Energy & Materials Sector

• Paradise Co Ltd (034230 KS) will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.
• E&D Co Ltd (101360 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 21 June to replace Paradise Co Ltd (034230 KS). 
• Paradise Co Ltd (034230 KS) belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.

• Archean Chemical Industries (ACI IN) is largest producer of Bromine and largest exporter of Bromine from India.
• The company is doing brownfield and greenfield capex in Bromine derivatives which are Margin accretive.
• Archean Chemical Industries (ACI IN)  is confident about 30% volume growth in FY25.

• Chinese real estate investments fell 10.1% in the first five months of 2024 YoY. New home prices fell at the fastest pace in more than 9.5 years in May.
• Fresh bank lending in China rebounded well expectations in May. Chinese banks issued 950B yuan (v/s 1.36T yuan issued last May) in new loans last month.
• China’s consumer inflation held flat in May amid feeble domestic demand, uneven economic recovery, and consumer confidence weakness.

• Be Careful Precious Metals Bulls Another friendly reminder that positioning in copper remains super speculative bullish – aka, there is much room for speculators to reduce their bullish bets again.
• The same can be said for gold and copper, but not for crude oil.
• Once again, there seems to be less demand than people realize – especially from China.

Since our initiation note in January, NioCorp has 1) raised c US$7.6m in debt and equity instruments, 2) de-listed from the Toronto Stock Exchange, 3) announced the results of a scoping study, which suggested that the adoption of a Railveyor system could lead to material savings in both capex and opex at its Elk Creek project as well as reducing the underground mine’s carbon footprint, and 4) announced that it has received a preliminary, non-binding indicative financing term sheet from the Export-Import Bank of the United States (EXIM) with respect to NioCorp’s application for US$800m in debt financing to develop the project. This note updates our valuation of NioCorp for all of the above as well as the construction of an aluminium-scandium master alloy line at the mine, the size and timing of future equity fund-raisings and rare earth oxide pricing assumptions.

• Plains All American reported its first quarter 2024 results, reaffirming its commitment to capital discipline, generating free cash flow, and returning capital to investors.
• The management highlighted an adjusted EBITDA of $718 million for the quarter and is optimistic about achieving its full-year EBITDA guidance of between $2.625 billion and $2.725 billion.
• These results align with the company’s February projections and are supported by strong underlying operations and strategic investments.

• Sylvamo’s stock has greatly appreciated since its spin-off from IP in 2021, with a recent price of $57 per share and total return of 135%
• The company is now valued at $2.4 billion with an enterprise value of $3 billion, making it an attractive value investment
• Factors contributing to its appeal include potential growth in Brazilian assets, the end of inventory destocking in North America, and expectations for improved earnings in Europe

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in June but there are a lot of float and capping changes.
• Estimated one-way turnover is 3.9% resulting in a round-trip trade of US$418m. There are 17 stocks with over 1x ADV to trade from passive trackers.
• The largest inflows are expected in Cia de Minas Buenaventura SAA (BVN US), Equinox Gold (EQX US) and Red 5 Ltd (RED AU). 

• SGX Iron Ore prices exhibit seasonality. For select six months being long Iron Ore combined with short positions during other months deliver positive P&L based on back tests. 
• In line with prices, realised volatility exhibits seasonality too. Options strategies can exploit this to deliver superior alpha & higher sharpe ratio.
• Averages confound extreme variances. Monthly iron ore futures price returns are less volatile during the months of December, February, June, October, & March based on range.

• Core Lithium Ltd (CXO AU) and Piedmont Lithium (PLL US) will be deleted from the VanEck Rare Earth/Strategic Me (REMX US) at the close on 21 June.
• Constituent changes, float changes and capping changes result in an estimated one-way turnover of 6.4% and in a one-way trade of US$28m.
• The largest inflows will be in Sociedad Quimica y Minera de Chile (SQM US), Pilbara Minerals (PLS AU), Arcadium Lithium (ALTM US), Lithium Americas (LAC US) and Sigma Lithium (SGML).

