressures contributed to reaching the upper end of its projected Q2 earnings growth range.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Enterprise Products Partners’ results were a major disappointment as it failed to meet the revenue as well as the earnings expectations of Wall Street.
• Despite challenging market conditions with lower prices for various energy products, Enterprise Products Partners delivered a resilient financial performance in the year’s second quarter.
• Furthermore, Enterprise Products Partners achieved several operational momentums during the quarter, underscoring its operational excellence and commitment to delivering value to its stakeholders.

• Pioneer Natural Resources delivered a mixed result in the recent quarter, with revenues below market expectations.
• Still, it surpassed the analyst consensus in earnings, achieving oil production that exceeded expectations and showcased healthy performance compared to the previous year.
• As a result of the exceptionally well productivity and efficient operations, Pioneer has decided to increase its full-year 2023 production guidance.

• PT Avia Avian is Indonesia’s leading integrated paint manufacturing company with around 20% market share. It is undergoing a strong recovery in margins as raw material inputs have stabilised. 
• The company continues to expand both its distribution centres and the range of products it offers, with a strong emphasis on below-the-line marketing, reaching 54,000 retail outlets.
• PT Avia Avian (AVIA IJ) is an interesting proxy for the strong recovery in Indonesia’s economy and property market, with the added tailwind of lower input costs. Valuations are attractive. 

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.

• Fosun International

Pan American Silver (PAAS) reported a significant increase in mineral reserves and resources estimates, for gold in particular, on the back of the Yamana transaction. Inclusive of MARA, Morococha and Jeronimo, the company’s total proven and probable (P&P) reserves grew 12% y-o-y to 577Moz of contained silver (Ag) and 259% to 13Moz of contained gold (Au). PAAS plans an extensive drilling and exploration campaign for 2023 in order to further upgrade and extend the resource base. While our financial estimates remain unchanged, we have slightly revised our valuation down to US$22.0/share to reflect the reported reserves and resources data.

• KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
• Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
• Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.

• Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
• The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
• If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%. 

• Singapore-based solar-as-a-service startup Solar AI Technologies has secured US$1.5 million in a seed funding round led by Earth Venture Capital with participation from Undivided Ventures, Investible, and climate-tech angel investor David Pardo.
• The funds will primarily be used to upscale its rent-to-own (RTO) solar programme in the island nation before embarking on regional expansion in the next 12 months.
• Started in 2020 by Chew (CEO), Gérald Chablowski (CTO), and Luke Ong, Solar AI seeks to make rooftop solar accessible and hassle-free for smaller, underserved property owners by providing them with zero upfront cost.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Schoeller Allibert’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Schoeller Allibert is a leading manufacturer of returnable transit packaging (RTP) products in Europe.