Industrials

Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

NIFTY NEXT50 Index Rebalance: Significant Impact for an Overlooked Index

Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements.

NIFTY50 Index Rebalance: Adani Enterprises Replaces Shree Cement

Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher.

China Comm Const (1800 HK): Key Takeaways from Post-1H22 Call

China Communications Construction (1800 HK) should see positive new contract momentum in 2H22. We also expect softening in cost pressure to bring about better margin.
It is actively looking to recycle and realise the value of its assets and good progress are expected in 2H22. Such moves will narrow the currently deeply discounted 0.18x P/B.
With order backlog amounting to 4.6x of annualised 1H22 revenue, earnings prospects are well secured, making its FY22F PER of 2.6x and FY23F of 2.3x very cheap.

NIFTY Sep 2022 Rebal: Adani Enterprises and Adani Total Gas Are Top Positives

By Janaghan Jeyakumar, CFA

The September 2022 Rebalance results for the NIFTY 50, 100, and 500 Indices were announced after the close on 1st September 2022.
There will be one ADD/DEL for the NIFTY 50 Index and 6 ADDs/DELs for the NIFTY 100 Index, mostly in line with our expectations.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

Sany Profit Falls 73.85% as Demand for Construction Gear Dries Up

By Caixin Global

Sany Heavy Industry, one of China’s largest construction machinery makers, reported a plunge in first-half profit as slower growth and Covid restrictions reduce demand for building equipment.
Revenue fell 40.9% to 39.7 billion yuan ($5.76 billion) for the first six months of 2022, the company said Tuesday. Net income plummeted 73.85% to 2.63 billion yuan.
Excavators are Sany’s core product. In the first half, the company’s excavator sales declined 35.6% year-on-year to 16.7 billion yuan

United Airlines: Sustainable Aviation Fuel Update & Other Drivers

United Airlines had a disappointing quarter despite seeing an unprecedented return of customers.
In this quarter, Cargo remained strong and premium leisure has been a bright spot as the domestic revenue growth of premium cabins outpaces the economy cabin.
We provide the United Airlines stock with a ‘Hold’ rating with a revised target price.

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Sep 02

Daily Brief Industrials: Comfortdelgro Corp, Bharat Electronics, Adani Enterprises, China Communications Construction, Sany Heavy Industry, United Airlines Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

STI Index Rebalance: Emperador IN, ComfortDelGro OUT
NIFTY NEXT50 Index Rebalance: Significant Impact for an Overlooked Index
NIFTY50 Index Rebalance: Adani Enterprises Replaces Shree Cement
China Comm Const (1800 HK): Key Takeaways from Post-1H22 Call
NIFTY Sep 2022 Rebal: Adani Enterprises and Adani Total Gas Are Top Positives
Sany Profit Falls 73.85% as Demand for Construction Gear Dries Up
United Airlines: Sustainable Aviation Fuel Update & Other Drivers

STI Index Rebalance: Emperador IN, ComfortDelGro OUT

Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

NIFTY NEXT50 Index Rebalance: Significant Impact for an Overlooked Index

Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements.

NIFTY50 Index Rebalance: Adani Enterprises Replaces Shree Cement

Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher.

China Comm Const (1800 HK): Key Takeaways from Post-1H22 Call

China Communications Construction (1800 HK) should see positive new contract momentum in 2H22. We also expect softening in cost pressure to bring about better margin.
It is actively looking to recycle and realise the value of its assets and good progress are expected in 2H22. Such moves will narrow the currently deeply discounted 0.18x P/B.
With order backlog amounting to 4.6x of annualised 1H22 revenue, earnings prospects are well secured, making its FY22F PER of 2.6x and FY23F of 2.3x very cheap.

NIFTY Sep 2022 Rebal: Adani Enterprises and Adani Total Gas Are Top Positives

By Janaghan Jeyakumar, CFA

The September 2022 Rebalance results for the NIFTY 50, 100, and 500 Indices were announced after the close on 1st September 2022.
There will be one ADD/DEL for the NIFTY 50 Index and 6 ADDs/DELs for the NIFTY 100 Index, mostly in line with our expectations.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

Sany Profit Falls 73.85% as Demand for Construction Gear Dries Up

By Caixin Global

Sany Heavy Industry, one of China’s largest construction machinery makers, reported a plunge in first-half profit as slower growth and Covid restrictions reduce demand for building equipment.
Revenue fell 40.9% to 39.7 billion yuan ($5.76 billion) for the first six months of 2022, the company said Tuesday. Net income plummeted 73.85% to 2.63 billion yuan.
Excavators are Sany’s core product. In the first half, the company’s excavator sales declined 35.6% year-on-year to 16.7 billion yuan

United Airlines: Sustainable Aviation Fuel Update & Other Drivers

United Airlines had a disappointing quarter despite seeing an unprecedented return of customers.
In this quarter, Cargo remained strong and premium leisure has been a bright spot as the domestic revenue growth of premium cabins outpaces the economy cabin.
We provide the United Airlines stock with a ‘Hold’ rating with a revised target price.