• Gold MONTHLY chart records back-to-back bearish shooting stars in April and May.
• Steel stocks possibly bottoming on incessant tariff talks creating opportunity.
• Silver looks technically better than gold and likely to outshine precious metal into year-end.

• Shares of EcoPro Materials are down 16% today to 112,300 won, due to another block deal sale of by BRV Capital in the after hours trading on 13 June.
• After the second block deal sale on 14 June, BRV’s stake declined further from 21.2% to 18.2%. 
• This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming months/years.

• In Korea, the lockup period for block deals is set by the seller and underwriters, not by law, and can be adjusted if both parties agree.
• BRV obtained consent from Goldman, UBS, and KB for a second block deal after assessing that many initial buyers had sold their shares.
• Understanding this lockup structure provides key insights into predicting when the next block deal might occur.

• After the market close on 14 June, it was reported that Woori PE/other investors will be selling 705,384 shares of Enchem in a block deal, representing 3.6% of outstanding shares. 
• The block deal discount rate ranges from 6.9% to 8.92%, resulting in potential block deal sale price of 270,500 won to 276,500 won.
• We would not subscribe to this block deal and we are concerned about the valuations of Enchem after a sharp share price appreciation this year.

• Woori PE, NH PE and KDB Capital seek to raise around KRW195bn (US$141m) through a secondary block deal, selling 0.71m shares (3.64% of TSO) of Enchem (348370 KS).
• The deal is a small one to digest at only 1.1 days of three-month ADV. 
• In this note, we will talk about the placement and run the deal through our ECM framework.

• The EIA expects US natural gas production to fall by 1% in 2024 and lifted LNG price forecast for Henry Hub benchmark by 13% for the year.
• OPEC’s 2024 global oil demand growth forecast unchanged at 2.25m bpd. But IEA lowered its projection to 960k bpd from 1.1m bpd.
• Russia, Iraq, & Kazakhstan continued to oversupply despite lowering production MoM in May.

• FY03/24 revenue was JPY174.9bn (-1.9% YoY), operating profit JPY5.5bn (-34.9% YoY), and net income JPY1.6bn (-70.9% YoY).
• FY03/25 forecast: revenue JPY185.0bn (+5.8% YoY), operating profit JPY7.2bn (+31.8% YoY), net income JPY4.5bn (+181.6% YoY).
• FY03/27 targets: revenue JPY220.0bn, operating profit JPY12.0bn, recurring profit JPY12.0bn, EBITDA JPY16.4bn, ROE at least 12.0%.

• In FY03/24, JPC reported revenue of JPY11.4bn (-29.7% YoY), operating profit of JPY354mn (-37.6% YoY), recurring profit of JPY553mn (-26.6% YoY), and net income of JPY548mn (-3.8% YoY).
• Revenue and profit declined YoY due to lower sales of plating chemicals for connectors and lead frames, as demand for consumer products such as smartphones and PCs was slow to recover.
• The revised FY03/25 forecast looks for full-year revenue of JPY13.0bn (+13.8% YoY), operating profit of JPY500mn (+41.1% YoY), recurring profit of JPY680mn (-22.9% YoY), and net income of JPY580mn (+5.8% YoY).

• In FY09/23, revenue was JPY64.9bn (+4.0% YoY), operating profit was JPY7.5bn (-6.8% YoY), recurring profit was JPY8.2bn (-9.8% YoY), and net income attributable to owners of the parent was JPY6.7bn (-16.7% YoY).
• Consolidated revenue amounted to JPY64.9bn (+4.0% YoY).
• Revenue increased 1.4% YoY at the parent, while major US subsidiaries saw a 4.6% increase YoY (-6.3% YoY on a local currency basis) due to a weak yen.

