Industrials

• The ADDs/DELs for the TDIV, T50, and T100 indices for the September 2024 index rebal event was confirmed after market close on Friday 6th September 2024.
• There will be one change for the T50 index and four separate changes for the T100 index. One of the T100 changes will also trigger a TDIV index deletion.
• In this insight, we have presented our final estimates for the index flows for ADDs/DELs and capping flows for the TDIV index.

• The ADDs/DELs for the TDIV, T50, and T100 indices for the September 2024 index rebal event was confirmed after market close on Friday 6th September 2024.
• There will be one change for the T50 index and four separate changes for the T100 index. One of the T100 changes will also trigger a TDIV index deletion.
• In this insight, we have presented our final estimates for the index flows for ADDs/DELs and capping flows for the TDIV index.

• After publishing my insight (Jardine Matheson (JM SP): Trading “Cheap”) last week, my NAV calcs were called into question by some readers, when compared to street estimates.
• Which is cool. I’m big enough to admit mistakes, where needed. So I’ve done some digging, including a back and forth with Jardine Matheson Holdings (JM SP).
• The upshot? I have not lead you astray. You’ve been coming to the right place.

• Hero Motors Limited (2313904Z IN) is looking to raise about US$110m in its upcoming India IPO. The deal will be run by ICICI, DAM Cap and JM Fin.
• Hero Motors (HML) is an integrated powertrain systems provider offering comprehensive solutions for designing, prototyping, validating, developing, and delivering system-level transmission solutions for electric as well as nonelectric powertrains.
• According to CRISIL, it was among the first companies in India to capitalize on the global e-bike powertrain opportunity and have a distinct first mover advantage in this industry.

• HEICO Corporation’s third quarter fiscal 2024 results reveal a robust financial performance, with significant increases in consolidated operating income and net sales that set new records for the company.
• The earnings call provided a comprehensive analysis of HEICO’s various segments and strategic initiatives, showing a strong trajectory in its core markets, underscored by recent acquisitions and expanded product lines.
• 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.

• After publishing my insight (Jardine Matheson (JM SP): Trading “Cheap”) last week, my NAV calcs were called into question by some readers, when compared to street estimates.
• Which is cool. I’m big enough to admit mistakes, where needed. So I’ve done some digging, including a back and forth with Jardine Matheson Holdings (JM SP).
• The upshot? I have not lead you astray. You’ve been coming to the right place.

• Hero Motors Limited (2313904Z IN) is looking to raise about US$110m in its upcoming India IPO. The deal will be run by ICICI, DAM Cap and JM Fin.
• Hero Motors (HML) is an integrated powertrain systems provider offering comprehensive solutions for designing, prototyping, validating, developing, and delivering system-level transmission solutions for electric as well as nonelectric powertrains.
• According to CRISIL, it was among the first companies in India to capitalize on the global e-bike powertrain opportunity and have a distinct first mover advantage in this industry.

• HEICO Corporation’s third quarter fiscal 2024 results reveal a robust financial performance, with significant increases in consolidated operating income and net sales that set new records for the company.
• The earnings call provided a comprehensive analysis of HEICO’s various segments and strategic initiatives, showing a strong trajectory in its core markets, underscored by recent acquisitions and expanded product lines.
• 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.

• Pasco Corp (9232 JP) has recommended a tender offer from Secom Co Ltd (9735 JP) and Itochu Corp (8001 JP) at JPY2,140, 31.4% premium to the undisturbed price of JPY1,629.
• The tender offer runs from 6 September to 22 October (30 business days), with payment commencing on 28 October. It represents a 10-year high. 
• This a done deal as the offeror represents a 71.66% ownership ratio, higher than the two-thirds of voting rights required to implement a squeeze-out through share consolidation.  

• July 2024 ranked as the warmest July in NOAA’s 175-year global record. Land & sea surface temperatures were above average across the planet barring few exceptions.
• July had the 2nd smallest sea ice coverage in 46-years at 8.49 million square miles. There is a 77% chance that 2024 will rank as the warmest year on record.
• Heating, Ventilation, and Air Conditioning (“HVAC”) stocks continue to rise on strong demand as temperatures peak across the planet.

• Since our last note in May, there have been 10 additional takeouts in Canadian small-caps, most of which coming in a significant premiums.
• The new acquisitions largely fit within the framework outlined in previous reports.
• Our potential takeouts portfolio is up 43% since inception (November 2023) and 17% since our last note, compared to the TSX up 18% and 3% respectively.

• Pasco Corp (9232 JP) has recommended a tender offer from Secom Co Ltd (9735 JP) and Itochu Corp (8001 JP) at JPY2,140, 31.4% premium to the undisturbed price of JPY1,629.
• The tender offer runs from 6 September to 22 October (30 business days), with payment commencing on 28 October. It represents a 10-year high. 
• This a done deal as the offeror represents a 71.66% ownership ratio, higher than the two-thirds of voting rights required to implement a squeeze-out through share consolidation.  

