Energy & Materials Sector

• The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
• The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
• This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.

• Early 8 August, OZ Minerals Ltd (OZL AU) announced it had rejected BHP Group Ltd (BHP AU)‘s  indicative acquisition proposal at A$25.00/share, after BHP had bought less than 5%.
• The Board took a quick look over the weekend and decided “the Indicative Proposal significantly undervalues OZ Minerals” and rejected it out of hand. 
• It has been an obvious deal for years. This may not be BHP’s last go, but they will probably need to pay more like A$30/share to get it. 

• Today Inpex Corp (1605 JP) announced Q2 earnings (results, presentation), a revised full-year forecast due to higher crude and lower yen, an 11%-above-guidance dividend, and a big buyback.
• The buyback is for up to 120mm shares spending up to ¥120bn, to run through year-end. Practically speaking, it is limited to 80mm shares or so at current price. 
• This should be a non-negligible portion of Real World Float, and I expect the buyback to have impact over the next five months.

• Inpex reported strong Q2 financial results with operating income rising 161% to ¥584 billion 
• The company revised its full-year OP guidance by 23% to ¥1,133 billion. It is still conservative 
• Inpex also announced a blockbuster buyback of 120 million shares, or 8.65% of its outstanding capital 

• On 4 August (after market close), it was reported that Foosung Co plans to IPO its subsidiary Foosung Global. The timing is to complete the IPO in 2023. 
• After this news came out, Foosung’s share price has declined by 17%. Since its share price peak in May 2022, its share price has declined by 42%. 
• Recent share price decline has presented a more attractive investment opportunity.  Foosung is currently trading at EV/EBITDA multiple of 7.7x in 2022, which is much lower than 20.9x in 2021.

• WTI bear call from 116 is meeting our 89/85 low zone with a key turn target near 85 that will spur a rally and shift inflation expectations.
• The touted break down from triangulation is setting up a key low. We did reduce our short at 89 with a plan to close the remaining tranche on weakness.
• RSI is not confirming new price lows for a case of bull divergence. A macro low is setting up if the 85 support holds and induces a bull turn.

• BHP Group Ltd (BHP AU) made a non-binding indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$25/share and was swiftly rejected.
• We feel an offer around the A$28.5-A$29/share range would get the OZ Minerals Ltd (OZL AU) Board to open up its books for due diligence.
• 3.25% of the outstanding shares have been shorted and the stock could trade higher than the BHP offer price. We’d wait for a price around A$25/share to enter.

• Alcoa Corp is seeing improving shipment volumes and benefitting heavily from the stronger U.S. dollar as well as the higher alumina price index.
• Higher costs and lower aluminum and alumina premiums combined with lower metal prices, which included about $40 million to set inventories to net realizable value, more than offset those advantages.
• It is worth highlighting that Alcoa holds accreditations from the Aluminum Stewardship Initiative, the most comprehensive independent system for auditing ethical aluminum production.

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.

• Adaro Minerals
• China Hongqiao
• Gajah Tunggal
• Sino-Ocean Service

• ECVT continued to benefit from the growing need of sulfuric acid and catalysts throughout its customer base.
• Refineries are operating at high utilization rates resulting in eco services sales rising faster than expected. The silica catalysts segment continues to benefit from polyethylene demand
• The free cash flow ECVT is generating has resulted in ECVT lowering its debt ratio to lowest in the Company’s history. However, the stock price has yet to reward shareholders

• Commodities rallied as the dollar weakened and real rates declined again.
• As you can see above, the CRB index bounced right from the 200D MA.
• More important commodities did so even while GDP data was worse than expected.

• Crude price movements have been almost entirely dictated by sentiment in the broader financial markets since around mid-June.
• Prices rose in the week to July 29 as part of a broader relief rally in risk assets. The rally is exhausted but may help resist sharp downswings for now.
• For the mid-Aug to mid-Sep period, we are mildly bullish. 

• XME and XLE long bets outlined on July 18 are meeting targets to unwind/reverse with XME displaying intermediate potential out of a bull wedge formation.
• Weak buy volumes on this rise fit with it being corrective in nature (vulnerable bounce), calling for a fresh bear test into September.
• XME bull wedge brewing and 40 macro support stand out as a macro bull set up from September into year-end.

• Soosan Industries (126720 KS) raised around US$153m in its South Korea IPO, after the deal was priced at the bottom end of its IPO price range.
• Subscription rates for SSI have been tepid, to say the least, and previous deals with similar subscription rates as that to SSI’s have had dismal debuts.
• A lack of instis opting for lockup meant that a large percentage of outstanding shares will be available for trading on debut.

• Semirara Mining And Power Corp (SCC PM) will replace Security Bank (SECB PM) in the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the close of trading on 5 August.
• Passive trackers will need to buy 5.5 days of ADV on Semirara Mining And Power Corp (SCC PM) and sell nearly 30 days of ADV on Security Bank (SECB PM).
• Historically, the adds have outperformed the deletes and there has been a pop/drop in the adds/deletes the day after announcement. Square off existing pre-positions by mid week.

• Hanwha Group announced another large-scale reorganization directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact. Several deal contracts arise, two of which require shareholder approval. However, none grants appraisal rights.
• The market responded quite positively to this. Direct parties to the reorganization were Hanwha Corp and Hanwha Aerospace, up 7.83% and 19.93%, respectively, on Friday.
• This event has little room for event trading for its size. We have no choice but to approach this event with outright momentum trading, which inevitably increases the risk-reward ratio.

• Shin Etsu Chemical (4063 JP) reported Q1 earnings after the close on 27 July, and they blew the lights out. Higher margins and 10-year record high Q1 progression ratios.
• The company also announced guidance which was pretty healthy, but progression ratios suggest it is conservative.
• The company announced its second ¥100bn buyback in three months. This one lasts 6 months so impact will be lower, but it will have some impact.

• This is our first report on EzFill Holdings and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
• However, it is trading at a revenue multiple of around 1x whereas it can easily command a 5-6x revenue multiple.
• EzFill’s current share price does not reflect the potential upside of its huge revenue growth potential as well as its attractiveness as an acquisition target for oil majors.