Industrials

• Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP. 
• Despite that, we see some small positive signs across the various industrial segments. 
• On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

• The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
• The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized. 
• The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.

• Rescinding of Rs 200 bn FPO deprives the company of much needed long-term funds
• Company has a liquidity issue as this analyst estimates its short term borrowing exceeds its short term borrowing limit and it requires long term funds to bridge the gap
• With foreign and private sector banks unwilling to increase exposure, the company needs to inject funds from founder entities, divest assets, reduce capex and improve working capital to infuse liquidity.

• The result of analyzing 23,940 news articles on 2,722 Korean listed companies released between 1 January and 31 December 2022, reveal that 565 companies (20.7%) had ESG risks.
• Companies with ESG risks has decreased compared to 2021, which is the first time a decrease trend has been recorded since Who’s Good began conducting ESG analysis in 2015.
• Social risk ranked as the highest risk among ESG (Environment, Social, Governance) with the highest ranking ESG issue being ‘Supply Chain Management’.

• Pentamaster Corp (PENT MK) specialises in the manufacturing of automated testing equipment (ATE segment) and the provision of factory automated solutions (FAS segment). 
• Pentamaster’s solid track record, exposure to structural trends (electric vehicles), profitability, cash generation and healthy balance sheet are attractive. The shares are up 12.9% YTD.
• However, the shares reflect this story and the valuation looks full compared to peers and historical multiples. We like the fundamentals and would be buyers of any prolonged weakness.

• Waste Management delivered a highly disappointing result in the last quarter and did not live up to analyst expectations with respect to revenues as well as earnings.
• They observed a slowdown in the rate of labor increases and remained committed to managing operating costs and bending costs to match shifting volumes.
• The company advanced its planned recycling investments and provided more details in the supplemental presentation on its website.

• Downgrading to Neutral from Buy. Target is now $6 from $9.
• ACCO faces greater challenges than could be currently priced in the stock with a longer duration of retailers rebalancing inventory against a weak consumer spending environment
• We have grown concerned the softness ACCO experienced in the third quarter of 2022 could spill over into 2023

• Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP. 
• Despite that, we see some small positive signs across the various industrial segments. 
• On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

• The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
• The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized. 
• The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.

• Rescinding of Rs 200 bn FPO deprives the company of much needed long-term funds
• Company has a liquidity issue as this analyst estimates its short term borrowing exceeds its short term borrowing limit and it requires long term funds to bridge the gap
• With foreign and private sector banks unwilling to increase exposure, the company needs to inject funds from founder entities, divest assets, reduce capex and improve working capital to infuse liquidity.

• The result of analyzing 23,940 news articles on 2,722 Korean listed companies released between 1 January and 31 December 2022, reveal that 565 companies (20.7%) had ESG risks.
• Companies with ESG risks has decreased compared to 2021, which is the first time a decrease trend has been recorded since Who’s Good began conducting ESG analysis in 2015.
• Social risk ranked as the highest risk among ESG (Environment, Social, Governance) with the highest ranking ESG issue being ‘Supply Chain Management’.

• Pentamaster Corp (PENT MK) specialises in the manufacturing of automated testing equipment (ATE segment) and the provision of factory automated solutions (FAS segment). 
• Pentamaster’s solid track record, exposure to structural trends (electric vehicles), profitability, cash generation and healthy balance sheet are attractive. The shares are up 12.9% YTD.
• However, the shares reflect this story and the valuation looks full compared to peers and historical multiples. We like the fundamentals and would be buyers of any prolonged weakness.

• Waste Management delivered a highly disappointing result in the last quarter and did not live up to analyst expectations with respect to revenues as well as earnings.
• They observed a slowdown in the rate of labor increases and remained committed to managing operating costs and bending costs to match shifting volumes.
• The company advanced its planned recycling investments and provided more details in the supplemental presentation on its website.

