Industrials

• Timee Inc (215A JP) ’s share price has declined 26% over the last five days with the company reporting 3QFY10/2024 earnings on 12th September 2024.
• As we expected, top line growth has further slowed down while OPM for the quarter has dropped both QoQ and YoY concerning investors over Timee’s ability to generate sustainable margins.
• Timee’s proven business model has attracted Mercari and Sharefull to offer similar services, nevertheless, we would not be too concerned as Timee has the first mover advantage.

• Timee Inc (215A JP) ’s share price has declined 26% over the last five days with the company reporting 3QFY10/2024 earnings on 12th September 2024.
• As we expected, top line growth has further slowed down while OPM for the quarter has dropped both QoQ and YoY concerning investors over Timee’s ability to generate sustainable margins.
• Timee’s proven business model has attracted Mercari and Sharefull to offer similar services, nevertheless, we would not be too concerned as Timee has the first mover advantage.

• Logistics takeovers are hot this year. Any cutting-edge-of-efficiencies business in the space is likely to get a look. Trancom Co Ltd (9058 JP) is one. 
• But while logistics assets put into bidding competition like Alps Logistics and Chilled & Frozen get high EV/EBITDA multiples, MBO transactions without competition get done too cheaply.
• Here again, an “Value Activist” “selling into the bid” to reinvest in the levered back end (at the takeover price). That tells you this deal is being done too cheaply.

• Following its acquisition by Nationwide, Virgin Money UK Plc (VUK AU) is scheduled to stop trading on the ASX Ltd (ASX AU) after market close on 25 September.
• Virgin Money UK Plc (VUK AU) is a member of the S&P/ASX100 Index and S&P/ASX 200 (AS51 INDEX) and there will be adhoc inclusions at the close on 25 September.
• There are a couple of stocks vying for inclusion in each index and the next couple of days will determine which ones make it.

• Trancom Co Ltd (9058 JP) recommended a Bain-sponsored MBO at JPY10,300, a 40.5% and 42.9% premium to the last close and undisturbed price, respectively. 
• The offer represents an all-time high but is lower than the midpoint of the IFA’s DCF valuation range and implies multiples below precedent transaction multiples. 
• While the Dalton irrevocable has a counteroffer clause, Mr Takebe (the largest shareholder) does not. Therefore, there is a low probability of a competing bidder emerging.   

• Our NAV valuation of Young Poong Precision suggests NAV of 325 billion won or NAV per share of 20,657 won which is 70% higher than current price.
• Young Poong Precision tender offer could become one of the most important case studies for future tender offers in Korea. 
• The biggest component of the NAV is Young Poong Precision’s 1.85% stake in Korea Zinc which is worth 255 billion won (133% of its current market cap). 

• RaaS Research Group has published a flash comment on advanced materials manufacturing group Amaero International (ASX:3DA) following the completion of an upsized institutional placement to raise $25m at $0.35/share to fund capital equipment purchases and further fit out its Tennessee facility.
• The raise was not unexpected; we had factored in a $22.5m raise at $0.34/share in our modelling before 30 September.
• We have incorporated the raise into our forecasts with no impact on current numbers.Post raise, the company will have pro-forma cash of approximately $37.5m to fund the capex programme ahead of ramping up production and transitioning to commercial sales.

• Jet2 stock has been accumulating over the last 6 months, trading at a lower valuation compared to competitor BKNG
• Company has shifted focus to asset-light package holiday earnings, with majority of flight passengers now going on package holidays
• Despite being range-bound since COVID-19, Jet2 has continued to grow and execute its plans, offering an attractive investment opportunity with low earnings multiple and smart fleet choices by founder

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.

Epwin Group’s H124 results were robust, with management navigating inflationary pressures well. That said, we have reduced our revenue estimates reflecting the H1 performance, maintained underlying operating profit estimates and raised EPS forecasts due to the impact of the increased share buyback programme. Long-term, well-established growth trends imply that Epwin is well-placed to leverage increasing demand for its energy-efficient and low-maintenance building products. The company offers an attractive investment case with the potential for uplifts from additional self-funded M&A. It trades on an FY24e P/E ratio of 9.3x, below the long-term average of 10.5x, and yields more than 5%. The extended share buyback programme should help support the share price.

• Enviri (NVRI) is an environmental services company undergoing a transformation to increase shareholder value
• Despite being overleveraged with near-term earnings challenges, the company has long-term growth opportunities in the environmental sector
• Insider buying and self-help initiatives are in progress, making now an opportune time to invest in the company.

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.

• Logistics takeovers are hot this year. Any cutting-edge-of-efficiencies business in the space is likely to get a look. Trancom Co Ltd (9058 JP) is one. 
• But while logistics assets put into bidding competition like Alps Logistics and Chilled & Frozen get high EV/EBITDA multiples, MBO transactions without competition get done too cheaply.
• Here again, an “Value Activist” “selling into the bid” to reinvest in the levered back end (at the takeover price). That tells you this deal is being done too cheaply.

