Industrials

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Leapmotor (9863 HK) and Onetwo (2602 HK) poor debuts. CALB (3931 HK) prices at the low-end.
Event-Driven developments – SATS (SATS SP), Jinke Smart Services (9666 HK), EVOC Intelligent Technology Company Limited H (2308 HK), Tassal (TGR AU), MACA Ltd (MLD AU), Nearmap Ltd (NEA AU).

💡 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

Oct 02

Daily Brief Industrials: Monadelphous, Toyo Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

💡 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

Oct 02

Daily Brief Industrials: Monadelphous, Toyo Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

💡 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

Oct 01

Daily Brief Industrials: Atlantia SpA and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Edizione & KKR/Atlantia: All Clearances Obtained

Edizione & KKR/Atlantia: All Clearances Obtained

Edizione/Blacktone have obtained clearances from Bank of Italy and Bank of Spain regarding their voluntary takeover offer for Atlantia. Once the Consob approves the prospectus the offer can be launched.
The offer period should start in October and should be completed after 40 working days, with settlement by the end of November, and delisting by the end of the year.
Gross spread is 1.13%, 7.06% annualised return assuming settlement by 30 November. Long ATL IM.

💡 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

Oct 01

Daily Brief Industrials: Atlantia SpA and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Edizione & KKR/Atlantia: All Clearances Obtained

Edizione & KKR/Atlantia: All Clearances Obtained

Edizione/Blacktone have obtained clearances from Bank of Italy and Bank of Spain regarding their voluntary takeover offer for Atlantia. Once the Consob approves the prospectus the offer can be launched.
The offer period should start in October and should be completed after 40 working days, with settlement by the end of November, and delisting by the end of the year.
Gross spread is 1.13%, 7.06% annualised return assuming settlement by 30 November. Long ATL IM.

💡 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

Sep 29

Daily Brief Industrials: SATS, Biffa, WCP, AKR Corporindo, Southwest Airlines Co and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits
SATS Agrees to Acquire WFS for an EV of S$3.1 Billion
Biffa Accepts Lowered Bid from Energy Capital Partners
WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough
AKR Corporindo (AKRA IJ) – Multiple Drivers Ahead
Southwest Airlines: Improving Airline Macro & Other Drivers

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits

SATS (SATS SP) has announced that it is buying Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management at an Enterprise Value of €2.25bn (S$3.107bn).
The cash consideration is €1.187bn (S$1.639bn) and will likely be financed by an equity fund raising. This could be a rights issue and could be combined with a private placement.
Expect the stock to drop once it resumes trading. A significant drop from current levels could provide a buying opportunity as the rights issue could be backstopped.

SATS Agrees to Acquire WFS for an EV of S$3.1 Billion

SATS (SATS SP) agreed to acquire Worldwide Flight Services (WFS), the world’s largest air cargo handling firm, from Cerberus Capital for a cash consideration of S$1,639 million.
The base funding plan is based on a S$1.7 billion equity raise. The uncertain structure and timing of the equity raise will be a short-term overhang.
The acquisition is conditional on shareholder and regulatory approvals. Assuming no synergies, our pro-forma price per share is S$4.97, a 28.5% upside to the last close.

Biffa Accepts Lowered Bid from Energy Capital Partners

ECP lowers its initial offer to 410p/share in cash plus the final dividend of 4.69p/share (28% premium, implied equity value is €1,269 million, implied EV is €1,847 million).
The offer represents 1.2x EV/Fwd revenue, 8.3x EV/Fwd EBITDA and 32.1x Fwd P/E. Suez was taken at similar multiples: 1.5x, 8.1x and 27.4x respectively. My updated fair value estimate (DCF-based) is 410.6p.
The equity value prior to approach was undemanding. The offer price seems fair. Gross spread (including final dividend) is 2.1%. Reiterate Long BIFF LN.

WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough

By Sumeet Singh

WCP raised around US$314m via selling a mix of primary and secondary shares in its Korean IPO.
WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
In this note, we will talk about the demand for the deal and other trading dynamics.

AKR Corporindo (AKRA IJ) – Multiple Drivers Ahead

By Angus Mackintosh

AKR Corporindo (AKRA IJ) continues to see strong sales momentum in July and August after releasing a strong set of 1H2022 results previously with strong momentum expected to year-end.
Both petroleum distribution and chemical distribution are seeing strong tailwinds and its gas station business should be a beneficiary of the fuel price hike.
AKR Corporindo‘s JIIPE estate booked a large 37-hectare plot sale in August with a potential for more smelter-related buyers to come. Valuations look fair but there are potential catalysts ahead.

Southwest Airlines: Improving Airline Macro & Other Drivers

Southwest Airlines delivered a positive set of results in the quarter, surpassing Wall Street expectations on all counts.
The rise in demand and limited capacity led to a favourable yield environment and recorded operating revenues of $6.7 billion for the quarter.
Despite increasing fuel and inflationary cost pressures, the revenue performance resulted in quarterly net profitability, excluding special items, of $825 million.