• Downgrading to Neutral from Buy. Target is now $6 from $9.
• ACCO faces greater challenges than could be currently priced in the stock with a longer duration of retailers rebalancing inventory against a weak consumer spending environment
• We have grown concerned the softness ACCO experienced in the third quarter of 2022 could spill over into 2023

• Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
• Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
• Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

• Oasis proposals to restructure the Fujitec Co Ltd (6406 JP) Board which will be voted on at the 24 February EGM have got independent proxy advisor, ISS, support.
• An Oasis win would renew enthusiasm that Fujitec can close the performance gap with peers, resulting in a catalyst for the rerating of the shares.
• An Oasis loss is not disastrous as Oasis could come back or Fujitec would likely offer a premium to buyout Oasis. Fujitec is also cheap on a cash-adjusted P/E basis.

• Rohm is increasingly an automotive semiconductor maker. Its business should hold up reasonably well in the downturn and grow significantly in the long term.
• Capital spending risks excess capacity in the coming year, but sets the stage for long term growth. Possible investment in Toshiba a positive. 
• Weak quarters ahead. Buy on weakness for the long term. 

• UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors. 
• UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation. 
• Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today. 

• There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
• New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
• Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
• Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).

• Recruit’s Q3 results are unlikely to move the market. Full year guidance slightly above consensus estimates
• Much of the bad news on the labour market and interest rates is now discounted in current valuations
• We remain bullish. At 23x PE the stock is trading at a deep discount to its historical 30x

• Recruit Holdings (6098 JP) reported 3QFY03/2023 results today. Revenue increased 18% YoY to JPY880.1bn (vs consensus JPY862.0bn) while operating profit for the quarter decreased 12.4% YoY to JPY96.8bn (consensus JPY107.2bn).
• Though HR Tech top line grew 24.2% YoY, it declined sequentially while adjusted EBITDA margin of the segment also declined during the quarter.
• Recruit’s share price has fallen 24% over the last 12-months and with further weakening of labour markets, there is more room for shares to fall.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The 2021/2023 downtrend is accompanied by comprehensive LT momentum confirmation. The 2012/2023 uptrend support at 6.92/6.94 remains at risk of being retested in the coming 1-2 months,
• A monthly close below 6.92/6.94 would confirm a far more significant multi-month downtrend. For now we target 6.92/6.94 (-10%). The response to 6.92/6.94 is critical to the MT outlook.

• Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
• Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
• Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

• Oasis proposals to restructure the Fujitec Co Ltd (6406 JP) Board which will be voted on at the 24 February EGM have got independent proxy advisor, ISS, support.
• An Oasis win would renew enthusiasm that Fujitec can close the performance gap with peers, resulting in a catalyst for the rerating of the shares.
• An Oasis loss is not disastrous as Oasis could come back or Fujitec would likely offer a premium to buyout Oasis. Fujitec is also cheap on a cash-adjusted P/E basis.

• Rohm is increasingly an automotive semiconductor maker. Its business should hold up reasonably well in the downturn and grow significantly in the long term.
• Capital spending risks excess capacity in the coming year, but sets the stage for long term growth. Possible investment in Toshiba a positive. 
• Weak quarters ahead. Buy on weakness for the long term. 

• UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors. 
• UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation. 
• Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today. 

• There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
• New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
• Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
• Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).

• Recruit’s Q3 results are unlikely to move the market. Full year guidance slightly above consensus estimates
• Much of the bad news on the labour market and interest rates is now discounted in current valuations
• We remain bullish. At 23x PE the stock is trading at a deep discount to its historical 30x

• Recruit Holdings (6098 JP) reported 3QFY03/2023 results today. Revenue increased 18% YoY to JPY880.1bn (vs consensus JPY862.0bn) while operating profit for the quarter decreased 12.4% YoY to JPY96.8bn (consensus JPY107.2bn).
• Though HR Tech top line grew 24.2% YoY, it declined sequentially while adjusted EBITDA margin of the segment also declined during the quarter.
• Recruit’s share price has fallen 24% over the last 12-months and with further weakening of labour markets, there is more room for shares to fall.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The 2021/2023 downtrend is accompanied by comprehensive LT momentum confirmation. The 2012/2023 uptrend support at 6.92/6.94 remains at risk of being retested in the coming 1-2 months,
• A monthly close below 6.92/6.94 would confirm a far more significant multi-month downtrend. For now we target 6.92/6.94 (-10%). The response to 6.92/6.94 is critical to the MT outlook.

• A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP). 
• DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
• DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster. 

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.