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Aug 31

Daily Brief Industrials: Doosan Enerbility, Doosan Corp, Antony Waste Handling Cell Limited, Shenzhen International and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Doosan Enerbility Placement – Selldown by Parent Doesn’t Send the Best Signal
Doosan Corp: A Block Deal Sale of 4.5% Stake in Doosan Enerbility
Antony Waste Handling Cell Ltd – Forensic Analysis
Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

Doosan Enerbility Placement – Selldown by Parent Doesn’t Send the Best Signal

By Clarence Chu

Doosan Corp (000150 KS) is looking to raise up to US$435m from trimming a portion of its stake in Doosan Enerbility (034020 KS).
The deal isn’t exactly a large one to process at just 5.2 days of three month ADV. Shares are offered at a discount range between 5.1-7.8%.
As there wasn’t a specific mention of the former’s intention to sell, we would argue that the deal isn’t particularly well flagged.

Doosan Corp: A Block Deal Sale of 4.5% Stake in Doosan Enerbility

After the market close today, Doosan Corp (000150 KS) announced that it plans to sell a 4.5% stake in Doosan Enerbility (034020 KS) in a block deal sale.
The discount range on the block deal price is 5.1% to 7.8% based on today’s closing price of 21,700 won.
This block deal sale should have a positive impact on Doosan Corp but a negative impact on Doosan Enerbility.

Antony Waste Handling Cell Ltd – Forensic Analysis

By Nitin Mangal

Antony Waste Handling Cell Limited (AWHCL IN) is one of the key players operating in the Municipal Solid Waste (MSW) industry.
Key takeaways that warrant attention overlooked include disparity between accounting and management commentary on margins and reimbursements and stained auditor qualifications since F13
Other forensic checks consist of poor quality of debtors, subsidiary stress and few eye-brow raising related party transactions.

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV.

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Aug 31

Daily Brief Industrials: Doosan Enerbility, Doosan Corp, Antony Waste Handling Cell Limited, Shenzhen International and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Doosan Enerbility Placement – Selldown by Parent Doesn’t Send the Best Signal
Doosan Corp: A Block Deal Sale of 4.5% Stake in Doosan Enerbility
Antony Waste Handling Cell Ltd – Forensic Analysis
Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

Doosan Enerbility Placement – Selldown by Parent Doesn’t Send the Best Signal

By Clarence Chu

Doosan Corp (000150 KS) is looking to raise up to US$435m from trimming a portion of its stake in Doosan Enerbility (034020 KS).
The deal isn’t exactly a large one to process at just 5.2 days of three month ADV. Shares are offered at a discount range between 5.1-7.8%.
As there wasn’t a specific mention of the former’s intention to sell, we would argue that the deal isn’t particularly well flagged.

Doosan Corp: A Block Deal Sale of 4.5% Stake in Doosan Enerbility

After the market close today, Doosan Corp (000150 KS) announced that it plans to sell a 4.5% stake in Doosan Enerbility (034020 KS) in a block deal sale.
The discount range on the block deal price is 5.1% to 7.8% based on today’s closing price of 21,700 won.
This block deal sale should have a positive impact on Doosan Corp but a negative impact on Doosan Enerbility.

Antony Waste Handling Cell Ltd – Forensic Analysis

By Nitin Mangal

Antony Waste Handling Cell Limited (AWHCL IN) is one of the key players operating in the Municipal Solid Waste (MSW) industry.
Key takeaways that warrant attention overlooked include disparity between accounting and management commentary on margins and reimbursements and stained auditor qualifications since F13
Other forensic checks consist of poor quality of debtors, subsidiary stress and few eye-brow raising related party transactions.

Shenzhen Intl (152 HK): The Toughest Time Should Be over Now

The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV.

