Energy & Materials Sector

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Braskem Idesa’s ESG as “Adequate”, in line with its scores for the Environmental, Social and Governance pillars. Controversies are “Material” and Disclosure is “Strong”.
• Braskem Idesa (Bakide), a single-asset 75%/25% JV between Braskem and Idesa, is Mexico’s largest polyethylene (PE) producer.

• CF Industries Holdings managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• The company had net earnings of $560 million for the first quarter of 2023.
• We give CF Industries Holdings, Inc. a ‘Hold’ rating with a revised target price.

• FMC delivered a mixed result in the recent quarter, with revenues below market expectations but it managed to surpass the analyst consensus in terms of earnings.
• North America experienced a substantial quarter with significant sales growth, driven by high customer demand, price increases, and a favorable product mix.
• Despite revised market conditions, FMC’s management is confident about achieving revenue growth through pricing gains, new product offerings, and expanded market access.

• Jericho announced a strategic industrial partnership with Sofinter Group and EXOGEN Hydrogen to manufacture, implement, and service a new hydrogen steam plant (the HSP3000).
• The HSP3000 will be a scalable and modular solution featuring HT’s DCC boiler technology which will be produced by Sofinter and marketed by Exogen.
• The HSP3000 is being produced and assembled by Sofinter Group and features Hydrogen Technologies’ (100% owned by JEV) patented DCC boiler technology.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Pemex’s ESG as “Weak”, in line with the “Weak” Environmental, Governance and Social scores. Controversies are “Material”, but Disclosure is “Adequate”.

• Ring is pursuing a strategy to position the company to ultimately return capital to shareholders.
• Execution involves accretive acquisitions that generate free cash flow, which can be applied to the balance sheet to reduce leverage.
• Please see our June 22, 2023, Management Series Report “Conventional Path to Shareholder Value” for discussion of the strategy.

• Statistics South Africa released new mining data on Thursday morning.
• Sibanye Stillwater Limited stock and ADRs surged shortly after the release.
• However, our analysis highlights the risk of year-end impairments, according to our analysis.

• WestRock delivered an all-around beat in the most recent quarterly result.
• Low demand, increasing inflation, and shifting consumer spending continue to affect the company’s Corrugated Packaging and Global Paper businesses.
• With new client wins and rising income from plastic replacement, WestRock has seen improved stability in its consumer packaging market.

• We take a look at Ecopro Co Ltd (086520 KS), Kum Yang (001570 KS) and Jyp Entertainment (035900 KS) since they appear to be on investor radars.
• Foreign investors have been buyers while retail have been sellers in Ecopro Co and Kum Yang over the last month, while foreign investors have continued to buy Jyp Entertainment.
• Short interest on all stocks has dropped over the last month, though there has been a recent tick up in shorts on Jyp Entertainment (035900 KS). 

Vedanta Resources Ltd is widely reported to be exploring asset-liability management related to the USD bonds due in 2024 and 2025. The plan apparently involves: [1] repaying USD 500 mn of the secured USD 1 bn 13.875% January 2024 notes, while rolling the remaining principal into the unsecured USD 9.25% 2026 notes; [2] converting the USD 950 mn 6.125% August 2024 notes into new secured notes due in 2026; and [3] redeeming USD 250 mn of the USD 1.2 bn 2025 notes, while exchanging the remaining principal into a new bond due in 2027.

The proposal might not be well-received by the affected bondholders, who would likely expect full repayment at maturity. We move to “Hold” on the VEDLN notes from “Buy”.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Orbia’s ESG as “Adequate” bordering on “Strong”, reflecting the company’s “Adequate” Social and Governance scores as well as its “Strong” Environmental score. The Environmental pillar carries the highest weightage in our assessment, due to the nature of the chemicals industry. Controversies are “Immaterial” and Disclosure is “Strong”. 

• Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
• There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
• There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

• Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
• The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
• The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  

• Syngenta Group (1844795D CH) is looking to raise around US$9.2bn in its upcoming China A-share IPO.
• Syngenta Group (Syngenta) is one of the largest agricultural firms globally, developing, producing and commercializing a portfolio of crop protection, seeds, crop nutrition products.
• In this note, we will talk about the not so positive aspects of the deal.

• Chariot has raised US mm of new equity priced at £0.14 per share.
• The company is also looking to raise up to an additional US$3 mm through an open offer. 
• The proceeds of the raise will be used to drill four new low cost/low risk exploration wells onshore Morocco in a licence expected to be awarded imminently.

• 3,030m of the 15,000m 2023 program have been completed to-date, totaling 11 holes.
• This morning, Endurance Gold Corporation (EDG:TSXV) provided an update on the ongoing exploration program at its Reliance Gold Project and assay results for one drill hole completed at the Imperial target.
• Eleven holes have now been completed for over 3,030m of the ongoing 15,000m drill program, the largest program to date.

• ADX is issuing A$1.5 mm of loan notes with a term of 18 months.
• A$1.0 mm of the loan notes carry an interest rate of 8% per annum with 30 mm options with an exercise price of A$0.01 per share and 30 mm options with an exercise price of A$0.014 per share.
• ADX expects to secure farm-in partners for some of its Upper Austrian drilling projects during the summer.

• 2Q23 production was 22,097 bbl/d, near our forecast of 22.8 mbbl/d.
• Drilling operations at the Manora oil field are currently in the final stages of a three-well programme.
• Valeura has paid US$178.1 mm in tax during 2Q23 in line with the our expectations.

• In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally. 
• It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too. 
• FUD and Flows mean that it is likely to continue to trade wide for the near future.

• We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
• Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
• Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

• Why isn’t Gold starting to sell off? In last week’s report, we already highlighted that the golden metal stays unattractive – as the Fed will likely do more rate hikes.
• The, in some parts, stronger-than-expected job market data we received last week confirmed that view once again.
• We find it interesting that gold hasn’t shown more weakness yet – even as rates continue to rise again.

• Syngenta Group (1844795D CH) is looking to raise around US$9.2bn in its upcoming China A-share IPO.
• Syngenta Group (Syngenta) is one of the largest agricultural firms globally, developing, producing and commercializing a portfolio of crop protection, seeds, crop nutrition products.
• In this note, we will talk about the positive aspects of the deal.

• Initial invoices submitted to the insurer have now been approved and reimbursement totalling ~US$0.8 mm have been received.
• Additional invoices are being submitted on a regular basis with payments expected within 30 days of receipt by the insurer.
• Greater costs will come later in the process and are expected to be regularly re-imbursed as invoices are submitted.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads  111 Inc (YI US), ENM Holdings (128 HK), Chindata Group (CD US), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
• Lowest spreads – Healius (HLS AU), Hailan Holdings (2278 HK), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Oishi Group PCL (OISHI TB), Yachiyo Industry (7298 JP), Penguin. 

• The derivatives market will commence trading 15 minutes earlier, starting from July 31st. On July 7, KRX published guidelines that consolidate crucial factors for traders to consider regarding this alteration.
• From a theoretical standpoint, the early discovery of derivative prices influenced by pre-market external variables can help mitigate excessive shocks in the spot market.
• Considering suspected matched order fraud, particularly involving large-cap battery stocks, we should anticipate attempts to further exacerbate volatility in the early stages of the spot market using this earlier opening.

• TOA Paint is Thailand’s leading decorative paints player with a 48% market share and a good track record but it has become caught up by association with STARK Corporation.
• This looks like a guilt by association sell down given there are no visible business connections between STARK and TOA Paint but the eldest son of the family controls Stark.
• The second son of the Patriarch is CEO of TOA Paint, which is otherwise enjoying a strong recovery in demand plus lower input costs. Valuations have declined to attractive levels. 

