Industrials

• In mid-May 2022, Kito Corporation (6409 JP) announced KKR would launch a Tender Offer to buy out the company at a big premium. I warned about the register.
• Two large shareholders were there prior to the bid – one “engagement-style” activist and one private company in a similar industry. Both had a 9+% holding visible.
• Both have now lifted their stakes above 10% post-announcement, at a small spread to terms. This makes things more interesting.

• SOE terminal operator Xiamen International Port (3378 HK) has announced a pre-conditional Offer from Xiamen Port Holding, a Fujian SASAC-controlled entity.
• The Offer price is HK$2.25 per H-share, a 55% premium to last close. The Offer price will NOT be increased. The final dividend will be added to the cancellation price. 
• Pre-Conditions include approvals from NDRC, MoC, SAFE, and CSRC. There is no tendering condition. This deal mirrors Guodian Technology (1296 HK), BCL (2868 HK), and Jin Jiang Capital (2006 HK).

• Voltas Ltd (VOLT IN) had a brutal Q4FY24 especially for its UPC segment where it lost market share to rival Havells India (HAVL IN).  
• There is a possibility of regaining some of the lost market share with some pricing interventions and high brand equity, however, it will be at cost of margins. 
• The sector view remains bearish, however, relative to HAVL, the downside would be limited with market share gains in Air-Conditioners (ACs) as key monitorable. 

• The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
• Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it’s a start.
• We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.

• We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu. 
• We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.
• We like Marubeni’s strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile. 

• Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
• Longleaf Partners Fund declined 0.53% in the first quarter, holding up better than the S&P 500, which fell 4.60%.
• New investments have a high hurdle to qualify given our conviction in our current holdings and the steep discount of the portfolio.

• Since Toshiba reported lacklustre earnings and guidance, there has been a steady flow of articles in the press about the privatisation process going on behind the scenes.
• On 25 March, Toshiba let it be known a privatisation process would start. On 31 March, Bain gave notice it would participate. Toshiba has been in talks since 21 April
• First round bids were due 30 May, and 10 total submissions were made, with 8 privatisation proposals proffered. Now we wait…

• Toshiba provided an update today on its management policy and the status of discussions with potential investors. 
• The management targets unveiled looked plausible but rather optimistic while the only real new information on the potential privatisation was that 8 bids had been submitted. 
• In the end the most interesting takeaway for us was that Toshiba Tec would play a key role in Toshiba’s data business.

• Xiamen International Port H (3378 HK) announced a pre-conditional privatisation offer from Xiamen Port Holding at HK$2.25 per H share + final dividend of RMB0.021 per share (ex-div: 15 June). 
• The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.  
• The offer is attractive in comparison to historical share prices and multiples. We think that the privatisation proposal will likely succeed. At the last close, the gross spread is 55.2%.

• National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.
• The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.
• Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake

• Maintain BUY recommendation for BAFS with a target price of Bt34.0. Business performance are expected to turn profit by 3Q22, driven by recovery in aviation fuel services volume along
• BAFS report 1Q22 net loss at Bt77m, the smallest loss in the past eight quarters. The result came out slightly above our expectation.
• The least loss in the past eight quarters supported by dividend income recognition worth Bt50m from power plant business in Japan (acquired in 4Q21)and an increase in aviation fuel volume

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• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products. 
• In this note, we will talk about the not so positive aspects of the deal.

• While current conditions are likely to be tough for budget airline Skymark it will be a key beneficiary of reopening. 
• Without significant exposure to international business travel the airline could find favour with investors as a pure play on the reopening theme. 
• In addition, a weak yen could prove a tailwind for domestic companies looking to boost inbound tourism and Skymark could be a beneficiary here as well.

• Fanuc’s share price is geared into the machine tool cycle. Unfortunately the cycle is rolling over
• Fanuc is also facing extreme margin pressure from rising parts and logistics costs
• We expect the share price to trade down 20% from here and bottom at around 2x book value

• The Carillon Family of Funds spans a range of investment objectives and asset classes designed for long-term investors.
• Inflation concerns and accelerating expectations of interest rate hikes by the U.S. Federal Reserve sent equity markets in a downward spiral to start the new year.
• Investors continued to favor value stocks over growth stocks as small-cap value outperformed small-cap growth by more than 10% during the quarter.