• Adani Green Energy
• Adani Ports & Special Economic Zone
• Adani Transmission
• Lippo Malls Indonesia Retail Trust
• NagaCorp Ltd
• Sunny Optical

• A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP). 
• DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
• DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster. 

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.

• Adani Green Energy
• Adani Ports & Special Economic Zone
• Adani Transmission
• Lippo Malls Indonesia Retail Trust
• NagaCorp Ltd
• Sunny Optical

• Amorepacific Group is more likely to remain in LargeCap due to its share price surge earlier this year. Instead, Hyundai Autoever will likely face a large→mid migration.
• Of Small→Mid migrants. Sebang and Kum Yang deserve attention, as they will rank high in the Mid due to the rapid market cap growth over the past six months.
• YTD performance seems to have a higher correlation with individual sector performance than causality with this event. So, there is still a circumstantial probability that justifies the trade.

• Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
• The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter. 
• Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.

• The market welcomed TEL’s 3Q results and new guidance, but sales, profits and margins continue to decline year-on-year.
• An optimistic consensus sees a new cyclical high in the second half of the decade, but avoids the question of disengagement from China.
• Inventories are at a record high. Valuations out to FY Mar-25 do not look attractive. 

• The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected. 
• Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares. 
• The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“. 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Pertamina Geothermal (0125738D IJ) guides to the low end of the IDR875-880 price range and Hesai Group (HSAI US) has a good debut.
• Event-Driven developments – Newcrest Mining (NCM AU), Nitro Software Ltd (NTO AU), Toshiba Corp (6502 JP), Ihara Science (5999 JP), Boustead Projects (BOCJ SP), Sabana Industrial REIT (SSREIT SP). 

• Amorepacific Group is more likely to remain in LargeCap due to its share price surge earlier this year. Instead, Hyundai Autoever will likely face a large→mid migration.
• Of Small→Mid migrants. Sebang and Kum Yang deserve attention, as they will rank high in the Mid due to the rapid market cap growth over the past six months.
• YTD performance seems to have a higher correlation with individual sector performance than causality with this event. So, there is still a circumstantial probability that justifies the trade.

• Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
• The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter. 
• Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.

• The market welcomed TEL’s 3Q results and new guidance, but sales, profits and margins continue to decline year-on-year.
• An optimistic consensus sees a new cyclical high in the second half of the decade, but avoids the question of disengagement from China.
• Inventories are at a record high. Valuations out to FY Mar-25 do not look attractive. 

• The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected. 
• Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares. 
• The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“. 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Pertamina Geothermal (0125738D IJ) guides to the low end of the IDR875-880 price range and Hesai Group (HSAI US) has a good debut.
• Event-Driven developments – Newcrest Mining (NCM AU), Nitro Software Ltd (NTO AU), Toshiba Corp (6502 JP), Ihara Science (5999 JP), Boustead Projects (BOCJ SP), Sabana Industrial REIT (SSREIT SP). 

• Dai Nippon Printing’s announcement that it would double its RoE target in its next MTP was a pleasant surprise. 
• Together with saucy hints that future buybacks could be the biggest in its history this has propelled the stock to a post-2007 high. 
• We think Elliott has found an easy win here and consider this likely to end as a standout success for activism in Japan.

• VFlowTech, a vanadium-based redox flow (VRF) battery company in Singapore, has announced a US$10 million Series A funding round

• VFlowTech will use the funds to set up a 200MWh production line capacity and scale up the manufacturing of its 250 kWh modular vanadium-based long-duration energy storage solutions. 

• A portion of the new capital will be used to expand into Turkey, the US, Japan and India.

• Dai Nippon Printing’s announcement that it would double its RoE target in its next MTP was a pleasant surprise. 
• Together with saucy hints that future buybacks could be the biggest in its history this has propelled the stock to a post-2007 high. 
• We think Elliott has found an easy win here and consider this likely to end as a standout success for activism in Japan.

• VFlowTech, a vanadium-based redox flow (VRF) battery company in Singapore, has announced a US$10 million Series A funding round

• VFlowTech will use the funds to set up a 200MWh production line capacity and scale up the manufacturing of its 250 kWh modular vanadium-based long-duration energy storage solutions. 

• A portion of the new capital will be used to expand into Turkey, the US, Japan and India.