• July 2024 ranked as the warmest July in NOAA’s 175-year global record. Land & sea surface temperatures were above average across the planet barring few exceptions.
• July had the 2nd smallest sea ice coverage in 46-years at 8.49 million square miles. There is a 77% chance that 2024 will rank as the warmest year on record.
• Heating, Ventilation, and Air Conditioning (“HVAC”) stocks continue to rise on strong demand as temperatures peak across the planet.

• Since our last note in May, there have been 10 additional takeouts in Canadian small-caps, most of which coming in a significant premiums.
• The new acquisitions largely fit within the framework outlined in previous reports.
• Our potential takeouts portfolio is up 43% since inception (November 2023) and 17% since our last note, compared to the TSX up 18% and 3% respectively.

• Ecopro HN announced a ₩200 billion rights issue, offering 5.67 million shares (a 40% capital increase) with a stockholder allocation rate of 0.3 per share.
• The extended timeline likely results from the issuer’s 20% discount push, with Daishin, an underdog banker, extending it to boost subscriptions despite risking price stability.
• The strategy is to time entry when the stock rights and subscription costs create a solid spread versus the spot price, despite increased volatility making price predictions harder.

• On 4 September, Ecopro HN announced that it plans to conduct a rights offering capital raise of about 200 billion won. 
• The company plans to issue 5.67 million new shares and the expected rights offering price is 35,300 won (23% lower than current price). 
• We would not subscribe to this rights offering mainly due to lofty valuations, declining sales and profit growth, continued negative free cash flow, and concerns about excessive shares dilution. 

• Louis Dreyfus Company (LDC) and Olam (OLG SP)‘s Olam Agri have been going toe-to-toe over Namoi Cotton (NAM AU) since the 1st February. LDC has now declared its Offer unconditional. 
• It’s an interesting move. Namoi is trading through LDC’s A$0.67/share Offer terms. But unlike Olam’s Offer, LDC now has FIRB and ACCC under its belt.
• Currently trading at Olam’s A$0.70/share terms. All eyes are on ACCC giving Olam the green light. Or not.

• Carraro India Limited (810618Z IN) is looking to raise about US$216m in its upcoming India IPO. The deal will be run by Axis, Nuvama and BNP Paribas.
• Carraro India Limited (CIL), is a technology driven integrated supplier that develops complex engineering products and solutions for its original equipment manufacturer (OEM) customers.
• CIL primarily manufactures axles and transmission systems for agricultural tractors and construction vehicles such as backhoe loaders, soil compactors, cranes, self-loading concrete mixers and small motor graders.

• Western Carriers (1489172D IN) is looking to raise about US$100m in its upcoming India IPO.
• Western Carriers (India) Limited (WCIL) was the largest private, multimodal, rail focused, 4PL asset-light logistics company in India in terms of container volumes in FY22, as per 1Lattice.
• In this note, we talk about the company’s historical performance.

• The Company specializes in temporary construction equipment and offers a one-stop service from development and manufacturing to sales, rentals, design and installation, as well as management and logistics.
• Its flagship product, the next-generation scaffolding “Iq System,” was launched in 2014 and excels in safety and ease of use.
• The Company is transitioning its business to a platform-based model aimed at generating stable income with reduced rental asset intensity.

• Ecopro HN announced a ₩200 billion rights issue, offering 5.67 million shares (a 40% capital increase) with a stockholder allocation rate of 0.3 per share.
• The extended timeline likely results from the issuer’s 20% discount push, with Daishin, an underdog banker, extending it to boost subscriptions despite risking price stability.
• The strategy is to time entry when the stock rights and subscription costs create a solid spread versus the spot price, despite increased volatility making price predictions harder.

• On 4 September, Ecopro HN announced that it plans to conduct a rights offering capital raise of about 200 billion won. 
• The company plans to issue 5.67 million new shares and the expected rights offering price is 35,300 won (23% lower than current price). 
• We would not subscribe to this rights offering mainly due to lofty valuations, declining sales and profit growth, continued negative free cash flow, and concerns about excessive shares dilution. 

• Louis Dreyfus Company (LDC) and Olam (OLG SP)‘s Olam Agri have been going toe-to-toe over Namoi Cotton (NAM AU) since the 1st February. LDC has now declared its Offer unconditional. 
• It’s an interesting move. Namoi is trading through LDC’s A$0.67/share Offer terms. But unlike Olam’s Offer, LDC now has FIRB and ACCC under its belt.
• Currently trading at Olam’s A$0.70/share terms. All eyes are on ACCC giving Olam the green light. Or not.

• Carraro India Limited (810618Z IN) is looking to raise about US$216m in its upcoming India IPO. The deal will be run by Axis, Nuvama and BNP Paribas.
• Carraro India Limited (CIL), is a technology driven integrated supplier that develops complex engineering products and solutions for its original equipment manufacturer (OEM) customers.
• CIL primarily manufactures axles and transmission systems for agricultural tractors and construction vehicles such as backhoe loaders, soil compactors, cranes, self-loading concrete mixers and small motor graders.

• Western Carriers (1489172D IN) is looking to raise about US$100m in its upcoming India IPO.
• Western Carriers (India) Limited (WCIL) was the largest private, multimodal, rail focused, 4PL asset-light logistics company in India in terms of container volumes in FY22, as per 1Lattice.
• In this note, we talk about the company’s historical performance.