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Aug 30

Daily Brief Industrials: MACA Ltd, Hanwha Solutions, Berli Jucker, AST SpaceMobile Inc, Hanjin KAL Corp, Otis Worldwide Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
US Inflation Reduction Act: Bifurcated Impact on Korean Chaebols (Hyundai, LG, Hanwha, SK & Samsung)
Berli Jucker (BJC TB) – Well-Packaged Recovery Proxy
AST SpaceMobile Vs Starlink: The Race for Global Connectivity
Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion
Otis Corp: Major Drivers

MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any

By David Blennerhassett

Back on the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the undisturbed price.
The Bidder’s Statement was dispatched on the 9 August. After rejecting NRW Holdings (NWH AU)‘s non-binding proposal (implied consideration of $1.085/share), MACA dispatched the Target Statement on the 25 August.
Thiess has now lifted its all-cash Offer to A$1.075/share – a 34.4% to undisturbed. MACA is trading marginally through the revised terms. The first closing date is the 12 September.

MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely

By Arun George

Theiss has improved its MACA Ltd (MLD AU) offer from A$1.025 to A$1.075 per share. The offer is conditional on 90% minimum acceptances, FIRB approval and no prescribed occurrences.
Theiss increased its shareholding to 15.90% of outstanding shares due to acceptances from MACA founders and directors. This is a stumbling block to a potential NRW Holdings (NWH AU) scheme.
While the value of NRW’s default option remains higher than Thiess’ revised offer, it is increasingly unlikely that NRW will start a bidding war.

US Inflation Reduction Act: Bifurcated Impact on Korean Chaebols (Hyundai, LG, Hanwha, SK & Samsung)

The US Inflation Reduction Act (IRA) is likely to have a bifurcated impact on key Korean companies including Hanwha Solutions (009830 KS) and Hyundai Motor (005380 KS).
IRA is likely to have a positive impact on Hanwha Solutions, CS Wind, LG Energy Solution, and Samsung SDI and negative impact on Hyundai Motor Group.
The impact of the IRA could last for a few more trading days although it is difficult to tell exactly how long the bifurcated impact by the IRA will last.

Berli Jucker (BJC TB) – Well-Packaged Recovery Proxy

By Angus Mackintosh

Berli Jucker (BJC TB) 2Q2022 results saw continue momentum to sales from the recovery in Thailand and Vietnam with some impacy from higher raw material costs on margins.
It packaging supply chain saw a strong recovery from both glass bottling and aluminium cans with the latter seeing the biggest rebound. Retail under BigC also saw strong growth.
Berli Jucker remains a top proxy for the recovery in domestic consumption in both Thailand and Vietnam through its packaging plus for the retail recovery in Thailand through BigC.

AST SpaceMobile Vs Starlink: The Race for Global Connectivity

By subSPAC

Elon Musk’s Starlink recently announced plans to enter the global carrier market, spooking shareholders of space-based cellular operator AST SpaceMobile.
AST, which went public through a SPAC in 2021, has plans to commercialise global space based telecommunications, but has notably struggled due to technical challenges.
AST Shareholders have feared that the Starlink announcement risked overshadowing the company’s upcoming launch and also possibly beat the company to market, despite the latter having a significant head start.

Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion

By Sanghyun Park

Bando sold all of its 17% stakes through a club deal. Of this, about 3.8% went to LX Pantos. The remaining 13% found a new home among several institutional investors.
Outright shorting for Hanjin Kal seems to require a bit more cautious approach. That’s because there is still no definitive information on the owners of the 13% stake.
If the price correction does not go as harshly as expected and expectations for a proxy battle resurface, we should consider switching to flow trading aimed at MSCI inclusion.

Otis Corp: Major Drivers

Otis had a decent quarter with growth in organic sales and expansion in margins though it failed to meet market expectations on the revenue front.
In the quarter, the net sales were down mainly because of the wide strengthening of the U.S. dollar.
The service business of Otis grew sales and expanded margins.

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Aug 30

Daily Brief Industrials: MACA Ltd, Hanwha Solutions, Berli Jucker, AST SpaceMobile Inc, Hanjin KAL Corp, Otis Worldwide Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
US Inflation Reduction Act: Bifurcated Impact on Korean Chaebols (Hyundai, LG, Hanwha, SK & Samsung)
Berli Jucker (BJC TB) – Well-Packaged Recovery Proxy
AST SpaceMobile Vs Starlink: The Race for Global Connectivity
Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion
Otis Corp: Major Drivers

MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any

By David Blennerhassett

Back on the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the undisturbed price.
The Bidder’s Statement was dispatched on the 9 August. After rejecting NRW Holdings (NWH AU)‘s non-binding proposal (implied consideration of $1.085/share), MACA dispatched the Target Statement on the 25 August.
Thiess has now lifted its all-cash Offer to A$1.075/share – a 34.4% to undisturbed. MACA is trading marginally through the revised terms. The first closing date is the 12 September.

MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely

By Arun George

Theiss has improved its MACA Ltd (MLD AU) offer from A$1.025 to A$1.075 per share. The offer is conditional on 90% minimum acceptances, FIRB approval and no prescribed occurrences.
Theiss increased its shareholding to 15.90% of outstanding shares due to acceptances from MACA founders and directors. This is a stumbling block to a potential NRW Holdings (NWH AU) scheme.
While the value of NRW’s default option remains higher than Thiess’ revised offer, it is increasingly unlikely that NRW will start a bidding war.

US Inflation Reduction Act: Bifurcated Impact on Korean Chaebols (Hyundai, LG, Hanwha, SK & Samsung)

The US Inflation Reduction Act (IRA) is likely to have a bifurcated impact on key Korean companies including Hanwha Solutions (009830 KS) and Hyundai Motor (005380 KS).
IRA is likely to have a positive impact on Hanwha Solutions, CS Wind, LG Energy Solution, and Samsung SDI and negative impact on Hyundai Motor Group.
The impact of the IRA could last for a few more trading days although it is difficult to tell exactly how long the bifurcated impact by the IRA will last.

Berli Jucker (BJC TB) – Well-Packaged Recovery Proxy

By Angus Mackintosh

Berli Jucker (BJC TB) 2Q2022 results saw continue momentum to sales from the recovery in Thailand and Vietnam with some impacy from higher raw material costs on margins.
It packaging supply chain saw a strong recovery from both glass bottling and aluminium cans with the latter seeing the biggest rebound. Retail under BigC also saw strong growth.
Berli Jucker remains a top proxy for the recovery in domestic consumption in both Thailand and Vietnam through its packaging plus for the retail recovery in Thailand through BigC.

AST SpaceMobile Vs Starlink: The Race for Global Connectivity

By subSPAC

Elon Musk’s Starlink recently announced plans to enter the global carrier market, spooking shareholders of space-based cellular operator AST SpaceMobile.
AST, which went public through a SPAC in 2021, has plans to commercialise global space based telecommunications, but has notably struggled due to technical challenges.
AST Shareholders have feared that the Starlink announcement risked overshadowing the company’s upcoming launch and also possibly beat the company to market, despite the latter having a significant head start.

Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion

By Sanghyun Park

Bando sold all of its 17% stakes through a club deal. Of this, about 3.8% went to LX Pantos. The remaining 13% found a new home among several institutional investors.
Outright shorting for Hanjin Kal seems to require a bit more cautious approach. That’s because there is still no definitive information on the owners of the 13% stake.
If the price correction does not go as harshly as expected and expectations for a proxy battle resurface, we should consider switching to flow trading aimed at MSCI inclusion.

Otis Corp: Major Drivers

Otis had a decent quarter with growth in organic sales and expansion in margins though it failed to meet market expectations on the revenue front.
In the quarter, the net sales were down mainly because of the wide strengthening of the U.S. dollar.
The service business of Otis grew sales and expanded margins.

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Aug 29

Daily Brief Industrials: Jeju Air, CIMC Enric Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders
CIMC Enric (3899 HK): Growth Outlook Supported by Multiple Engines

Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders

On 26 August, Jeju Air (089590 KS) announced a rights offering worth 320 billion won, representing 39% of its market cap.
The expected rights offering price is 11,750 won (29% lower than its current price of 16,550 won) and the expected rights offering shares are 27.23 million shares.
Overall, we are negative on this rights offering mainly because we believe it is likely to result in too much dilution for the existing shareholders.

CIMC Enric (3899 HK): Growth Outlook Supported by Multiple Engines

We see the positive share price reaction of CIMC Enric Holdings (3899 HK) after posting a 34.5% 1H22 core profit growth not yet enough to reflect its encouraging earnings outlook.
Good order backlog, recovery at clean energy and increase in liquid food demand will add to the strength at chemical and environment segment as CIMC Enric’s drivers.
Hydrogen energy business made impressive contribution growth and it should benefit from local governments’ hydrogen initiatives. The stock’s high PERs are just reflection of huge long-term potential.

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Aug 29

Daily Brief Industrials: Jeju Air, CIMC Enric Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders
CIMC Enric (3899 HK): Growth Outlook Supported by Multiple Engines

Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders

On 26 August, Jeju Air (089590 KS) announced a rights offering worth 320 billion won, representing 39% of its market cap.
The expected rights offering price is 11,750 won (29% lower than its current price of 16,550 won) and the expected rights offering shares are 27.23 million shares.
Overall, we are negative on this rights offering mainly because we believe it is likely to result in too much dilution for the existing shareholders.

CIMC Enric (3899 HK): Growth Outlook Supported by Multiple Engines