Industrials

Halcyon Agri (HACL SP) has announced Sinochem, its largest shareholder with 65.2%, has entered into a SPA to sell 36% of shares out to China Hainan Rubber Industry (601118 CH).
Upon completion of the SPA, Hainan Rubber will make an MGO, conditional on a 50% tendering acceptance. Sinochem has provided an undertaking not to tender its remaining 29.2% stake.
The Offer Price? The SPA price is US$0.315/share and the Offer Price will be the SGD equivalent at the close of the SPA.

Delhivery IPO Lockup Expiry – US$2.8bn Lockup Release, with Softbank the Largest Holder

In May 2022, Delhivery raised around US$680m in its India IPO, the company is backed by a host of financial investors, the largest being Softbank.
Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
In this note, we will talk about the upcoming lockup expiry.

Growatt Technology Pre-IPO – Thoughts on Valuation

Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization.
In our previous notes, we looked at the company’s past performance and peer comparison. In this note, we will look at assumptions and share our thoughts on valuation.

PTB Group: Scheme Approved. Now For The Dividend

PTB Group Ltd (PTB AU) shareholders comprehensively approved the PAG Scheme on the 16 November. Shares will be suspended from trading at the close on the 30 November.
However, before the trading halt, PTB’s board is expected to declare a final (and fully franked) dividend to Scheme shareholders up to the amount of A$0.03/share.
Expect that declaration to occur on or around Monday, 28 November.

Ametek Inc: Recent Acquisitions & Other Developments

By Baptista Research

Ametek’s stock price has surged as the company delivered excellent results with strong sales growth as well as solid operational execution, thus leading to high earnings, both of which were well above market expectations.
Ametek also sees continued broad-based and strong demand across its diversified niche markets that leads to impressive organic order growth.
The Electronic Instruments Group of the company delivered excellent operating performance having broad-based and continued strong growth.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 18

Daily Brief Industrials: Halcyon Agri, Delhivery, Growatt Technology, PTB Group Ltd, Ametek Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Halcyon Agri: Hainan Rubber’s Conditional MGO
Delhivery IPO Lockup Expiry – US$2.8bn Lockup Release, with Softbank the Largest Holder
Growatt Technology Pre-IPO – Thoughts on Valuation
PTB Group: Scheme Approved. Now For The Dividend
Ametek Inc: Recent Acquisitions & Other Developments

Halcyon Agri: Hainan Rubber’s Conditional MGO

Halcyon Agri (HACL SP) has announced Sinochem, its largest shareholder with 65.2%, has entered into a SPA to sell 36% of shares out to China Hainan Rubber Industry (601118 CH).
Upon completion of the SPA, Hainan Rubber will make an MGO, conditional on a 50% tendering acceptance. Sinochem has provided an undertaking not to tender its remaining 29.2% stake.
The Offer Price? The SPA price is US$0.315/share and the Offer Price will be the SGD equivalent at the close of the SPA.

Delhivery IPO Lockup Expiry – US$2.8bn Lockup Release, with Softbank the Largest Holder

In May 2022, Delhivery raised around US$680m in its India IPO, the company is backed by a host of financial investors, the largest being Softbank.
Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
In this note, we will talk about the upcoming lockup expiry.

Growatt Technology Pre-IPO – Thoughts on Valuation

Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization.
In our previous notes, we looked at the company’s past performance and peer comparison. In this note, we will look at assumptions and share our thoughts on valuation.

PTB Group: Scheme Approved. Now For The Dividend

PTB Group Ltd (PTB AU) shareholders comprehensively approved the PAG Scheme on the 16 November. Shares will be suspended from trading at the close on the 30 November.
However, before the trading halt, PTB’s board is expected to declare a final (and fully franked) dividend to Scheme shareholders up to the amount of A$0.03/share.
Expect that declaration to occur on or around Monday, 28 November.