• The Carillon Family of Funds spans a range of investment objectives and asset classes designed for long-term investors.
• The U.S. stock and bond markets appear to be conveying different assessments of the outlook, leaving investors to decide which view will prevail.
• Focusing on how it affects markets, the war also is a concern for global growth and a source of volatility as the highly uncertain situation evolves.

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• The Carillon Family of Funds spans a range of investment objectives and asset classes designed for long-term investors.
• The U.S. stock and bond markets appear to be conveying different assessments of the outlook, leaving investors to decide which view will prevail.
• The situation could favor U.S. stocks, as they are more insulated than their European counterparts from energy price spikes and the direct impacts of the war and its economic ramifications.

• The Carillon Family of Funds spans a range of investment objectives and asset classes designed for long-term investors.
• Small-cap stocks overall posted rather lackluster returns in the first quarter of 2022.
• Inflation and sharply higher gasoline prices have taken a chunk out of the consumer’s pocketbook.

• The Carillon Family of Funds spans a range of investment objectives and asset classes designed for long-term investors.
• Mid-cap stocks overall posted rather disappointing returns in the first quarter of 2022.
• The outlook for the cyclical areas of the stock market appears mixed against a backdrop of higher commodity prices, rising interest rates, and geopolitical unrest.
• On a more positive note, strong pent-up demand for travel should help to bolster securities.

• The overall Air Condition (AC) season has been good, with volumes up by more than +20% compared to the last two years.
• Daikin Industries (6367 JP) & Voltas Ltd (VOLT IN) have performed below expectations with stiff pricing and poor dealer support. 
• Havells India (HAVL IN) (Lloyd) market share gain is on the back of lower prices. The focus has moved from premiumizing brand & expanding margins to gaining market share. 

• Founded by value investor Wally Weitz in 1983, Weitz Investment Management, Inc. is a boutique, employee-owned asset management firm headquartered in Omaha, Nebraska.
• The Value Fund’s Institutional Class returned -7.96% for the first quarter.
• Our companies are generally reporting solid financial results, at least so far, and they are adapting fluidly to rapidly evolving conditions.

• Founded by value investor Wally Weitz in 1983, Weitz Investment Management, Inc. is a boutique, employee-owned asset management firm headquartered in Omaha, Nebraska.
• The Weitz Investment Management Partners III Opportunity Fund’s Institutional Class returned -5.09% in the first quarter of 2022.
• Anticipating a hawkish shift at the Federal Reserve, investors began the year repricing assets for a higher interest rate environment.

• Distillate Capital Partners LLC was formed in 2017 and is based in Chicago, IL. The firm is 100% employee-owned, and DCP’s partners each have invested significantly in the firm’s investment strategies.
• Distillate’s U.S. FSV returned -3.60% net of fees versus -4.60% for the benchmark.
• Distillate’s Intl. FSV strategy returned -6.19% net of fees.
• Distillate’s U.S. SQV’s 2022 Q1 total return after fees was -4.49%.

• GR Infraprojects Ltd (GRIL) reported a decent set of numbers in Q4FY22. The company reported revenue of Rs 2,268 Cr, better than our estimate of Rs 2,103 Cr, down 13.7% YoY
• It registered EBITDA Margins of 17.8% in Q4FY22 (our estimate: 14.9%) as against 15.6% in Q4FY21
• We maintain a BUY on GRIL and value the EPC business at 15x FY24E EPS and HAM portfolio at 1x Book Value to arrive at a target price of Rs 1,765/share, implying an upside of 26% from the CMP.