• The Company specializes in temporary construction equipment and offers a one-stop service from development and manufacturing to sales, rentals, design and installation, as well as management and logistics.
• Its flagship product, the next-generation scaffolding “Iq System,” was launched in 2014 and excels in safety and ease of use.
• The Company is transitioning its business to a platform-based model aimed at generating stable income with reduced rental asset intensity.

• Almost exactly a year ago, Auckland City Council (ACC) raised around US$320m via selling around 7% of its stake in Auckland Intl Airport (AIA NZ).
• ACC still has an 11% stake left, which it now plans to transfer to a future fund, which will be free to sell the shares
• In this note, we will talk about the possible placement and other deal dynamics.

• We provide an updated NAV analysis of Samsung C&T, discuss the reduced overhang post final Lee family inheritance tax payment, and also provide further details of its Corporate Value-Up announcement. 
• Given 2025 will be the last year of major inheritance tax payment for the Lee family, there is likely to be reduced overhang associated with inheritance tax issue next year.
• Our NAV analysis of Samsung C&T suggests NAV of 39.9 trillion won or NAV per share of 224,249 won which is 45% higher from current levels.

• Dongfang Electric (1072 HK) is now closer to the bottom after underperformance due to a weaker-than-expected 1H24 result dragged by low-margin coal-fired products.
• New contract momentum, however, stayed resilient with a 14.8% YoY increase to Rmb56.1bn in 1H24. Forward backlog coverage is now at 1.8x FY24F revenue.
• There is a significant Rmb6.3bn positive operating cash flow swing in 1H24. This helps to raise net cash (excluding contract liabilities) to 76.4% of the share price.

• Volume and revenue grow as the company works with China’s new trading partners
• Margins and cashflow under pressure due to a weak domestic economy and higher freight rates
• Cross-Border e-commerce growing fast from a small base relative to other divisions

• ASGN Incorporated has released its earnings for the second quarter of 2024, revealing a mixture of steady performance amid challenging macroeconomic conditions.
• The company reported revenues of $1.035 billion, aligned with the management’s guidance and demonstrating a cautious but steady demand environment similar to the previous quarter.
• The adjusted EBITDA was $117.1 million, translating to a margin of 11.3%, which is at the higher end of expectations.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Boels’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Investors evaluating Teledyne Technologies Incorporated should consider both the achievements and challenges reported in their latest financial updates.
• Notably, the company achieved record free cash flow, allowing for significant allocations towards debt repayment, acquisitions, and stock buybacks.
• This demonstrates adept financial management and the capability to maintain operational flexibility.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Verisure’s ESG as “Strong”, in line with its Social score, while the Environmental and Governance scores are “Adequate”. Controversies are “Immaterial” and Disclosure is “Strong”. 

• Almost exactly a year ago, Auckland City Council (ACC) raised around US$320m via selling around 7% of its stake in Auckland Intl Airport (AIA NZ).
• ACC still has an 11% stake left, which it now plans to transfer to a future fund, which will be free to sell the shares
• In this note, we will talk about the possible placement and other deal dynamics.

• We provide an updated NAV analysis of Samsung C&T, discuss the reduced overhang post final Lee family inheritance tax payment, and also provide further details of its Corporate Value-Up announcement. 
• Given 2025 will be the last year of major inheritance tax payment for the Lee family, there is likely to be reduced overhang associated with inheritance tax issue next year.
• Our NAV analysis of Samsung C&T suggests NAV of 39.9 trillion won or NAV per share of 224,249 won which is 45% higher from current levels.

• Dongfang Electric (1072 HK) is now closer to the bottom after underperformance due to a weaker-than-expected 1H24 result dragged by low-margin coal-fired products.
• New contract momentum, however, stayed resilient with a 14.8% YoY increase to Rmb56.1bn in 1H24. Forward backlog coverage is now at 1.8x FY24F revenue.
• There is a significant Rmb6.3bn positive operating cash flow swing in 1H24. This helps to raise net cash (excluding contract liabilities) to 76.4% of the share price.

• Volume and revenue grow as the company works with China’s new trading partners
• Margins and cashflow under pressure due to a weak domestic economy and higher freight rates
• Cross-Border e-commerce growing fast from a small base relative to other divisions

• ASGN Incorporated has released its earnings for the second quarter of 2024, revealing a mixture of steady performance amid challenging macroeconomic conditions.
• The company reported revenues of $1.035 billion, aligned with the management’s guidance and demonstrating a cautious but steady demand environment similar to the previous quarter.
• The adjusted EBITDA was $117.1 million, translating to a margin of 11.3%, which is at the higher end of expectations.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Boels’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Investors evaluating Teledyne Technologies Incorporated should consider both the achievements and challenges reported in their latest financial updates.
• Notably, the company achieved record free cash flow, allowing for significant allocations towards debt repayment, acquisitions, and stock buybacks.
• This demonstrates adept financial management and the capability to maintain operational flexibility.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Verisure’s ESG as “Strong”, in line with its Social score, while the Environmental and Governance scores are “Adequate”. Controversies are “Immaterial” and Disclosure is “Strong”.