Industrials

• Rentokil Initial has long been a dominant player in the global pest control and hygiene services market, with a reputation for operational efficiency and steady growth.
• The company recently reported a strong first half of 2024, showcasing a 4% increase in revenue to GBP 2.8 billion and a 4.7% rise in adjusted operating profit to GBP 455 million.
• Despite these positives, the company’s stock price took a hit amid reports that Philip Jansen, the former BT Group boss who was reportedly working with private equity firms to buy out Rentokil, is no longer interested in pursuing a takeover.

• Rentokil Initial has long been a dominant player in the global pest control and hygiene services market, with a reputation for operational efficiency and steady growth.
• The company recently reported a strong first half of 2024, showcasing a 4% increase in revenue to GBP 2.8 billion and a 4.7% rise in adjusted operating profit to GBP 455 million.
• Despite these positives, the company’s stock price took a hit amid reports that Philip Jansen, the former BT Group boss who was reportedly working with private equity firms to buy out Rentokil, is no longer interested in pursuing a takeover.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP). 

• Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. 
• The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. 
• We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.

• Despite a 3.1% drop in profit, China Communications Construction (1800 HK) is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. 
• High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. 
• Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. 

• We compare H1 revenue growth and Adjusted EBITDA margins of six companies
• We then add needed context to aid understanding of each company’s results
• We think it’s time to look for bargains in express; focus on SF Holding, Yunda

• Premier Energies Limited (0377949D IN) raised around US$337m after pricing the deal at the top end of the range at INR450 / share.
• It also executes engineering, procurement, and construction (EPC) projects and provides follow-up operation and maintenance (O&M) services.
• We have looked at various aspects of the deal in our previous notes. In this note,  we talk about demand and trading dynamics. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP). 

• Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. 
• The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. 
• We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.

• Despite a 3.1% drop in profit, China Communications Construction (1800 HK) is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. 
• High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. 
• Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. 

• We compare H1 revenue growth and Adjusted EBITDA margins of six companies
• We then add needed context to aid understanding of each company’s results
• We think it’s time to look for bargains in express; focus on SF Holding, Yunda

• Premier Energies Limited (0377949D IN) raised around US$337m after pricing the deal at the top end of the range at INR450 / share.
• It also executes engineering, procurement, and construction (EPC) projects and provides follow-up operation and maintenance (O&M) services.
• We have looked at various aspects of the deal in our previous notes. In this note,  we talk about demand and trading dynamics. 

• Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
• Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
• Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

• CTBC’s (likely) goal is to boost Shin Kong (2888 TT)‘s shares, so as to make the Taishin Financial Holding (2887 TT) merger unpalatable for Shin Kong shareholders. That smells of opportunity.
• Jardine Matheson Holdings (JM SP) is trading cheap to NAV and its implied stub. It may well get cheaper.
• Toyota Motor (7203 JP)‘s resulting supply/demand profile is mixed, but on balance, expect to see positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

• Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
• Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
• Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

• CTBC’s (likely) goal is to boost Shin Kong (2888 TT)‘s shares, so as to make the Taishin Financial Holding (2887 TT) merger unpalatable for Shin Kong shareholders. That smells of opportunity.
• Jardine Matheson Holdings (JM SP) is trading cheap to NAV and its implied stub. It may well get cheaper.
• Toyota Motor (7203 JP)‘s resulting supply/demand profile is mixed, but on balance, expect to see positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

• Premier Energies made SALE before Offer For Sale – A mini OFS just before IPO to close investors who helped company in its journey till IPO.
• The stake sale amounting to INR 800+ crores raises the concern over governance and disclosure norms
• Such a unique case where the promoter used the loophole might face actions from SEBI.

• Sanyo Industries Product Categories Sanyo Industries (TYO 5958) is a manufacturer of construction materials that’s been in business since 1948.
• Their main products are sheet metal works used for flooring, roofing, aluminium building materials, and rooftop ventilators.
• They also manufactur earthquake and other disaster resilient components.

• Elgi Equipments (ELEQ IN) headquartered in Tamil Nadu, India manufactures a range of air compressors and automotive equipments and sells across domestic and international geographies.
• Overall, balance sheet looks strong with consistent FCF generation, upward sloping ROCEs and low risk of solvency
• But one needs to be cautious about the performance of subsidiaries, especially the Belgium and US arms, and goodwill assessment, whistle blower trends, etc.

