Industrials

• Bumhan Fuel Cell is one of the leading players in the hydrogen fuel cell industry in Korea.
• Amid very difficult capital markets, a Korean company called Bumhan Fuelcell is getting ready to complete its IPO in June 2022.
• IPO price range is from 32,200 won to 40,000 won. The expected market cap after the IPO is from 288 billion won to 358 billion won.

• China’s Sinosteel Corp. has struck a deal with the Cameroonian government to begin production of iron ore at a mine, becoming the latest Chinese firm to tap the valuable resource in West Africa.
• According to a company statement, Sinosteel obtained a permit to exploit the Lobé mine after signing a contract with Gabriel Dodo Ndoke, Cameroon’s minister of mines, industry and technological development
• The state-owned mining giant will invest about $700 million to develop the Lobé mine, which is estimated to have about 600 million tons of iron ore reserves

• FPA Queens Road Small Cap Value Fund returned -3.3% in the first quarter of 2022.
• First quarter performance was negatively impacted by the Fund’s overweight position in the technology sector.
• The Fund’s overweight position in technology sector also negatively impacted the Fund’s first quarter performance.

• Beijing Enterprises Water Group (371 HK) (BEW) has effectively increased its stake in Beijing Enterprises Urban Resources (3718 HK) (BEURG) after entering into Acting In Concert agreements (AIC). 
• Parties to the AICs “irrevocably and unconditionally” undertake to vote in the same manner as BEW in BEURG shareholder meetings. 
• There was no update on the timing of the MGO, which is expected to open for tendering on the 20 May. 

• Shinko may look attractively valued, but it is highly geared to a slowdown in demand. Rising materials costs and depreciation accentuate downside gearing.
• Management is guiding for another year of strong sales growth, but may be ignoring the possibility of a decline in remote-work and other COVID-related demand.
• Rolling over, but still up 6.7x since March 2020. Not worth the risk in the current environment.

• ComplyAdvantage (1448975D LN) uses machine learning to provide accurate data on the connections between individuals and business entities.
• The company has entered into a number of strategic partnerships which have helped it grow revenues.
• The growth of financial crime and money laundering is likely to drive ComplyAdvantage revenues over the medium-term.

• Continuing a now familiar theme for manufacturers Daikin’s 4QFY22 revenue beat consensus by 9.8% but raw material prices restricted OP to meagre 0.3% beat. 
• FY23 guidance is also mixed as they expect strong revenue of ¥3,380bn (+5.9% vs. consensus, +8.7% YoY) but weak OP of ¥340bn (-2.9% vs. consensus). 
• We believe price hikes could be bigger than projected and the weak yen will help but multiples remain elevated.

• We reiterate a BUY rating but trim down target price to Bt20.0 (Previous TP: Bt22.20) after revised down earnings in 2022E by 10%.The target derived from 37xPE’22E, its +1.0 S.D. 
• Expect solid performance for logistics and warehouse businesses from 2Q22 onward to 2H22
• Anticipate shared profit from Transimex(Vietnam)to gradually drop from high base in 4Q21which will be pressured by decreasing global freight rate but the impact is likely to be offset with profit 

• Turtle Creek is an independent investment management firm focused on long-term capital growth for a clientele of high-net-worth individuals, families and institutions.
• During the quarter, the net asset value of the Turtle Creek Equity Fund (“TCEF”) declined 10.4%.

• Comany Inc (7945 JP)‘s Chairman Tsukamoto is 71. Together with younger Tsukamoto family members he is conducting an MBO to buy out minorities at a 76% premium. 
• This most likely gets done, and it is tough to trade anyway because it is horribly illiquid.
• But it is another example of an MBO done at the wrong price. TOB PER is low. But the entire thing is financed by net receivables. Ex-receivables, EV is zero.