Ametek Inc: Recent Acquisitions & Other Developments

By Baptista Research

Ametek’s stock price has surged as the company delivered excellent results with strong sales growth as well as solid operational execution, thus leading to high earnings, both of which were well above market expectations.
Ametek also sees continued broad-based and strong demand across its diversified niche markets that leads to impressive organic order growth.
The Electronic Instruments Group of the company delivered excellent operating performance having broad-based and continued strong growth.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 17

Daily Brief Industrials: Halcyon Agri, Senior PLC, Beijing Sinohytec Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Halcyon Agri Suspended Ahead Of Possible Offer
Halcyon Agri (HACL SP)’s Potential MGO
FTSE UK Quiddity Leaderboard Dec 22: Euromoney DEL and More High-Impact Intra-Review Changes
Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation

Halcyon Agri Suspended Ahead Of Possible Offer

Natural rubber play Halcyon Agri (HACL SP) was suspended ahead of trading on the 14 November.
Word on the street is that a privatisation will be announced shortly.
The benefit of hindsight … Halcyon’s largest shareholder, SOE-backed Sinochem, recently increased its stake, paying ~S$0.45/share.

Halcyon Agri (HACL SP)’s Potential MGO

China Hainan Rubber Industry (601118 CH) has entered a conditional SPA with Sinochem International Corporation A (600500 CH) to acquire a 36.00% stake in Halcyon Agri (HACL SP) at US$0.315/share.
The SPA completion will trigger an MGO at US$0.315 (S$0.436) per share. The pre-conditions mainly relate to Chinese regulatory approvals which should be a formality due to SOE links.
The MGO has a 50%+ minimum acceptance condition which requires around a 40% minorities acceptance rate. We think that this is achievable as the offer is attractive.

FTSE UK Quiddity Leaderboard Dec 22: Euromoney DEL and More High-Impact Intra-Review Changes

In this insight, we take a look at the potential index changes for FTSE 100 and FTSE 250 in the run up to the December 2022 Rebalance.
FTSE 250 candidate Euromoney Institutional Investor (ERM LN) could get deleted before the end of November and there could be more intra-review changes in December 2022.
The highest-ranked candidates that are leading the race to become FTSE250 replacements have 15+ days of volume to buy.

Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation

Beijing Sinohytec Co Ltd (688339 CH) (BSH) is looking to raise up to US$400m via its H-shares listing.
BSH provides fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks mainly for commercial vehicles, such as buses and trucks.
We looked at the company’s past performance in our previous note. In this note, we’ll talk about valuations.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 17

Daily Brief Industrials: Halcyon Agri, Senior PLC, Beijing Sinohytec Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Halcyon Agri Suspended Ahead Of Possible Offer
Halcyon Agri (HACL SP)’s Potential MGO
FTSE UK Quiddity Leaderboard Dec 22: Euromoney DEL and More High-Impact Intra-Review Changes
Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation

Halcyon Agri Suspended Ahead Of Possible Offer

Natural rubber play Halcyon Agri (HACL SP) was suspended ahead of trading on the 14 November.
Word on the street is that a privatisation will be announced shortly.
The benefit of hindsight … Halcyon’s largest shareholder, SOE-backed Sinochem, recently increased its stake, paying ~S$0.45/share.

Halcyon Agri (HACL SP)’s Potential MGO

China Hainan Rubber Industry (601118 CH) has entered a conditional SPA with Sinochem International Corporation A (600500 CH) to acquire a 36.00% stake in Halcyon Agri (HACL SP) at US$0.315/share.
The SPA completion will trigger an MGO at US$0.315 (S$0.436) per share. The pre-conditions mainly relate to Chinese regulatory approvals which should be a formality due to SOE links.
The MGO has a 50%+ minimum acceptance condition which requires around a 40% minorities acceptance rate. We think that this is achievable as the offer is attractive.

FTSE UK Quiddity Leaderboard Dec 22: Euromoney DEL and More High-Impact Intra-Review Changes

In this insight, we take a look at the potential index changes for FTSE 100 and FTSE 250 in the run up to the December 2022 Rebalance.
FTSE 250 candidate Euromoney Institutional Investor (ERM LN) could get deleted before the end of November and there could be more intra-review changes in December 2022.
The highest-ranked candidates that are leading the race to become FTSE250 replacements have 15+ days of volume to buy.

Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation

Beijing Sinohytec Co Ltd (688339 CH) (BSH) is looking to raise up to US$400m via its H-shares listing.
BSH provides fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks mainly for commercial vehicles, such as buses and trucks.
We looked at the company’s past performance in our previous note. In this note, we’ll talk about valuations.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 16

Daily Brief Industrials: Harmonic Drive Systems, Sungeel Hitech, Monadelphous, Tokyo Electron, Washtec, Dongfang Electric, Escorts Kubota Limited, Thermax, Atlantia SpA, Daiei Kankyo and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name
Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns
Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
Edizione & KKR/Atlantia: What Now?
Daiei Kankyo Pre-IPO – Steady, at Best

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

By Sanghyun Park

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

By Scott Foster

Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Roughly half of the 20-trading day reference period for the December 2022 Rebalance is now complete.
Among the names identified as potential index changes, Washtec (WSU GR) appears to be a very high impact name with around 50+ days of volume to buy.

Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years

China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK).
CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges.

Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns

By Pranav Bhavsar

Escorts Kubota Limited (ESCORTS IN) reported a 69 bps YoY gain in market share, but a -540 bps drop in EBITDA margins in spite of a 2% price hike.
We believe the product and management issues highlighted earlier, are likely to ensure both margins and market share do not cross 10% for FY23.
As per the FY22 Annual Report, auditors have received whistle-blower complaints, but no details are disclosed. Credit-impaired trade receivables are also increasing. Stock is not cheap and hence the caution.

Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure

By Tina Banerjee

In Q2FY23, Thermax (TMX IN) recorded strong revenue growth of 41% y/y to Rs20.8bn, driven by strong growth across all the three segments.
The company bore the brunt of high raw material prices as EBIT margins saw a 900 bps decline y/y to 6.9%. However, EBIT margin improved 200 bps over Q1FY23.
The order book of the company grew 46% y/y to Rs94.8bn. Order book is well diversified across sectors. Domestic orders comprised ~84% of the order book.

Edizione & KKR/Atlantia: What Now?

Schema Alfa now holds 87.350% of Atlantia and has waived the 90% Threshold Condition. The offer will be reopened 21-25 November at same terms (settlement 2 December).
Schema Alfa has no obligation to acquire the shares of minority shareholders, moreover it could call an EGM to seek approval for a merger with Atlantia and delist Atlantia.
Gross spread is 0.09%. Accept offer, considering this was almost a knock-out bid with minimal interloper risk and the most likely scenario is delisting by the end of the year.

Daiei Kankyo Pre-IPO – Steady, at Best

Daiei Kankyo (9336 JP) (DK), a waste management company, aims to raise around US$280m in its Japan IPO.
Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
In this note, we talk about the company’s past performance.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 16

Daily Brief Industrials: Harmonic Drive Systems, Sungeel Hitech, Monadelphous, Tokyo Electron, Washtec, Dongfang Electric, Escorts Kubota Limited, Thermax, Atlantia SpA, Daiei Kankyo and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name
Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns
Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
Edizione & KKR/Atlantia: What Now?
Daiei Kankyo Pre-IPO – Steady, at Best

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

By Sanghyun Park

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

By Scott Foster

Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Roughly half of the 20-trading day reference period for the December 2022 Rebalance is now complete.
Among the names identified as potential index changes, Washtec (WSU GR) appears to be a very high impact name with around 50+ days of volume to buy.

Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years

China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK).
CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges.

Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns

By Pranav Bhavsar

Escorts Kubota Limited (ESCORTS IN) reported a 69 bps YoY gain in market share, but a -540 bps drop in EBITDA margins in spite of a 2% price hike.
We believe the product and management issues highlighted earlier, are likely to ensure both margins and market share do not cross 10% for FY23.
As per the FY22 Annual Report, auditors have received whistle-blower complaints, but no details are disclosed. Credit-impaired trade receivables are also increasing. Stock is not cheap and hence the caution.

Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure

By Tina Banerjee

In Q2FY23, Thermax (TMX IN) recorded strong revenue growth of 41% y/y to Rs20.8bn, driven by strong growth across all the three segments.
The company bore the brunt of high raw material prices as EBIT margins saw a 900 bps decline y/y to 6.9%. However, EBIT margin improved 200 bps over Q1FY23.
The order book of the company grew 46% y/y to Rs94.8bn. Order book is well diversified across sectors. Domestic orders comprised ~84% of the order book.

Edizione & KKR/Atlantia: What Now?

Schema Alfa now holds 87.350% of Atlantia and has waived the 90% Threshold Condition. The offer will be reopened 21-25 November at same terms (settlement 2 December).
Schema Alfa has no obligation to acquire the shares of minority shareholders, moreover it could call an EGM to seek approval for a merger with Atlantia and delist Atlantia.
Gross spread is 0.09%. Accept offer, considering this was almost a knock-out bid with minimal interloper risk and the most likely scenario is delisting by the end of the year.

Daiei Kankyo Pre-IPO – Steady, at Best

By Shifara Samsudeen, ACMA, CGMA

Daiei Kankyo (9336 JP) (DK), a waste management company, aims to raise around US$280m in its Japan IPO.
Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
In this note, we talk about the company’s past performance.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 15

Daily Brief Industrials: Recruit Holdings, Fanuc Corp, Growatt Technology, Jiangsu Expressway (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging
Fanuc (6954) | This Time Is Different
Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts
Jiangsu Expressway (177 HK): Positive Updates from Management

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging

Recruit Holdings (6098 JP) reported 2QFY03/2023 earnings today. Revenue increased 25.3% YoY to JPY878.4bn (vs consensus JPY842.7bn) while EBIT decreased 8.2% YoY to JPY108.5bn (vs consensus JPY116.1bn).
HR Tech’s top line growth further slowed down to 40.2% YoY while adjusted EBITDA margin of the segment declined to 30.4% from 40.6% in the same period a year ago.
The company’s 2QFY03/2023 earnings were better than we expected, however, it shows that the earnings growth is slowing down with weakening of labour markets globally.

Fanuc (6954) | This Time Is Different

By Mark Chadwick

Machine Tool Orders in Japan decreased to 141 billion yen in October from 149 billion yen a year ago.
The 5.4% decline marks the start of the third downturn in Machine Tool Orders over the past decade.
We analyse those downturns and believe that Fanuc’s stock price has probably hit bottom, but THIS TIME IS DIFFERENT

Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts

Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization.
In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

Jiangsu Expressway (177 HK): Positive Updates from Management

By Shifara Samsudeen, ACMA, CGMA

Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable.
We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 15

Daily Brief Industrials: Recruit Holdings, Fanuc Corp, Growatt Technology, Jiangsu Expressway (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging
Fanuc (6954) | This Time Is Different
Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts
Jiangsu Expressway (177 HK): Positive Updates from Management

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging

Recruit Holdings (6098 JP) reported 2QFY03/2023 earnings today. Revenue increased 25.3% YoY to JPY878.4bn (vs consensus JPY842.7bn) while EBIT decreased 8.2% YoY to JPY108.5bn (vs consensus JPY116.1bn).
HR Tech’s top line growth further slowed down to 40.2% YoY while adjusted EBITDA margin of the segment declined to 30.4% from 40.6% in the same period a year ago.
The company’s 2QFY03/2023 earnings were better than we expected, however, it shows that the earnings growth is slowing down with weakening of labour markets globally.

Fanuc (6954) | This Time Is Different

By Mark Chadwick

Machine Tool Orders in Japan decreased to 141 billion yen in October from 149 billion yen a year ago.
The 5.4% decline marks the start of the third downturn in Machine Tool Orders over the past decade.
We analyse those downturns and believe that Fanuc’s stock price has probably hit bottom, but THIS TIME IS DIFFERENT

Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts

Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization.
In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

Jiangsu Expressway (177 HK): Positive Updates from Management

Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable.
We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 14

Daily Brief Industrials: Delhivery, Sumitomo Precision Products, Golden Energy & Resources, Caverion Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
North Holdings 3/Caverion: Agreed Takeout

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

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 Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.

North Holdings 3/Caverion: Agreed Takeout

The main shareholders of Caverion (27.08% in aggregate) are joining Bain Capital in a voluntary recommended public €7/share cash tender offer that seems adequate in the short term.
Nevertheless the offer price fails to account for the potential of Caverion, in my view. My fair value estimate (comps-based) is €9.01/share, thus an offer sweetening could be likely.
I consider it unlikely that the offer will fail, and although the current spread is not so attractive on a rate of return basis, I would be long the shares.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 14

Daily Brief Industrials: Delhivery, Sumitomo Precision Products, Golden Energy & Resources, Caverion Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
North Holdings 3/Caverion: Agreed Takeout

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

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 Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.

North Holdings 3/Caverion: Agreed Takeout