• BQE announced that it has been contracted for a new water treatment plant for the closure of the legacy Valley Tailings Facility in the Yukon.
• This continues the rapid growth that BQE has posted in its recurring operations segment which grew 79% YoY and 43% QoQ in Q2.
• The plant is expected to be completed in Q2/25 and operate for six years.

• In terms of topline, both the Management Consulting Business and the Revitalization Support Business continued to perform favorably, achieving net sales of ¥2,908 mn (+14.3% YoY) and ¥791 mn (+5.6% YoY), respectively.
• The M&A Advisory Business reported net sales of ¥746 mn (-52.3% YoY).
• The Investment Business posted significant growth (+117% YoY), though its scale remained small with net sales of only ¥39 mn. 

• Minres reported full year results, leading to a 10% drop in share price and a 50% decline since May
• Company’s balance sheet is a concern due to exposure to the cyclical nature of the mining industry and risky investments in lithium
• Analysts are nervous about the company’s direction and future prospects, particularly with over $3 billion in capex invested in projects like Onslow

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Premier Energies made SALE before Offer For Sale – A mini OFS just before IPO to close investors who helped company in its journey till IPO.
• The stake sale amounting to INR 800+ crores raises the concern over governance and disclosure norms
• Such a unique case where the promoter used the loophole might face actions from SEBI.

• Sanyo Industries Product Categories Sanyo Industries (TYO 5958) is a manufacturer of construction materials that’s been in business since 1948.
• Their main products are sheet metal works used for flooring, roofing, aluminium building materials, and rooftop ventilators.
• They also manufactur earthquake and other disaster resilient components.

• Elgi Equipments (ELEQ IN) headquartered in Tamil Nadu, India manufactures a range of air compressors and automotive equipments and sells across domestic and international geographies.
• Overall, balance sheet looks strong with consistent FCF generation, upward sloping ROCEs and low risk of solvency
• But one needs to be cautious about the performance of subsidiaries, especially the Belgium and US arms, and goodwill assessment, whistle blower trends, etc.

• BQE announced that it has been contracted for a new water treatment plant for the closure of the legacy Valley Tailings Facility in the Yukon.
• This continues the rapid growth that BQE has posted in its recurring operations segment which grew 79% YoY and 43% QoQ in Q2.
• The plant is expected to be completed in Q2/25 and operate for six years.

• In terms of topline, both the Management Consulting Business and the Revitalization Support Business continued to perform favorably, achieving net sales of ¥2,908 mn (+14.3% YoY) and ¥791 mn (+5.6% YoY), respectively.
• The M&A Advisory Business reported net sales of ¥746 mn (-52.3% YoY).
• The Investment Business posted significant growth (+117% YoY), though its scale remained small with net sales of only ¥39 mn. 

• Minres reported full year results, leading to a 10% drop in share price and a 50% decline since May
• Company’s balance sheet is a concern due to exposure to the cyclical nature of the mining industry and risky investments in lithium
• Analysts are nervous about the company’s direction and future prospects, particularly with over $3 billion in capex invested in projects like Onslow

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
• Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
• With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

• Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
• The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
• The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

• On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
• However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
• Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.  

• Timee began trading on 26th July and share price has surged 47% since its debut where the company priced the IPO at top of the indicative price range.
• Though Timee Inc (215A JP) is in early stages, the company has proven that its business model is successful and continue to dominate a market that is underpenetrated.
• Though we think there is further upside, if you have already bought shares at the IPO, we would suggest taking profits and wait for a dip to make a re-entry.

• Shenzhen International (152 HK) reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.
• In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.
• SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. 

• Chinese parcel volume growth slowed in July (+22%) vs firmer pace in Q2 (+32%)
• At company level, there are signs the steep price declines from H1 are moderating
• If worst of price declines is in rearview mirror, beat down names are worth a look

• Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
• Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
• With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

• Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
• The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
• The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

• On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
• However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
• Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.  

• Timee began trading on 26th July and share price has surged 47% since its debut where the company priced the IPO at top of the indicative price range.
• Though Timee Inc (215A JP) is in early stages, the company has proven that its business model is successful and continue to dominate a market that is underpenetrated.
• Though we think there is further upside, if you have already bought shares at the IPO, we would suggest taking profits and wait for a dip to make a re-entry.

• Shenzhen International (152 HK) reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.
• In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.
• SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. 

• Chinese parcel volume growth slowed in July (+22%) vs firmer pace in Q2 (+32%)
• At company level, there are signs the steep price declines from H1 are moderating
• If worst of price declines is in rearview mirror, beat down names are worth a look