• Chiyoda results were slightly weak driven by a poor gross margin in the fourth quarter but revenue guidance was punchy at ¥500bn vs. consensus at ¥354bn. 
• We had flagged previously that Chiyoda would be moving to the favourable portion of the construction s-curve shortly and that appears to be coming through. 
• That drove OP guidance of ¥20bn which is far above consensus at ¥14bn and could eventually help Chiyoda reduce potential dilution.

• Daikin reported FY3/22 OP ¥316 bn, in-line with guidance and Nikkei preview. The company guided for FY3/23 OP of ¥340 billion (+7.5% yoy) on a 9% rise in projected sales
• Guidance seems conservative as the company is using a USD/JPY rate of ¥116 and EUR/JPY ¥126. We highlight sales/margin risks making guidance a stretch 
• Daikin’s premium valuation multiple will come under pressure in a rising interest rate environment. We would sell into today’s bounce.

• For Q1 2022, the Aristotle Small Cap Equity Composite generated a total return of -5.77% gross of fees.
• While near-term price movements and volatility continue to be driven by macroeconomic and geopolitical issues in the short term, we believe business fundamentals will ultimately determine equity values in the long run.

• For the first quarter of 2022, the Aristotle Small/Mid Cap Equity Composite generated a total return of -4.38% gross of fees.
• We remain optimistic about the prospects for small/mid cap equities going forward, according to the company.
• The Aristotle Small and Mid Cap Equity composite generated atotal return of 4.

• The Aristotle Investment Grade Corporate Bond Composite returned -7.34% gross of fees in the first quarter.
• Despite the increase in uncertainties, we continue to believe there are opportunities in U.S.
• corporate credit markets and maintain a positive outlook, especially for shorter duration high yield bonds.
• The Aristotle Strategic Credit composite returned -3.

• GrafTech International Ltd (EAF US) reported solid results for Q1 2022. The stock still continues to look cheap at 4.7x FY22 PE.
• The debt deleveraging target of 400 mn USD a year seems on track, and the company will be zero debt by FY23. FCF yield is 24% at the current price.
• The company also bought back 30 mn USD of stock (3 mn shares @9.88 USD/share representing 1.1% of the outstanding shares) in Q1 2022. 

• Following listing of China Conch Environment (587 HK), China Conch Venture (586 HK) is seeking a spin-off of CV Green Energy in A-share market and we view this move positively.
• Limited details are currently available, but we think CV Green Energy, which operates WTE businesses, will trade at significantly higher multiples than its Hong Kong peers. 
• Assuming CV Green Energy to hold all Conch Venture’s WTE businesses, we estimate the IPO will boost the latter’s sum-of-the-parts value by 8% or HK$2.14 per share.

• I think most (value) investors go through four stages: Stage 0: Buy stuff that goes up. Especially when a lot of people around you get rich from doing it.
• Stage 1: Invest in the future! Buy into some fancy exciting new technology that will become big some day! The Cathie Wood stage. Usually stage 1 and stage 0 go hand in hand.
• Stage 2: Buy at low PE multiples. Some are smart and skip the first two. This stage is not bad, it should lead to slight outperformance. Can be dangerous without wide diversification as a lot of them are value traps.

• For Q1 2022, Aristotle Capital’s International Equity Composite posted a total USD return of -10.28% gross of fees.Performance for the first few months of 2022 has undoubtedly been disappointing.

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 Q1 2022, Aristotle Capital’s International Equity ADR Composite posted a total USD return of -9.75% gross of fees.
• The company is an independent/employee-owned investment management organization that specializes in equity and fixed income portfolio management for institutional and advisory clients worldwide.

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.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
• This week, the highest gross spreads are Dongzheng Automotive Finance (2718 HK), Yashili International Holdings (1230 HK), 21Vianet Group (VNET US), Sezzle Inc (SZL AU), Alliance Aviation Services (AQZ AU). 
• The lowest gross spreads are Beijing Enterprises Urban Resources (3718 HK), Virtus Health (VRT AU), Uniti Group Ltd (UWL AU), China Logistics Property Holdings (1589 HK), Irongate Group (IAP AU). 