• Olympic Industries (OLYMPI BD)  experienced weak 3Q earnings due to moderated growth, contraction of margins, and the impact of high inflation.
• Square Textiles (SQTT BD) recorded weak 3Q numbers due to factors such as a decline in yarn production, increased energy costs, and decreased yarn prices in the international market.
• Bashundhara Paper Mills (BPML BD)  delivered strong 3Q earnings driven by increased sales, leading to improved profitability.

• Recent events suggest change is en route at Anglo American plc.
• A managerial shakeup is in full swing with “next generation” leadership emphasized.
• Kio Kumba is pushing for a railway lease deal with the South African government.Investors must consider past and future impairment charges with caution.

• 1st Vertical | Recycling and Renewables: A very important vertical segment helping APERAM Group to attain a neutral CO2 emission footprint.
• Innovative business based on new technology. Companies active within the segment are ELG (Recycling), BioEnergia (charcoal production from forests; plant in Brazil, CO2 neutral), Recyco (metal recycling from dust).
• Represented 13% of consolidated EBITDA in FY 2022.

• Our estimations for 2023 annual revenue range around $6,805 million and for 2024 around $7,354 million.
• The company’s annual revenue reached $9,701 million in 2022, compared to $10,518 million in 2021, posting a de- crease of 7.77%.
• West Fraser Timber Co. Ltd.’s gross profit for 2022 was $4,559 million, a decrease of 22% compared to $5,873 million for the corresponding period in 2021.

• Following HDFC Limited (HDFC IN)‘s delisting, JSW Steel Ltd (JSTL IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) at the close on 12 July.
• The change was largely expected, but passive trackers need to buy over 5 days of ADV and nearly 12 days of delivery volume of JSW Steel Ltd (JSTL IN) .
• The HDFC Limited (HDFC IN) delisting could help Wipro Ltd (WPRO IN) in avoiding deletion from the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) in December.

• Zhejiang Yongtai Tech A (002326 CH) is looking to raise US$107m in its London GDR listing. Huatai is the sole bookrunner on the deal.
• The firm is offering 11.4m GDRs (1 GDR to 5 ordinary A-shares) for sale, at a fixed 12.7% discount to last close on its A-share leg.
• The deal is a relatively small one for the firm to digest, representing just 3.9 days of three month ADV on its A-share leg.

• SKC announced aggressive plans to expand its rechargeable battery, semiconductor, and ecofriendly materials and it plans to invest about 5 trillion to 6 trillion won in these businesses by 2027. 
• We believe that the company will use a combination of asset sales, sale of its treasury shares, and additional debt and equity raising in the next 3-5 years. 
• While the market welcomes sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns about additional debt and equity raising. 

• EV adoption in the ASEAN is very low compared to developed markets including the US, the Europe and China due to higher ASPs and lack of logistics, maintenance and repair.
• However, there has been a rapid growth in EV related investment in the region recently, focusing on developing domestic EV markets to make them more affordable while conserving the environment.
• The governments have put forward several incentives such as government funding, tax incentives to buy EVs, while introducing measures to discourage the use of ICE vehicles.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Eastman delivered a mixed result in the recent quarter, with revenues below market expectations, but it managed to surpass the analyst consensus in terms of earnings.
• The company made improvements in the Fiber business due to increased prices and operational performance.
• Supply-side factors, such as capacity reduction and effective capacity loss, have created tight markets and a focus on the security of supply.

• What you need to know: • The precious metals markets were down slightly in the month of June, however, we view this as a healthy consolidation period following significant price increases since November 2022.
• Sentiment Update June was similar to May for the gold price, posting a modest 2.2% decline to $1,919.1/oz, while silver fell 3.1% to $22.8/oz, and copper increased 2.8% to $3.7/lb.
• We believe the last two months of consolidation for precious metals and other commodities is healthy considering the significant increase in prices since November 2022.