💡 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

Sep 29

Daily Brief Industrials: SATS, Biffa, WCP, AKR Corporindo, Southwest Airlines Co and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits
SATS Agrees to Acquire WFS for an EV of S$3.1 Billion
Biffa Accepts Lowered Bid from Energy Capital Partners
WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough
AKR Corporindo (AKRA IJ) – Multiple Drivers Ahead
Southwest Airlines: Improving Airline Macro & Other Drivers

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits

SATS (SATS SP) has announced that it is buying Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management at an Enterprise Value of €2.25bn (S$3.107bn).
The cash consideration is €1.187bn (S$1.639bn) and will likely be financed by an equity fund raising. This could be a rights issue and could be combined with a private placement.
Expect the stock to drop once it resumes trading. A significant drop from current levels could provide a buying opportunity as the rights issue could be backstopped.

SATS Agrees to Acquire WFS for an EV of S$3.1 Billion

SATS (SATS SP) agreed to acquire Worldwide Flight Services (WFS), the world’s largest air cargo handling firm, from Cerberus Capital for a cash consideration of S$1,639 million.
The base funding plan is based on a S$1.7 billion equity raise. The uncertain structure and timing of the equity raise will be a short-term overhang.
The acquisition is conditional on shareholder and regulatory approvals. Assuming no synergies, our pro-forma price per share is S$4.97, a 28.5% upside to the last close.

Biffa Accepts Lowered Bid from Energy Capital Partners

ECP lowers its initial offer to 410p/share in cash plus the final dividend of 4.69p/share (28% premium, implied equity value is €1,269 million, implied EV is €1,847 million).
The offer represents 1.2x EV/Fwd revenue, 8.3x EV/Fwd EBITDA and 32.1x Fwd P/E. Suez was taken at similar multiples: 1.5x, 8.1x and 27.4x respectively. My updated fair value estimate (DCF-based) is 410.6p.
The equity value prior to approach was undemanding. The offer price seems fair. Gross spread (including final dividend) is 2.1%. Reiterate Long BIFF LN.

WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough

By Sumeet Singh

WCP raised around US$314m via selling a mix of primary and secondary shares in its Korean IPO.
WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
In this note, we will talk about the demand for the deal and other trading dynamics.

AKR Corporindo (AKRA IJ) – Multiple Drivers Ahead

By Angus Mackintosh

AKR Corporindo (AKRA IJ) continues to see strong sales momentum in July and August after releasing a strong set of 1H2022 results previously with strong momentum expected to year-end.
Both petroleum distribution and chemical distribution are seeing strong tailwinds and its gas station business should be a beneficiary of the fuel price hike.
AKR Corporindo‘s JIIPE estate booked a large 37-hectare plot sale in August with a potential for more smelter-related buyers to come. Valuations look fair but there are potential catalysts ahead.

Southwest Airlines: Improving Airline Macro & Other Drivers

Southwest Airlines delivered a positive set of results in the quarter, surpassing Wall Street expectations on all counts.
The rise in demand and limited capacity led to a favourable yield environment and recorded operating revenues of $6.7 billion for the quarter.
Despite increasing fuel and inflationary cost pressures, the revenue performance resulted in quarterly net profitability, excluding special items, of $825 million.

💡 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

Sep 28

Daily Brief Industrials: Nidec Corp, MACA Ltd, iShares Micro-Cap ETF, Waste Management and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

About A Gajillion Yen of Index Flows At the Close
MACA’s A$1.075 Offer from Theiss Declared Unconditional
Summers Value Partners Q2 2022 Investor Letter
MACA: Thiess Declares Offer Unconditional
Waste Management: Recent Acquisitions & Other Drivers

About A Gajillion Yen of Index Flows At the Close

Today is a day which happens twice a year in Japan.
It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.

MACA’s A$1.075 Offer from Theiss Declared Unconditional

Theiss’ offer of A$1.075 per share for MACA Ltd (MLD AU) has been declared unconditional despite acquiring 44.30% of outstanding shares, below the 50% threshold.
The offer has met with resistance from retail shareholders as it remains below NRW’s rejected offer, and there is a lack of clarity on franking credits.
Thiess can restart on-market purchases from 27 September. The offer closes on 7 October. The shares are trading in line with the offer.

Summers Value Partners Q2 2022 Investor Letter

By Fund Newsletters

Summers Value Partners is a boutique value manager that uses a focused, long-term approach to investing in areas of the market where most managers are unwilling or unable to participate.
The Summers Value Fund LP (“the Fund”) returned -25.9% net in the first half of 2022.
The majority of our decline took place in the first quarter as we were too slow to react to the Fed’s decision to increase interest rates and shrink its balance sheet to cool the over-heated economy.
The next stage of the bear market will most likely involve lower corporate earnings due to a more challenging businessclimate and reducedaccess to capital.

MACA: Thiess Declares Offer Unconditional

By David Blennerhassett

Diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess on the 26 July, at A$1.025/share, a 28.1% premium to the undisturbed price.
After MACA rejected NRW Holdings (NWH AU)‘s non-binding proposal (with an implied consideration of $1.085/share), Thiess lifted its all-cash Offer to A$1.075/share. NRW subsequently walked.
The Offer was conditional on Thiess having a relevant interest in more than 90% of MACA. That condition has been waived and the Offer is now Unconditional.