• The shares look cheap on FY Mar-23 guidance, but operating profit has dropped back after a surge and 1H looks difficult.
• On the positive side, the VONA e-commerce business is catching up with Factory Automation as a source of profit. Annual sales and profitability have reached new highs.
• Management has rebalanced the business. The main risk now is macro-economic. 

• There are 37 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deal this week: Qantas Airways (QAN AU) has entered into a Scheme to buy smaller airline Alliance Aviation Services (AQZ AU).
• Key updates took place for: AGL Energy Ltd (AGL AU), Virtus Health (VRT AU), Suchuang Gas Corp (1430 HK), Yashili International Holdings (1230 HK) & Hitachi Transport System (9086 JP).

• SIS reported moderate growth in Q4FY22 with Revenue at Rs 2,648 Cr, registering an encouraging growth of 1.8% QoQ, (below our expectations).
• Consolidated EBITDA for the quarter de-grew by 4.1% QoQ to Rs 124 Cr, owing to tepid international business
• We recommend a BUY rating on the stock and assign a 21x P/E multiple to its FY24E earnings of Rs 28.4/share which gives a TP of Rs 590/share, implying an upside of 13% from the CMP.

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.

• Qantas Airways (QAN AU) has entered into a Scheme to buy smaller airline Alliance Aviation Services (AQZ AU).
• Alliance shareholders will receive $4.75 in Qantas shares or a 35% premium to last close. The consideration implies an equity value of A$764.5mn and an enterprise value of A$919.2mn.
• The Scheme is subject to shareholder and ACCC approval. The ACCC recently cleared Qantas’19.9% stake in Alliance after a three-year investigation.

• Korean Air will request the KDB and the KEXIM for early repayment before the step-up kicks in. Then, the creditors  decide conversion using Korean Air’s claim as an excuse.
• This is exactly the same as the case of HMM, whose stock price began to face corrections 7-10 trading days before the conversion announcement and peaked on the announcement date.
• So, aiming at the possibility of a conversion announcement coming out in the third week of May, I recommend gradually building up short positions starting next week.

• Alliance Aviation Services (AQZ AU) entered a SID with Qantas Airways (QAN AU). Shareholders will receive A$4.75 in Qantas shares for each Alliance share, 35.3% premium to 4 May close. 
• The key risk is approval from the ACCC, which will start a public review. On 5 April, the ACCC closed an investigation into Qantas’ acquisition of its 19.9% Alliance stake. 
• Alliance Aviation can pay an additional special cash dividend if ACCC approval takes time. The offer is attractive in the context of historical share prices and multiples.

• The 1Q22 result of Dongfang Electric (1072 HK) kick-started FY22 with an encouraging new record high quarterly profit and a good recovery in YoY new order momentum.
• We are excited to see DEC managed to control its selling, administrative and R&D costs with a slight 2.7% YoY growth, compared with a solid 29.8% revenue increase.
• Recurring pre-tax profit growth is estimated to be over 30% YoY, and its order backlog at around Rmb85.4bn, 1.8x its FY21 revenue. We consider its 7.7x FY22F PER very undemanding. 

• Komatsu reported 4QFY22 results on the 28th of April and recorded revenue of ¥787bn (6.2% above consensus) and OP of ¥94.5bn (13.1% above consensus). 
• They also guided for revenue to increase 7.1% YoY vs. HCM which guided for a 6.3% fall driving a significant and premature share price decline. 
• The market has corrected some of that fall as it appears to increasingly agree with our call that HCM’s guidance was nonsense conservatism.

• CJ Logistics, the largest logistics company in Korea, is facing four major headwinds which are likely to result in further downside risk for the stock in the next 6-12 months.
• The four major headwinds include greater competition from Coupang (CPNG US), lower e-commerce demand (parcel delivery), higher fuel prices, and higher interest rates.
• Amid the four major challenges, we believe the consensus earnings estimates are overly aggressive and they are likely to be revised down further in the next several months. 