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• Blue Tower Asset Management provides portfolio management services to individuals, financial advisers, and institutions.
• Our strategy composite returned -15.87% net of fees in the first quarter (-15.62% gross).
• We plan on liquidating our Russian portfolio companies as soon as they are unfrozen and we are able to receive a reasonable valuation for them.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• For Asia Pacific, there are 48 adds/76 deletes for the Standard Indices and 166 adds/147 deletes for the Small Cap Index that will be implemented at the close today.
• The adds have outperformed the deletes on average over the last few weeks/months. A long adds/short deletes trade performed better for Small Caps as compared to the Standard index.
• There are a lot of stocks that will have same-way flow from other index trackers over the next few weeks and there could be a higher impact on these names.

• The question now is whether this event can lead to a structural uptrend in LG Corp. I am skeptical about this.
• LG Corp took a preemptive action to increase its attractiveness as a dividend stock to prevent a share price decline ahead of the listing of LG CNS.
• However, this measure does not address the root cause of LG Corp’s massive NAV discount. So, I would consider a short position setup for LG Corp.

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products. 
• In this note, we will talk about the positive aspects of the deal.

• Harding Loevner has been investing globally in high-quality, growing businesses based on disciplined industry research since 1989.
• Stock markets fell in the quarter, as the world watched in horror Russia’s invasion of Ukraine.
• While we are optimistic that China will maintain its neutrality in the war, we can’t dismiss the possibility we are wrong.
• In recent years, as growth investors chased speculative and expensive“disruptive innovators” up, and more recently down, we have maintained a steady commitment to quality growth at steady premiums to the market over time.

• The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
• The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
• Below is a look at the names leading the race to become Adds and Deletes for NIFTY 50, NIFTY 100, and NIFTY 500 in September 2022.

• Japan’s reopening has started and pre-departure and on arrival tests for vaccinated tourists have also been abolished. 
• The beneficiary of this theme is less obvious for Japan Airport Terminal Co (9706 JP) while it is very obvious for Keisei Electric Railway Co (9009 JP) . 
• Japan Airport is trading at a PBR premium to Keisei while the former has a higher debt than the latter. 

• The sharp plunge in share price of China Conch Environment Protection Holdings (587 HK) has not yet brought its valuations back to more reasonable levels and we see more downside.
• Its 10.1x PER for FY22F is at a significant premium over peer average. Even taking into account the impressive ROE, we still cannot find justifications for its high P/B multiple.  
• Negative catalysts include overly aggressive expansion target, slower profit growth than rise in capacity and surge in gearing and finance costs – they will potentially lead to earnings disappointment.

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Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
• We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.
• There’s a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.

• Harding Loevner has been investing globally in high-quality, growing businesses based on disciplined industry research since 1989.
• Stock markets fell in the quarter, as the world watched in horror Russia’s invasion of Ukraine.
• China-based WuXi Biologics illustrates the perfect storm of macro issues pressuring the share prices of our rapidly growing companies.
• As questions mount whether globalization has reached a tipping point, companies are taking full advantage of the many advances occurring across the industrial automation landscape— propelling leadingp roviders of “Industry 4.0” solutions onto favorable growth paths.

• ITD Cementation India (ITCE IN) is one of the players engaged in the construction sector, especially for projects like Metros and Marines.
• Upon analysing the annual reports it was found that the company faces a plethora of forensic alarms.
• This includes re-statement of key line items, high growth of unbilled revenues, cash generation issues among others as highlighted in the insight.

• We should pay attention to the following three stocks: F&F, Iljin Hysolus, and K Car. They all have recently seen a drastic increase in the loan balance.
• Their passive flow sizes relative to ADTVs are the lowest among the additions. It seems that those with relatively little passive impact are targeted.
• Also, their projected earnings are highly volatile, and they all face overvaluation issues, whereas the other four names have more clear projections for earnings.

• Beijing Enterprises Urban Resources (3718 HK) composite document is out with the MGO’s first closing date of 17 June. The IFA considers Beijing Enterprises Water Group (371 HK)‘s offer fair. 
• The MGO is conditional on the offeror and concert parties holding more than 50% of the voting rights. With the offeror currently at 44.16%, the MGO should become unconditional. 
• At last close and for a 28 June payment, the gross and annualised spread to the MGO price (including final dividend) of HK$0.81 per share is 2.5% and 31.5%, respectively.