• FY03/24 revenue was JPY174.9bn (-1.9% YoY), operating profit JPY5.5bn (-34.9% YoY), and net income JPY1.6bn (-70.9% YoY).
• FY03/25 forecast: revenue JPY185.0bn (+5.8% YoY), operating profit JPY7.2bn (+31.8% YoY), and net income JPY4.5bn (+181.6% YoY).
• FY03/27 targets: revenue JPY220.0bn (CAGR 7.9% vs. FY03/24), operating profit JPY12.0bn (30.3%), and recurring profit JPY12.0bn (30.1%).

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Ardagh Metal Beverage Packaging’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

• FY03/24 revenue was JPY174.9bn (-1.9% YoY), operating profit JPY5.5bn (-34.9% YoY), and net income JPY1.6bn (-70.9% YoY).
• FY03/25 forecast: revenue JPY185.0bn (+5.8% YoY), operating profit JPY7.2bn (+31.8% YoY), and net income JPY4.5bn (+181.6% YoY).
• FY03/27 targets: revenue JPY220.0bn (CAGR 7.9%), operating profit JPY12.0bn (30.3%), recurring profit JPY12.0bn (30.1%).

• In FY03/24, the company reported revenue of JPY322.3bn (+17.5% YoY), operating profit of JPY12.4bn (-24.0% YoY), pre-tax profit of JPY12.4bn (-1.8% YoY), and net income attributable to owners of the parent of JPY24.5bn (+124.1% YoY).
• Revenue, operating profit, and pre-tax profit exceeded the previously announced targets due to higher-than-expected gold sales prices and growth in the North American operations in the Precious Metals business.
• Additionally, following the completion of the share exchange between the previously consolidated subsidiary, Japan Waste Corporation, and Renatus Co., Ltd., the company recorded the fair value assessment of Renatus’s shares under net income from discontinued operations.

• In FY03/24, revenue was JPY174.9bn (-1.9% YoY), operating profit JPY5.5bn (-34.9% YoY), recurring profit JPY5.4bn (-33.4% YoY), and net income attributable to owners of the parent JPY1.6bn (-70.9% YoY).
• Although revenue increased in the Aluminum and Copper Products, Equipment and Materials, and Metal Processing businesses in line with an increase in automobile-related transactions, overall revenue declined due to sluggish nickel and other material transactions in the Electronic and Advanced Materials business.
• Despite the increase in automobile-related transactions, profit declined due to delays in passing on higher costs to customers.

• Revenue for FY03/24 was JPY322.2bn (+17.5% YoY), driven by higher gold sales volumes and North American refining growth.
• Operating profit for FY03/24 was JPY12.4bn (-24.0% YoY) due to delayed recovery in precious metals recycling and falling palladium and rhodium prices.
• FY03/25 forecasts include revenue of JPY370.0bn (+14.8% YoY), operating profit of JPY18.0bn (+45.5% YoY), and a dividend of JPY80.0.

• Reliance Industries (RIL IN) is developing a new integrated industrial area in Navi Mumbai, part of a global economic hub.
• This project, supported by a 43-year land lease and strategic partnerships, aims to attract global companies, fostering innovation and economic growth in the Fourth Industrial Revolution.
• Reliance’s initiative will significantly boost Navi Mumbai’s attractiveness as an investment destination, driving regional economic growth and employment opportunities.

• Increased demand from power plants under construction outside  G-7 countries
• There is constrained supply as with many other fossil fuels
• We look at a basket of coal stocks with good balance sheets and increasing production

• Iron ore continued to operate in its band from 95-130 USD/ton over the last few years, with a recent drop from 120 USD/ton to 105 USD/ton on tepid China data.
• With incremental news on China’s stimulus in the property and infrastructure sectors, we remain confident that iron ore will return to 120 USD/ton in the short term. 
• We also remain bullish on the 65-62 spread, which has expanded to the teens. Rio Tinto Ltd (RIO AU) and Vale (VALE US)  are good plays on the spread.