• Following its acquisition by Nationwide, Virgin Money UK Plc (VUK AU) is scheduled to stop trading on the ASX Ltd (ASX AU) after market close on 25 September.
• Virgin Money UK Plc (VUK AU) is a member of the S&P/ASX100 Index and S&P/ASX 200 (AS51 INDEX) and there will be adhoc inclusions at the close on 25 September.
• There are a couple of stocks vying for inclusion in each index and the next couple of days will determine which ones make it.

• Trancom Co Ltd (9058 JP) recommended a Bain-sponsored MBO at JPY10,300, a 40.5% and 42.9% premium to the last close and undisturbed price, respectively. 
• The offer represents an all-time high but is lower than the midpoint of the IFA’s DCF valuation range and implies multiples below precedent transaction multiples. 
• While the Dalton irrevocable has a counteroffer clause, Mr Takebe (the largest shareholder) does not. Therefore, there is a low probability of a competing bidder emerging.   

• Our NAV valuation of Young Poong Precision suggests NAV of 325 billion won or NAV per share of 20,657 won which is 70% higher than current price.
• Young Poong Precision tender offer could become one of the most important case studies for future tender offers in Korea. 
• The biggest component of the NAV is Young Poong Precision’s 1.85% stake in Korea Zinc which is worth 255 billion won (133% of its current market cap). 

• RaaS Research Group has published a flash comment on advanced materials manufacturing group Amaero International (ASX:3DA) following the completion of an upsized institutional placement to raise $25m at $0.35/share to fund capital equipment purchases and further fit out its Tennessee facility.
• The raise was not unexpected; we had factored in a $22.5m raise at $0.34/share in our modelling before 30 September.
• We have incorporated the raise into our forecasts with no impact on current numbers.Post raise, the company will have pro-forma cash of approximately $37.5m to fund the capex programme ahead of ramping up production and transitioning to commercial sales.

• Jet2 stock has been accumulating over the last 6 months, trading at a lower valuation compared to competitor BKNG
• Company has shifted focus to asset-light package holiday earnings, with majority of flight passengers now going on package holidays
• Despite being range-bound since COVID-19, Jet2 has continued to grow and execute its plans, offering an attractive investment opportunity with low earnings multiple and smart fleet choices by founder

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.

Epwin Group’s H124 results were robust, with management navigating inflationary pressures well. That said, we have reduced our revenue estimates reflecting the H1 performance, maintained underlying operating profit estimates and raised EPS forecasts due to the impact of the increased share buyback programme. Long-term, well-established growth trends imply that Epwin is well-placed to leverage increasing demand for its energy-efficient and low-maintenance building products. The company offers an attractive investment case with the potential for uplifts from additional self-funded M&A. It trades on an FY24e P/E ratio of 9.3x, below the long-term average of 10.5x, and yields more than 5%. The extended share buyback programme should help support the share price.

• Enviri (NVRI) is an environmental services company undergoing a transformation to increase shareholder value
• Despite being overleveraged with near-term earnings challenges, the company has long-term growth opportunities in the environmental sector
• Insider buying and self-help initiatives are in progress, making now an opportune time to invest in the company.

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.

• Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
• The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
• We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.

• Auckland Intl Airport (AIA NZ) is looking to raise NZ$1.4bn (US$863m) in its primary follow-on offering. The offering includes a NZ$1.2bn underwritten placement, together with a NZ$200m non-underwritten retail offer.
• The underwritten placement alone is a large one for the stock to digest at 168 days of three month ADV.
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• Orient Overseas International (316 HK) sits on decent yields of 12% for FY24 and 9.6% for FY25. Its net cash (66.2% of the share price) can support such dividends.
• Despite the retreat from the recent peak, the spot freight rates are 9.7% and 145% higher than 1H24 and 2H23 respectively, pointing to better 2H24 earnings.
• Operationally, it recorded the first YoY realised rate increase in 2Q24 after 6 quarters of consecutive decline. Its load factor also grew 2.3pp YoY in the quarter.

ADS-TEC supplies intelligent energy storage and management systems supporting the energy transition, including electric vehicle (EV) charging. While the EV rate of adoption has slowed, the H124 results (sales +107%) demonstrate the benefits of ADS-TEC’s broader end-market applications and corporate customer base. With a positive EBITDA in the period, the group appears to be approaching operational cash positive, which we see as marking the transition to a sustainable growth company.

• Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
• The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
• We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.