• An opportune exit; maintain HOLD
• At USD120m EV (or USD109.5m equity value)
• Decent pricing, based on our estimates
• More details upon execution of definitive agreement

• KEC International (KEC Int) reported a poor set of numbers in Q4FY22 with revenues at Rs 4,275 Cr (down 2% YoY), EBIDTA of Rs 252 Cr ( down 29% YoY), and PAT of Rs 112 Cr (down 42% YoY)
• The company’s EBIDTA Margins declined to 5.9% in Q4FY22 from 7.2% in Q3FY22 and 8.1% in Q4FY21, primarily owing to an increase in material costs as well as interest costs during the quarter
• We value KEC International at 12.5x (14x earlier) FY24E EPS to arrive at a target price of Rs 385/share (Rs.555 earlier) implying an upside of 3% from the CMP and revise our rating from BUY to HOLD.

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.

• The market cap and liquidity review period for the June rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in less than four weeks.
• Potential inclusions are JMT Network Services (JMT), Jaymart PCL (JMART) and Berli Jucker (BJC) while the potential deletions are Ratch Group (RATCH), Sri Trang Gloves (STGT) and IRPC PCL (IRPC).
• There are a couple of stocks that are close on liquidity and trading volumes over the next few weeks will determine if they are added, they stay or go.

• Keppel Corp 7.0 old high barrier and pivot level as RSI and volume readings begin to warn of an exhaustive rise.
• While the KEP and Marine combination does off up better value for KEP, the market may have baked in the bulk of good news for the time being.
• RSI triangulation with non confirmation divergence warns of a pending intermediate top brewing with blow off resistance near 7.3 in the event we clear 7.0 near term resistance.

• Numerous local Korean media outlets reported today after the market close that SK Shieldus is likely to lower the IPO price by about 19% to 25,000 won.
• Our revised base case valuation of SK Shieldus is target price of 36,948 won per share, representing 48% upside from the estimated IPO price of 25,000 won.
• We maintain our same earnings estimates for SK Shieldus. We slightly lowered the valuation multiples mainly due to lower valuations of the comps and weaker market sentiment on IPOs. 

• Nihon M&A Center (2127 JP) reported 4QFY03/2022 results last week. Revenue declined 20.5% YoY to JPY6.1bn (vs consensus JPY7.6bn) while OP decreased 60.3% YoY to JPY889m (vs consensus JPY3.1bn)
• Revenue for FY03/2022 increased 16.1% YoY to JPY40.4bn (vs guidance JPY39.bn) while OP increased 7.1% YoY to JPY16.4bn (vs guidance JPY18bn).
• The company also announced in December last year that there were irregularities in recording sales and the share price has declined 47% since then.

• The Hitachi Transport System (9086 JP) deal announced last week was a big win for minorities, discussed in Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO. 
• Market ructions and the Hitachi Metals saga have this trading wide. 
• This deal looks different in terms of approval risk and timing risk than Hitachi Metals and is worth a closer look now.

• Air New Zealand (AIR) was aiming to raise around US$827m (NZ$1.2bn) via a renounceable rights issue. It has now launched a shortfall of around US$153m, at last close.
• We have covered the background of the rights and expected shortfall in our earlier note, Air New Zealand Rights and Possible Shortfall – Delayed Boarding but Its Priced to Fly.
• In this note, we talk about the recent updates and shortfall pricing.

• Shenzhen International (152 HK) has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  
• SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.
• Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. 

• Monotaro’s 1Q22 topline was broadly in line with expectations but OP overshot consensus and company guidance by ¥355m and ¥396m respectively as SG&A fell short of the plan by ¥435m.
• Although the market treated MonotaRO Co Ltd (3064 JP) as a pandemic stock, it has stronger fundamentals than most pandemic winners.
• Shares are not cheap enough to be outright bullish but it is still a decent long hedge to short many other low-quality names.