• KRX announced KOSDAQ Global rebalancing. Annually in June, effective date follows June options expiry. Passive flow trading on Thursday, the 13th. 49 companies designated, with nine excluded and eleven added.
• Predicting passive capital movement is challenging, but attention must be given to price impacts because reshuffle predictability is low, lacking preemptive trading setups.
• We must anticipate the SSF reshuffle in August, likely including new KOSDAQ Global constituents. KRX plans to list SSFs for all remaining constituents, potentially advancing setup timing for price increases.

• The Alumina Ltd (AWC AU) IE considers Alcoa (AA US)’s scheme offer (0.02854 Alcoa shares per Alumina share) fair and reasonable as the terms are within its valuation range. 
• The offer is conditional on FIRB and Alumina/Alcoa shareholder approval. FIRB approval should be forthcoming as Alcoa already owns most of Alumina’s sole assets (AWAC).
• The support of the substantive shareholders and the re-rating of Alcoa shares since 12 March (entry into a SID) has materially lowered the vote risk. This is a done deal.

• Debt restructuring in 2021 reduced interest costs and improved profitability, with promoters increasing their stake by 4%.
• Revenue and EBITDA have grown significantly, with a revenue CAGR of 35% and EBITDA CAGR of 72% over the past 3 years.
• Strong export presence and increasing domestic market share indicate robust growth potential despite global economic fluctuations.

• ADF Group reported Q1 financial results that largely beat our estimates, including revenue of $107.4M (+34% YoY) vs. $90.1M and EBITDA of $23.1M (+130% YoY) vs. $17.2M.
• ADF announced a cash utilization strategy including its intention to repurchase up to 3.0M shares from insiders and the doubling of its semi-annual dividend to $0.02/share.
• ADF Group (DRX:TSX, ADFJF:OTC) reported Q1 financial results today before market open that smashed our expectations across the board with the most notable beat being EBITDA coming in at $23.1M vs. $17.2M expected.

• Alumina Ltd (AWC AU) and Alcoa (AA US) announced an NBIO on the 26th Feb, before entering  into a Scheme on the 12th March. 
• Alcoa is offering  0.02854 new shares for each Alumina share, a 13% premium to undisturbed. Key shareholders Allan Gray and CITIC are supportive.
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 18th July. Expected implementation on the 1 August. The IE says fair & reasonable.

• Indo Tambangraya Megah (ITMG IJ) reported an inline Q1 FY24, with stabilizing price. Net cash at 875 mn USD is 50% of mkt cap. 
• If coal prices remain stable at 135 USD/ton, the company will be able to churn out 400 mn USD of profits (~24 mnt sales).  
• With a minimum 65% dividend payout ratio, we derive a dividend yield of 15%. This number could be an upside risk as payout ratios have also been 100%.

• Crude oil prices crater as OPEC meeting outcome fails to support oil prices. Despite OPEC+ extending larger cuts until end-2025, prices fell on fears of excess supply.
• Henry Hub Gas prices rose sharply last week driven by expectations of a hotter-than-expected summer in the US & Outages in Norway.
• Energy majors fell sharply on 3/June and ended the week in the red. BP and Exxon Mobile were downgraded. Berkshire ramped up holdings in Occidental.

• International Paper, a prominent player in the paper and packaging industry, recently disclosed its financial results for the first quarter of 2024.
• These results are pivotal when assessing the company’s current operational efficiency and financial health, especially considering its potential acquisition by Suzano, a Brazilian firm also in the paper and packaging sector.
• The reported quarter saw International Paper navigating through a mix of challenges and strategic advancements.

• The FY23 financials were in line with our forecasts.
• The high impact Anchois East well continues to be expected to spud in August.
• A drilling success could increase the size of Anchois to over 1 tcf (300 bcf net to Chariot).

• Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand. 
• ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.
• For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader. 

• With ORG offering a 4.9% higher price and securing Zhang Wei’s acceptance, the ball is now back in Baowu’s hands. Good reasons exist for Baowu to raise its offer price. 
• Baowu’s subsidiary Shanghai Baosteel Packaging-A (601968 CH) needs CPMC Holdings (906 HK) more than ORG, given its smaller market share and weaker profitability.
• At ORG’s offer price, CPMC’s PERs for FY24 and FY25 of 15.4x and 14.2x are cheaper than Baosteel Packaging’s 22x and 18.7x. This gives additional justifications for a higher offer. 

• Champion Iron (CIA AU) reported an inline result for FY24, with revenue/profits up 9%/16% YoY.  Q4 revenue/profits were -28%YoY/-73%YoY due to lower pricing on 60% of volumes in transit. 
• The company-guided production volumes have reached the annualized 15 mnt mark, but logistics continued to be challenging in Q1. Easing is expected in August, and base case a 1.5-year destock.
• The name carries some risks trading at 7x PE FY25 (March end), but it could be one to watch in case the 65-62 spread widens.

• Unpredictable Corn Supply from South America The grain supply from South America, especially corn, is among the most unpredictable globally.
• During the 2022-23 season, Argentina’s corn production dropped by nearly 29% due to drought, but then surged by 26% in the 2023-24 season, influenced by the El Niño phenomenon.
• Similarly, favorable weather conditions boosted Brazil’s corn production by approximately 17% in 2022-23. However, in 2023-24, it declined by 16% due to varying weather patterns.

• The Jetstream # 1 appraisal well has been tested at a rate of up to 0.8 mmcf/d with helium concentration of 8.7%-14.5%.
• The flow rate initially reached 0.15 mmcf/d with flowing tubing head pressure of 34 psi. The bottom hole pressure was 162 psi.
• A compressor was then installed at the well head to reduce the flowing tubing head pressure to 20 psi, thereby increasing the difference between the flowing pressure and the reservoir pressure.

• Author discusses investment in STNG for over-earning potential and short-term catalyst
• Mentions other stocks like VAL, TDW, and TNK in oil & gas industry
• Believes STNG stock price won’t fall significantly and discusses intrinsic value in comparison to bitcoin volatility through haiku

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• The State 36-2R well has reached TD.
• The well penetrated a folded and naturally fractured section of the Cane Creek reservoir, encountering drilling mud gas shows of a similar magnitude to the original well.
• Pore pressure analysis suggests formation pressures estimated at approximately 9,300 psi (which is broadly consistent with previously drilled offset wells).

• 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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK), Greatview Aseptic Packaging (468 HK).
• Lowest spreads: Alumina Ltd (AWC AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Nagatanien Holdings (2899 JP), Mimasu Semiconductor Industry (8155 JP), QV Equities Ltd (QVE AU). 

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s renewed buy streak continued this past week; every day net positive. Strong net buying. NORTHBOUND saw small net buying on renewables, utilities, and semiconductors.
• AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng/other HK indices fell and A-shares did not do much. Liquid Hs underperformed As by 2%.

• Since the China/Taiwan situation looks increasingly tense, Xu Xudong/Far Eastern Group may be eager to privatize ACC considering geopolitical conflicts and political risks. Its business is subject to strict regulation.
• HK$3.22 Offer Price is disappointing, but the privatization isn’t completely impossible (The headcount does not apply now). A certain number of investors are still willing to accept the Offer Price. 
• For arbitrageurs, the return looks not bad. However, considering the high uncertainties/failure risks, we still advise investors to be cautious. HK$2.5/share is a price point worth participating in.

• SOUTHBOUND was again a net buyer, for HK$27.2bn this week, on small two-way volumes. China Mobile (941 HK) dominated as it reached dividend ex-date. Other high-div SOEs also saw buying.
• It is not clear how much of this is H/A discounts, expected dividend tax removal, and the KPIs for SOE CEOs to raise prices and payout ratios, but it continues.
• Valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.

• TC Energy Corporation’s TRP.PR.D preferred shares offer attractive total return with limited risk over the next 5 years
• Best suited for PAs and small funds in Canada due to low trading volume and tax advantages
• Consider purchasing a basket of Canadian fixed-reset preferred shares for maximum exposure, potentially converting to Series 8 with a floating dividend rate based on the 90-day Government of Canada treasury bill rate

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.