• Auckland Intl Airport (AIA NZ) is looking to raise NZ$1.4bn (US$863m) in its primary follow-on offering. The offering includes a NZ$1.2bn underwritten placement, together with a NZ$200m non-underwritten retail offer.
• The underwritten placement alone is a large one for the stock to digest at 168 days of three month ADV.
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• Orient Overseas International (316 HK) sits on decent yields of 12% for FY24 and 9.6% for FY25. Its net cash (66.2% of the share price) can support such dividends.
• Despite the retreat from the recent peak, the spot freight rates are 9.7% and 145% higher than 1H24 and 2H23 respectively, pointing to better 2H24 earnings.
• Operationally, it recorded the first YoY realised rate increase in 2Q24 after 6 quarters of consecutive decline. Its load factor also grew 2.3pp YoY in the quarter.

ADS-TEC supplies intelligent energy storage and management systems supporting the energy transition, including electric vehicle (EV) charging. While the EV rate of adoption has slowed, the H124 results (sales +107%) demonstrate the benefits of ADS-TEC’s broader end-market applications and corporate customer base. With a positive EBITDA in the period, the group appears to be approaching operational cash positive, which we see as marking the transition to a sustainable growth company.

• The cutoff market cap is around ₩3.6T, and Hyundai Rotem is the only stock that screens into the inclusion zone.
• Hyundai Rotem might see a repeat of LS Electric’s pattern: heavy chasing towards screening and a big dive at the decision. Watch for aggressive momentum trades starting late September.
• The stock with the lowest full market cap, Kum Yang, is at risk, but Celltrion Pharm is close behind. KT Corp’s exclusion might save Kum Yang or Celltrion Pharm.

• The P/B multiple of Cosco Shipping Energy Transportation (H) (1138 HK) has pulled back to 0.8x now, from 1.3x three months ago. The risk-reward payoff has improved.
• Historically, there is no long-term correlation between oil prices and share prices. Hence, we should not be overfocused on the recent pullback in oil prices.
• Although the market consensus is high, FY24 should still see growth. The 3Q24 VLCC spot rate is 27.4% higher YoY, potentially boosting quarterly results and sustaining a high FY24 yield. 

• Workers at US East/Gulf Coast ports could strike without new contract by Oct 1st
• But data suggest importers have been boosting inventory over past few months
• Although US West Coast port workers support ILA, they’re unlikely to strike

• The cutoff market cap is around ₩3.6T, and Hyundai Rotem is the only stock that screens into the inclusion zone.
• Hyundai Rotem might see a repeat of LS Electric’s pattern: heavy chasing towards screening and a big dive at the decision. Watch for aggressive momentum trades starting late September.
• The stock with the lowest full market cap, Kum Yang, is at risk, but Celltrion Pharm is close behind. KT Corp’s exclusion might save Kum Yang or Celltrion Pharm.

• The P/B multiple of Cosco Shipping Energy Transportation (H) (1138 HK) has pulled back to 0.8x now, from 1.3x three months ago. The risk-reward payoff has improved.
• Historically, there is no long-term correlation between oil prices and share prices. Hence, we should not be overfocused on the recent pullback in oil prices.
• Although the market consensus is high, FY24 should still see growth. The 3Q24 VLCC spot rate is 27.4% higher YoY, potentially boosting quarterly results and sustaining a high FY24 yield. 

• Workers at US East/Gulf Coast ports could strike without new contract by Oct 1st
• But data suggest importers have been boosting inventory over past few months
• Although US West Coast port workers support ILA, they’re unlikely to strike

• Tuhu Car (9690 HK) is poised to capture the lion share of China’s automotive aftersales service industry that is forecasted to grow at 7.3% CAGR from 2023:30. 
• Tuhu is on an inflection of high earnings growth (+30% CAGR) as it has reached scalability, cost efficiency, and its younger shops are maturing profitably.    
• Our fair value of HKD24 implies 25x FY25 PE – average for US peers. A bargain with 3-year CAGR of 30%, net cash, and churns high free cash flow.

• Latest RDC fare data deep dive suggests scope for negative surprises at easyJet and Wizz Air – we publish a detailed analysis across booking windows.
• ​easyJet fare data suggest potential for late-market disappointment, albeit winter prospects more encouraging.
• Wizz Air fare data cast doubt on hopes for fare growth.

• Tuhu Car (9690 HK) is poised to capture the lion share of China’s automotive aftersales service industry that is forecasted to grow at 7.3% CAGR from 2023:30. 
• Tuhu is on an inflection of high earnings growth (+30% CAGR) as it has reached scalability, cost efficiency, and its younger shops are maturing profitably.    
• Our fair value of HKD24 implies 25x FY25 PE – average for US peers. A bargain with 3-year CAGR of 30%, net cash, and churns high free cash flow.

• Latest RDC fare data deep dive suggests scope for negative surprises at easyJet and Wizz Air – we publish a detailed analysis across booking windows.
• ​easyJet fare data suggest potential for late-market disappointment, albeit winter prospects more encouraging.
• Wizz Air fare data cast doubt on hopes for fare growth.