Energy & Materials Sector

• SK Group plans to merge SK Innovation and 90%-owned SK E&S by month-end. Chosun Ilbo’s report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
• Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
• SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.

• Tamboran Resources (TBN AU) is looking to raise US$175m from listing its shares in the US.
• Tamboran Resources is an early stage, independent natural gas exploration and production company.
• In this note, we talk about the deal dynamics and the listing impact.

• West China Cement (2233 HK) is a cement company based in Western China.  Sales volume in Africa in 2023 was 2.6 million tons, up 117% from 1.2 million tons in 2022. 
• The company has 2 million tons of cement capacity in Mozambique, 1.5 million tons in Congo, and 1.3 million tons in Ethiopia. 
• The company is trading at 4x 2024E PE.  I believe the risk reward is quite high here. 

• Tidewater Midstream & Infrastructure is a Canadian refining and midstream business with the Prince George Refinery as its primary asset
• Recent events, including the sale of gas processing plants and reaching capacity at the HDRD facility, have led to positive cash flow for the company for the first time
• TWM is focused on using its newfound cash flow for share repurchases and new investments in neglected assets, with projected upside potential of ~3x

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.

• kopi-C with Dyna-Mac’s CEO: ‘We went from near-bankruptcy to having a record order book’ Offshore oil and gas contractor Dyna-Mac’s CEO AC Lim shares how he overhauled the company’s business practices to bring it back from the brink and achieve remarkable growth.
• When Lim Ah Cheng, also known as AC Lim, became offshore oil and gas contractor Dyna-Mac’s chief executive officer in 2020, the firm was in crisis.

• Afentra focuses on acquiring marginal or late-life oil fields from oil majors and NOCs to pursue renewable energy or scale
• The company specifically targets Africa to establish a low-cost basis in acquired assets and deliver value through industrial expertise
• Leveraging in-house management expertise and track record in the energy sector, Afentra plans to enhance acquired subsurface acreage through field development techniques and enhancements

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.

• 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).