Waste Management: Recent Acquisitions & Other Drivers

Waste Management had remarkable organic revenue growth, driven by a collection and disposal yield of 6.2%.
The company continues to combat widespread inflationary cost pressures and its pricing has accelerated sequentially.
Overall, we give Waste Management a ‘Hold’ rating with a revised target price.

💡 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

Sep 28

Daily Brief Industrials: Nidec Corp, MACA Ltd, iShares Micro-Cap ETF, Waste Management and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

About A Gajillion Yen of Index Flows At the Close
MACA’s A$1.075 Offer from Theiss Declared Unconditional
Summers Value Partners Q2 2022 Investor Letter
MACA: Thiess Declares Offer Unconditional
Waste Management: Recent Acquisitions & Other Drivers

About A Gajillion Yen of Index Flows At the Close

Today is a day which happens twice a year in Japan.
It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.

MACA’s A$1.075 Offer from Theiss Declared Unconditional

Theiss’ offer of A$1.075 per share for MACA Ltd (MLD AU) has been declared unconditional despite acquiring 44.30% of outstanding shares, below the 50% threshold.
The offer has met with resistance from retail shareholders as it remains below NRW’s rejected offer, and there is a lack of clarity on franking credits.
Thiess can restart on-market purchases from 27 September. The offer closes on 7 October. The shares are trading in line with the offer.

Summers Value Partners Q2 2022 Investor Letter

By Fund Newsletters

Summers Value Partners is a boutique value manager that uses a focused, long-term approach to investing in areas of the market where most managers are unwilling or unable to participate.
The Summers Value Fund LP (“the Fund”) returned -25.9% net in the first half of 2022.
The majority of our decline took place in the first quarter as we were too slow to react to the Fed’s decision to increase interest rates and shrink its balance sheet to cool the over-heated economy.
The next stage of the bear market will most likely involve lower corporate earnings due to a more challenging businessclimate and reducedaccess to capital.

MACA: Thiess Declares Offer Unconditional

By David Blennerhassett

Diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess on the 26 July, at A$1.025/share, a 28.1% premium to the undisturbed price.
After MACA rejected NRW Holdings (NWH AU)‘s non-binding proposal (with an implied consideration of $1.085/share), Thiess lifted its all-cash Offer to A$1.075/share. NRW subsequently walked.
The Offer was conditional on Thiess having a relevant interest in more than 90% of MACA. That condition has been waived and the Offer is now Unconditional.

Waste Management: Recent Acquisitions & Other Drivers

Waste Management had remarkable organic revenue growth, driven by a collection and disposal yield of 6.2%.
The company continues to combat widespread inflationary cost pressures and its pricing has accelerated sequentially.
Overall, we give Waste Management a ‘Hold’ rating with a revised target price.

💡 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

Sep 27

Daily Brief Industrials: Nidec Corp, Monadelphous, Daewoo Shipbuilding & Marine Engineering, RPS Group PLC, Jeio, FuelCell Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Two Days Left Til Nikkei 225 Juggled Review Starts
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
A Detailed Summary of Hanwha’s DSME Acquisition Deal
Tetra Tech Outbids WSP
JEIO IPO Preview
FuelCell Energy: Carbon Savings Calculator & Other Drivers

Two Days Left Til Nikkei 225 Juggled Review Starts

The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.

S&P/ASX Index Rebalance Preview: A Few High Impact Adds

At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.

A Detailed Summary of Hanwha’s DSME Acquisition Deal

By Sanghyun Park

The acquisition will be carried out through a third-party allocation rights offering. DSME will issue 104M new shares, solely allocated to Hanwha’s six affiliates, which will own a combined 49.3%
This DSME acquisition will likely raise Hanwha’s holding ratio, potentially to more than 50%. What preemptive measures Hanwha will take will likely become a noteworthy subject from an investment perspective.
Hanwha Aerospace and Hanwha Systems will likely proceed with a capital increase. As their current cash capacity is quite limited, liquidity concerns will likely be raised in the market.

Tetra Tech Outbids WSP

On 24 September, Tetra Tech outbid WSP with a recommended 222p/share cash offer, a 7.8% increase vs. WSP’s and 110% premium to the start of the offer period.
The new offer represents 19.1x EV/Fwd EBIT and 25.7x Fwd P/E, and seems dilutive for Tetra Tech. Irrevocables and letters of intent amount to 27.53%.
Expect the shares to quickly close the spread at the beginning of the 26 September trading session and the market to possibly await a counterbid.

JEIO IPO Preview

By Douglas Kim

JEIO is getting ready to complete its IPO in Korea in early November. The IPO price range is from 15,000 won to 18,000 won.
Based on the bankers’ valuation, the expected market cap of the company is from 500 billion won to 600 billion won.
JEIO had a production capacity of 300 tons in 2021 for carbon nanotubes which is expected to increase to 1,000 tons in 2022 and to 3,000 tons by 2025.

FuelCell Energy: Carbon Savings Calculator & Other Drivers