• The DAX and Hang Seng are reversing their downtrends while MSCI China (MCHI-US) and China Internet (KWEB-US) are currently testing their respective multi-month downtrends.
• Reversals of these downtrends would signal a bear market rally in progress.
• We will need to see more basing, followed by base breakouts, in order to get bullish — a process that would likely take weeks or months.

• Korean Air might have already notified the creditors of its early repayment decision. Asiana will likely follow suit, immediately triggering the creditors to exercise the conversion rights.
• So, both Korean Air and Asiana’s conversion should be a foregone conclusion. There is only uncertainty about how many conversions we will actually see for Asiana from the KDB.
• Instead of preemptive position setup at this point, I would consider starting the position build-up within the 2-3 day window from the repayment filing to CB conversion.

• The Composite Doc for Beijing Enterprises Water Group (371 HK)‘s (BEURG) mandatory general cash for Beijing Enterprises Urban Resources (3718 HK) (BEW) has been despatched. 
• The first close is the 17 June but can be open until the 26 July. BEW has 44.16% in the bag and this requires a 50% hurdle to turn unconditional.
• It’s an underwhelming Offer yet the IFA considers the terms to be fair and reasonable. But there’s probably enough here for the Offer to get up.

• LG Corp announced a share buyback worth 500 billion won, representing 4.3% of market cap. This is the company’s first major buyback in 22 years.
• LG Corp will also remove the “limit” on dividend income, in order to secure the flexibility of the dividend income such as when one of its affiliated stakes are sold.
• A sizeable buyback, improved dividend policy, and a significant discount to its NAV are likely to lead to continued outperformance of LG Corp relative to KOSPI. 

• Siemens Energy seems to have the backing of both BlackRock and Norges, and could then count on 72.55% of the votes vs. 75% approval at EGM needed for delisting.
• The shares have seen high purchasing activity since the offer announcement (€158 million average turnover since Monday). Gross spread is 1.5%, 3.7% estimated annual return (assuming settlement on 24 October).
• One could sell part of the shares if the share price rises above the offer price and await a possible sweetening, and tender the rest during the acceptance period.

• There are three major reasons we like a pair trade between Doosan Corp (go long) and Doosan Enerbility (go short). 
• First, share prices of two companies have diverged too much this year. Second, Doosan Corp is currently trading at a 76% discount to its NAV, which is excessive. 
• Third, as investors have poured capital into nuclear power themed Doosan Enerbility, they have neglected its parent Doosan Corp. 

• Shenzhen Expressway Co H (548 HK) guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. 
• Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. 
• There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.

• RITES Ltd. (RITES) reported a good set of Q4FY22 numbers with revenues of Rs 766 Cr (up 20% YoY), supported by the higher export sales, EBIDTA of Rs 204 Cr (up 10% YoY), and APAT of Rs 141 Cr (down 1% YoY).
• The company registered EBITDA Margins of 26.7% in Q4FY22 (our estimate: 26.8%) as against 29.2% in Q4FY21
• We roll over our estimate to FY24 and retain a BUY rating on the stock, valuing the company at 11.5x FY24E EPS to arrive at a target price of Rs 275/share (Rs 305/share earlier), implying an upside of 10% from the CMP.

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Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• On the 21 May, Jinke Property (000656 CH) announced the forced sale of shares by its controlling shareholder. One day later, Jiayuan International (2768 HK) announced a similar event. 
• Jinke’s 52.3%-owned Jinke Smart (9666 HK) has now announced an agreement to acquire Jiayuan International’s 73.56% stake in property service play Jiayuan Services Holdings (1153 HK). No price was announced.
• In the past month, Jinke Property is down 24%, Jinke Smart 23%, Jiayuan International 54% and Jiayuan Services 80%. Jiayuan International and Jiayuan Services remain suspended.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.