Industrials

• Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.  
• YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed. 
• There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

• Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.  
• YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed. 
• There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU), Origin Energy (ORG AU), 111 Inc (YI US).
• Lowest spreads – Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading.

• We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
• We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
• Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

• Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
• ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
• Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU), Origin Energy (ORG AU), 111 Inc (YI US).
• Lowest spreads – Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading.

• We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
• We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
• Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

• Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
• ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
• Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

• There are 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deal was discussed on Smartkarma in the past week: Mitsui & Co’s tilt for Relia Inc (4708 JP).
• Key updates took place for: Kingston Financial (1031 HK), Shandong Fengxiang (9977 HK), Jafco Co Ltd (8595 JP), Golden Energy & Resources (GER SP), and Esso Thailand (ESSO TB).

• Cummins delivered a mixed set of results for the quarter, surpassing the revenue expectations of Wall Street but missing out on earnings.
• Also, through its subsidiary Meritor, Cummins announced the completion of its acquisition of the commercial vehicles business of Siemens.
• Demand for the products of the company remained quite strong across its key regions and markets, which resulted in strong revenue in this quarter.

• Plug Power delivered another below par result in the quarter, failing to meet Wall Street expectations in terms of revenues as well as earnings.
• The management claims that its fully developed green hydrogen platform has the potential to make it profitable.
• In the hydrogen and fuel cell industries, Plug Power has a first-mover advantage which drives investor optimism.

• There are 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deal was discussed on Smartkarma in the past week: Mitsui & Co’s tilt for Relia Inc (4708 JP).
• Key updates took place for: Kingston Financial (1031 HK), Shandong Fengxiang (9977 HK), Jafco Co Ltd (8595 JP), Golden Energy & Resources (GER SP), and Esso Thailand (ESSO TB).

• Cummins delivered a mixed set of results for the quarter, surpassing the revenue expectations of Wall Street but missing out on earnings.
• Also, through its subsidiary Meritor, Cummins announced the completion of its acquisition of the commercial vehicles business of Siemens.
• Demand for the products of the company remained quite strong across its key regions and markets, which resulted in strong revenue in this quarter.

• Plug Power delivered another below par result in the quarter, failing to meet Wall Street expectations in terms of revenues as well as earnings.
• The management claims that its fully developed green hydrogen platform has the potential to make it profitable.
• In the hydrogen and fuel cell industries, Plug Power has a first-mover advantage which drives investor optimism.

• The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
• An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally. 
• The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.  

• Acrow Formwork and Construction Services (‘ACF’) and Big River Industries (‘BRI’) are key players within the Australian Building Products and Distribution markets.
• Acrow focuses upon Formwork, Industrial Services and Scaffolding; and Big River specialises in the manufacturing of timber veneer, plywood and formply, and distribution of building supplies.
• Both businesses have undergone significant strategic pivots over the past 4-5 years and are now reaping the rewards.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• Heico had another successful quarter and managed an all-around beat driven by record performance within the Flight Support Group.
• The Flight Support Group’s operating income and net sales have increased sequentially.
• Heico’s ETG Group finalized the acquisition of TRAD Tests & Radiations, a pioneer in the extremely specialized field of radiation engineering.

• TransDigm managed to deliver yet another all-around beat in the recent result.
• Their value generation process heavily relies on their capital structure and allocations and has worked well in the post Covid environment.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Despite the world economy slowing down in the third quarter, particularly outside the U.S., UPS managed an all-around beat.
• The execution of their customer-first, people-led, innovation-driven strategy has fundamentally improved many parts of their business, resulting in stronger operating margins.
• In addition, they finished the first phase of their smart package, smart facility implementation, enabling RFID label technology in 101 buildings.

• The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
• An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally. 
• The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.  

• Acrow Formwork and Construction Services (‘ACF’) and Big River Industries (‘BRI’) are key players within the Australian Building Products and Distribution markets.
• Acrow focuses upon Formwork, Industrial Services and Scaffolding; and Big River specialises in the manufacturing of timber veneer, plywood and formply, and distribution of building supplies.
• Both businesses have undergone significant strategic pivots over the past 4-5 years and are now reaping the rewards.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• Heico had another successful quarter and managed an all-around beat driven by record performance within the Flight Support Group.
• The Flight Support Group’s operating income and net sales have increased sequentially.
• Heico’s ETG Group finalized the acquisition of TRAD Tests & Radiations, a pioneer in the extremely specialized field of radiation engineering.

• TransDigm managed to deliver yet another all-around beat in the recent result.
• Their value generation process heavily relies on their capital structure and allocations and has worked well in the post Covid environment.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Despite the world economy slowing down in the third quarter, particularly outside the U.S., UPS managed an all-around beat.
• The execution of their customer-first, people-led, innovation-driven strategy has fundamentally improved many parts of their business, resulting in stronger operating margins.
• In addition, they finished the first phase of their smart package, smart facility implementation, enabling RFID label technology in 101 buildings.

• Fanuc is a core structural growth stock that has fallen by -4% over the past year. We turn bullish with 8 days to earnings
• We believe that Fanuc is a key beneficiary of continued investment in automation and realignment of supply chains globally
• We focus on Fanuc’s core value drivers – revenue, margins, risk and investment – and see 25% upside for long term investors

• Avalon Technologies (6594468Z IN) is looking to raise about US$130m in its upcoming India IPO. The IPO is expected to consist of both a fresh issue and a secondary portion. 
• Avalon Tech (Avalon) is a vertically integrated electronic manufacturing services (EMS) firm delivering box build solutions in India.
• As per F&S, the firm is one of the leading domestic EMS companies with end-to-end capabilities offering a full stack product and solution suite.

• The acceptance period for EQT’s €26/share offer (46% premium, 16.1x EV/23eEBITDA) runs until 16 February. Minimum acceptance is 62.5% (49.4% of the float). EQT intends to implement a domination agreement.
• The deal makes sense from a strategic standpoint, although there are potential antitrust issues. The price offered seems generous considering my fair-value estimate of €18.67 (DCF-based).
• Gross spread is 3.7% (8.6% estimated annual return assuming settlement by 30 June), which is okayish for a not so liquid stock in the European space. Long.

• Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
• Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines’ drag are drivers. 
• ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. 

• Fanuc is a core structural growth stock that has fallen by -4% over the past year. We turn bullish with 8 days to earnings
• We believe that Fanuc is a key beneficiary of continued investment in automation and realignment of supply chains globally
• We focus on Fanuc’s core value drivers – revenue, margins, risk and investment – and see 25% upside for long term investors

• Avalon Technologies (6594468Z IN) is looking to raise about US$130m in its upcoming India IPO. The IPO is expected to consist of both a fresh issue and a secondary portion. 
• Avalon Tech (Avalon) is a vertically integrated electronic manufacturing services (EMS) firm delivering box build solutions in India.
• As per F&S, the firm is one of the leading domestic EMS companies with end-to-end capabilities offering a full stack product and solution suite.

• The acceptance period for EQT’s €26/share offer (46% premium, 16.1x EV/23eEBITDA) runs until 16 February. Minimum acceptance is 62.5% (49.4% of the float). EQT intends to implement a domination agreement.
• The deal makes sense from a strategic standpoint, although there are potential antitrust issues. The price offered seems generous considering my fair-value estimate of €18.67 (DCF-based).
• Gross spread is 3.7% (8.6% estimated annual return assuming settlement by 30 June), which is okayish for a not so liquid stock in the European space. Long.

• Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
• Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines’ drag are drivers. 
• ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently.