Industrials

• 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 – I-Tail (ITC TB) is set to launch it’s up to US$600 million SET IPO. 
• Event-Driven developments – Toshiba Corp (6502 JP), Uzabase Inc (3966 JP), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Origin Energy (ORG AU).   

• There are 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
• Four new deal were discussed on Smartkarma this week: Origin Energy (ORG AU), Totoku Electric (5807 JP), Uzabase Inc (3966 JP), and Golden Energy & Resources (GER SP) 
• Key updates took place for: Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Jinke Smart Services (9666 HK), Toshiba Corp (6502 JP), and Eagle Cement Corp (EAGLE PM).

• 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 – I-Tail (ITC TB) is set to launch it’s up to US$600 million SET IPO. 
• Event-Driven developments – Toshiba Corp (6502 JP), Uzabase Inc (3966 JP), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Origin Energy (ORG AU).   

• There are 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
• Four new deal were discussed on Smartkarma this week: Origin Energy (ORG AU), Totoku Electric (5807 JP), Uzabase Inc (3966 JP), and Golden Energy & Resources (GER SP) 
• Key updates took place for: Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Jinke Smart Services (9666 HK), Toshiba Corp (6502 JP), and Eagle Cement Corp (EAGLE PM).

• In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow. 
• GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
• Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

• Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted. 
• While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted. 
• It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.

• IndiaFirst Life Insurance (1083896D IN) is looking to raise about US$250m in its upcoming India IPO. The deal will be run by ICICI, Ambit, BNP, BOBCap, HSBC, Jefferies and JMF. 
• IndiaFirst Life Insurance (IFLI) Is a private life insurer in India with a product portfolio of retail and group products, ranging across different segments. 
• The company’s retail product portfolio in India comprises nine participating products, 16 non-participating products (comprising 11 nonparticipating savings products and six non-participating protection products) and four unit-linked products.

• In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow. 
• GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
• Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

• Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted. 
• While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted. 
• It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.

• IndiaFirst Life Insurance (1083896D IN) is looking to raise about US$250m in its upcoming India IPO. The deal will be run by ICICI, Ambit, BNP, BOBCap, HSBC, Jefferies and JMF. 
• IndiaFirst Life Insurance (IFLI) Is a private life insurer in India with a product portfolio of retail and group products, ranging across different segments. 
• The company’s retail product portfolio in India comprises nine participating products, 16 non-participating products (comprising 11 nonparticipating savings products and six non-participating protection products) and four unit-linked products.

• Golden Energy & Resources (GER SP) has proposed in-specie-ing its holding in Golden Energy Mines (GEMS IJ), subsequent to which the Widjaja family will undertake an Exit Offer.
• Ex-GEMS, the family is Offering S$0.16/share. That’s insulting. And the Offer was announced after GEAR’s share price had fallen 26%.  The Exit Offer has been declared final.
• GEAR’s jewel is the stake in GEMS, and shareholders are afforded future exposure. However, the stub ops are worth considerably more than S$0.16/share. 

• Archean Chemical Industries (0810406D IN) is looking to raise about US$178m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• We have looked at the background of the deal in our earlier notes. In this note, we will talk about the peer comparison and valuations.

• The CNMV has authorised the takeover bid for Siemens Gamesa launched by Siemens Energy. Shareholders can tender up to 13 December. The market believes the offer will succeed.
• Gross spread 0.194%, 1.6% estimated annual return (assuming settlement 23 December). Since announcement, the share price has remained below the offer price, with high daily turnover and a tight spread.
• Accept offer. I don’t expect any relevant changes: Siemens Energy already has control, operating problems persist and the financial position continues to deteriorate. The offer price represents 46.9x P/2024e E.

• Caterpillar delivered another solid quarter with an all around beat and generated strong ME&T free cash flow and a higher operating profit margin.
• To expand its offerings in the construction industry, Caterpillar is launching four prototypes of electric vehicles that are powered by lithium-ion batteries.
• We provide the stock of Caterpillar with a ‘Hold’ rating and a revision in the target price.

• Honeywell delivered a mixed set of results while going through a tough operating environment.
• Honeywell delivered organic sales growth and strong double-digit growth in its building products businesses, commercial aerospace, and advanced materials.
• In the quarter, earnings and cash flows was a bright spot as Honeywall managed an earnings beat.

• Golden Energy & Resources (GER SP) has proposed in-specie-ing its holding in Golden Energy Mines (GEMS IJ), subsequent to which the Widjaja family will undertake an Exit Offer.
• Ex-GEMS, the family is Offering S$0.16/share. That’s insulting. And the Offer was announced after GEAR’s share price had fallen 26%.  The Exit Offer has been declared final.
• GEAR’s jewel is the stake in GEMS, and shareholders are afforded future exposure. However, the stub ops are worth considerably more than S$0.16/share. 

• Archean Chemical Industries (0810406D IN) is looking to raise about US$178m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• We have looked at the background of the deal in our earlier notes. In this note, we will talk about the peer comparison and valuations.

• The CNMV has authorised the takeover bid for Siemens Gamesa launched by Siemens Energy. Shareholders can tender up to 13 December. The market believes the offer will succeed.
• Gross spread 0.194%, 1.6% estimated annual return (assuming settlement 23 December). Since announcement, the share price has remained below the offer price, with high daily turnover and a tight spread.
• Accept offer. I don’t expect any relevant changes: Siemens Energy already has control, operating problems persist and the financial position continues to deteriorate. The offer price represents 46.9x P/2024e E.

• Caterpillar delivered another solid quarter with an all around beat and generated strong ME&T free cash flow and a higher operating profit margin.
• To expand its offerings in the construction industry, Caterpillar is launching four prototypes of electric vehicles that are powered by lithium-ion batteries.
• We provide the stock of Caterpillar with a ‘Hold’ rating and a revision in the target price.

• Honeywell delivered a mixed set of results while going through a tough operating environment.
• Honeywell delivered organic sales growth and strong double-digit growth in its building products businesses, commercial aerospace, and advanced materials.
• In the quarter, earnings and cash flows was a bright spot as Honeywall managed an earnings beat.

• The Nikkei reported on Monday that JIP’s bid values Toshiba at roughly ¥2.2trn. 
• The stock has dropped to a level just below this valuation suggesting some anticipation of a Bain/JIC bid above that valuation. 
• While that is plausible, the cautiousness of JIP’s bid highlights the fundamental downside risk here in our view.

• Golden Energy & Resources (GER SP)‘s proposal from the Widjaja family – The distribution proposal (1.3936 GEMS share per share or IDR5,500 per GEMS share) and the delisting proposal (S$0.160).
• For minorities, the good news is that the distribution share ratio is in line with the control ratio and offers are at a premium to historical share prices/multiples. 
• The bad news is that the distribution cash alternative is unattractive and the delisting offer values GEAR at a discount to the Stanmore Coal (SMR AU) stake adjusted for debt.

• Yesterday, Carlyle announced a buyout of Totoku Electric (5807 JP) at ¥5,660/share, which was a cool 155% premium to Tuesday’s close of ¥2,215. The stock was limit up today. 
• It will be limit up tomorrow, and the next day. And probably the next day. 
• This is a very interesting outcome. But it is actually not as expensive as it “looks.”

• Strong 1H orders and the second upward revision to guidance this fiscal year have lifted the share price to a new high.
• The energy shortage and high energy prices should continue to drive demand for Yokogawa’s oil, gas and power related industrial control equipment. Demand from other users is also rising.
• Valuations suggest 15% to 20% additional upside potential for the share price. Recession or a strengthening of the yen could put this at risk, so watch the order flow.

• 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.
• In this note, we talk about the company’s past performance and other deal dynamics.

• ACCO had already warned of the sales shortfall in the third quarter but followed through on exhibiting the free cash flow capabilities of the business.
• Retailers have changed their purchasing habits and that has led to slower sales at ACCO. 
• Looking ahead to the fourth quarter, back to school season begins in Brazil and Australia, which should give a lift to sales. 

• The Nikkei reported on Monday that JIP’s bid values Toshiba at roughly ¥2.2trn. 
• The stock has dropped to a level just below this valuation suggesting some anticipation of a Bain/JIC bid above that valuation. 
• While that is plausible, the cautiousness of JIP’s bid highlights the fundamental downside risk here in our view.

• Golden Energy & Resources (GER SP)‘s proposal from the Widjaja family – The distribution proposal (1.3936 GEMS share per share or IDR5,500 per GEMS share) and the delisting proposal (S$0.160).
• For minorities, the good news is that the distribution share ratio is in line with the control ratio and offers are at a premium to historical share prices/multiples. 
• The bad news is that the distribution cash alternative is unattractive and the delisting offer values GEAR at a discount to the Stanmore Coal (SMR AU) stake adjusted for debt.

• Yesterday, Carlyle announced a buyout of Totoku Electric (5807 JP) at ¥5,660/share, which was a cool 155% premium to Tuesday’s close of ¥2,215. The stock was limit up today. 
• It will be limit up tomorrow, and the next day. And probably the next day. 
• This is a very interesting outcome. But it is actually not as expensive as it “looks.”

• Strong 1H orders and the second upward revision to guidance this fiscal year have lifted the share price to a new high.
• The energy shortage and high energy prices should continue to drive demand for Yokogawa’s oil, gas and power related industrial control equipment. Demand from other users is also rising.
• Valuations suggest 15% to 20% additional upside potential for the share price. Recession or a strengthening of the yen could put this at risk, so watch the order flow.

• 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.
• In this note, we talk about the company’s past performance and other deal dynamics.

• ACCO had already warned of the sales shortfall in the third quarter but followed through on exhibiting the free cash flow capabilities of the business.
• Retailers have changed their purchasing habits and that has led to slower sales at ACCO. 
• Looking ahead to the fourth quarter, back to school season begins in Brazil and Australia, which should give a lift to sales. 

• Media reported last night that JIP would bid ¥2.2trln for Toshiba. That’s about ¥5,000-5,100/share. 
• This morning, there is a bit more clarification. Funnily, that means there is less info here than people think.
• But it is not a great look for either JIP or Toshiba at this point.

• Kawasaki Kisen Kaisha (9107 JP) had a shareholder return program in place in May. Earnings forecasts on 3 Nov were slightly disappointing so the stock sold off but…
• The large buyback allowed investors to try to game the situation. Some may have, but this morning on the execution, VERY few Real World Float holders sold. 
• That leaves the stock squeezy going into a buyback to repurchase 20% of the Max Real World Float (including short-created longs). 

• Delhivery (DELHIVER IN) raised US$675m in its IPO and started trading on 24 May. The stock dropped below its IPO price a couple of weeks ago.
• Lock-Ups on pre-IPO investors expire on 20 November with 598m shares (US$2.89bn) becoming available for sale. Sell before then or hold off on buying.
• Delhivery (DELHIVER IN) is a potential inclusion to the MSCI Small Cap and FTSE All-World indices in the next month. Passive buying will be overshadowed by lock-up expiry.

• Archean Chemical Industries (0810406D IN) is looking to raise about US$176m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• ACI has been growing on the back of increasing production capacity, sales volume and average selling prices in recent years. However, the firm had nearly defaulted previously. 

• An ideal timing of selling/shorting Sungeel Hitech would be after its stock is included in KOSDAQ 150 but before the end of the 6 months lock up period. 
• Sungeel Hitech is a likely candidate for an early entry in KOSDAQ 150 in December.
• Sungeel Hitech’s 6 months end of lock-up period is on 28 January 2023. There are 0.31 million shares (2.6% of total outstanding shares) that can be sold after this period.

Adani Ports and Special Economic Zone’s (APSEZ) H1/22-23 results were moderately strong. The company reported robust earnings growth and margin expansion, supported by organic growth in cargo volumes and improved pricing. Leverage improved, as the company applied positive FCF towards debt reduction. That said, we expect slightly negative FY 2022-23 FCF, owing to higher full-year capex and the Haifa port acquisition. 

We note APSEZ’s continued aggressive growth ambitions, which would keep Net Debt/EBITDA at a moderate 3-4x. The company’s intention to bid for the Container Corporation of India (valued at a hefty USD 5.8 bn) may present an event risk, though the impact on leverage would ultimately hinge on APSEZ’s funding plans.

• Media reported last night that JIP would bid ¥2.2trln for Toshiba. That’s about ¥5,000-5,100/share. 
• This morning, there is a bit more clarification. Funnily, that means there is less info here than people think.
• But it is not a great look for either JIP or Toshiba at this point.

• Kawasaki Kisen Kaisha (9107 JP) had a shareholder return program in place in May. Earnings forecasts on 3 Nov were slightly disappointing so the stock sold off but…
• The large buyback allowed investors to try to game the situation. Some may have, but this morning on the execution, VERY few Real World Float holders sold. 
• That leaves the stock squeezy going into a buyback to repurchase 20% of the Max Real World Float (including short-created longs). 

• Delhivery (DELHIVER IN) raised US$675m in its IPO and started trading on 24 May. The stock dropped below its IPO price a couple of weeks ago.
• Lock-Ups on pre-IPO investors expire on 20 November with 598m shares (US$2.89bn) becoming available for sale. Sell before then or hold off on buying.
• Delhivery (DELHIVER IN) is a potential inclusion to the MSCI Small Cap and FTSE All-World indices in the next month. Passive buying will be overshadowed by lock-up expiry.

• Archean Chemical Industries (0810406D IN) is looking to raise about US$176m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• ACI has been growing on the back of increasing production capacity, sales volume and average selling prices in recent years. However, the firm had nearly defaulted previously. 

• An ideal timing of selling/shorting Sungeel Hitech would be after its stock is included in KOSDAQ 150 but before the end of the 6 months lock up period. 
• Sungeel Hitech is a likely candidate for an early entry in KOSDAQ 150 in December.
• Sungeel Hitech’s 6 months end of lock-up period is on 28 January 2023. There are 0.31 million shares (2.6% of total outstanding shares) that can be sold after this period.

Adani Ports and Special Economic Zone’s (APSEZ) H1/22-23 results were moderately strong. The company reported robust earnings growth and margin expansion, supported by organic growth in cargo volumes and improved pricing. Leverage improved, as the company applied positive FCF towards debt reduction. That said, we expect slightly negative FY 2022-23 FCF, owing to higher full-year capex and the Haifa port acquisition. 

We note APSEZ’s continued aggressive growth ambitions, which would keep Net Debt/EBITDA at a moderate 3-4x. The company’s intention to bid for the Container Corporation of India (valued at a hefty USD 5.8 bn) may present an event risk, though the impact on leverage would ultimately hinge on APSEZ’s funding plans.