Industrials

• Yamauchi No10 Family Office (YFO) Friday declared a fourth buyer in its group and reached 26.28% as of the 19th. 
• Toyo Construction revealed a back-and-forth between itself and YFO in which it was revealed It YFO had also proposed a Tender Offer at ¥1,000/Share subject to discussions and Board Agreement. 
• This, and YFO’s position make Infroneer’s ¥770/share Tender Offer somewhat untenable. Shares could become more volatile. 

• SK Shieldus (ABFHIZ KS) is a leading South Korean security provider. It is seeking a KRX IPO to raise up to US$0.9 billion. 
• The primary change in the updated prospectus is the syndicate’s valuation methodology which results in a 10% lower value per share. The IPO price range of KRW31,000-38,800 is unchanged.
• Sentiment on IPOs remains poor. For investors willing to look at IPOs, our valuation analysis suggests that the IPO price range remains reasonable.  

• Cimc Enric Holdings (3899 HK) has an encouraging 1Q22 with 24.9% revenue growth. If not the impact of the pandemic and lockdowns in Mar, growth would even reach 35.2%.
• Total new orders increased 23.2% in the quarter even in a period disrupted by lockdowns. Backlog stands at Rmb15.5bn, enough to fully cover FY22 revenue with 7% growth.
• Hydrogen energy business, though still small, witnessed 80.5% revenue growth. Good demand drives new orders to Rmb105.4m; and its backlog of Rmb180m equals to 5x of 1Q22 revenue. 

• Founder and Chairman Nagamori has reappointed himself CEO, obscuring the reasons why Nidec’s share price has declined.
• Quarterly earnings should recover, but strategic investments look three years into the future while materials costs rise and the economic situation deteriorates.
• Rising interest rates and compression of valuation multiples are likely to dampen the share price. Look to the long term without expecting a return to the glory days. 

• Guodian Technology & Environment Group (1296 HK)’s privatisation offer from China Energy is HK$1.08 per H share. The pre-condition was fulfilled on 22 April.  
• The key conditions for the delisting will be approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.  
• At last close and for a mid-June effective date (composite document despatched by 29 April), the gross and annualised spread to the offer is 2.9% and 19.9%, respectively.

• DiDi Global (DIDI US) had serious data problems. It still listed itself, against the wishes of the regulators. Then it got in serious hot water. And it’s been getting hotter. 
• Ramsay Health Care (RHC AU) announced an unsolicited, non-binding Offer from KKR (and HISTA), at A$88.00/share, a 36.7% premium to last close, however, earnings have been left bedridden by the pandemic.
• Post-Deal, Keppel Corp (KEP SP) will look more like Sembcorp Industries (SCI SP). More engineering, less power generation infra assets, more other infra assets and more data centres. 

• SK Shieldus (SKS) aims to raise around US$800m via issuing a mix of primary and secondary shares in its Korea IPO.
• SKS is the security subsidiary of SK Square. It provides security services across four main categories: information security/Cybersecurity, convergence security, physical security, and Safety & Care.
• In this note, we will look at the refiling updates.

• A sharp spike in bond yields pressured growth stocks and weighed on Strategy performance against its core benchmark, where leadership was decidedly one-sided in favor of value.
• Nevertheless, we remain positive on areas like the IT sector and have largely maintained holdings in our highest-conviction ideas.

• Toshiba announced that it will start a sale process by offering info, and running a two-round “strategic alternative” process. Info and non-binding proposals followed by due dili and binding proposals.
• For me, this seems like “That One Piece Of News” which is required to make the range jump, and to get people into Now-We-Are-Going-To-Get-A-Deal. 
• We may not, of course, and it will be a long, complicated road. But this is a step change. Starting a beauty contest is a big deal.

• Yangzijiang Shipbuilding (YZJSGD SP) is trading ex-spinoff today and is trading at S$0.85/share versus the last close of S$1.54/share, implying a price of S$0.69/share for Yangzijiang Financial Holding Ltd (YZJFH).
• At the last prices, Yangzijiang Shipbuilding (YZJSGD SP) will remain in the FTSE Straits Times Index (STI) (STI INDEX) while Yangzijiang Financial Holding (YZJFH) will be deleted on 4 May.
• To avoid index deletion, Yangzijiang Financial Holding (YZJFH) will need to trade at S$0.825/share or higher and that would result in the deletion of Comfortdelgro Corp (CD SP). 

• Toshiba announced yesterday that they would be soliciting proposals on strategic alternatives specifically mentioning privatisation. 
• The stock is up 3.5% on the news and had been up as much as 6.5% in a very weak market despite the news being well foreshadowed. 
• At the current price we believe there could be limited scope for a significant premium and much downside if tech turns over.

• Adi Sarana Armada (ASSA IJ) booked a strong set of FY2021 results with sales growing by +68% and net profit by +64%, driven by a strong performance from logistics business.
• Anteraja now makes up 54% of sales and broke even in FY2021, delivering an average of 650,000 parcels per day in 2021, expected to rise to 1.5m by December 2022.
• Adi Sarana Armada (ASSA IJ) is a proxy for mobility through car leasing, online and offline used car sales through Autopedia, and last-mile deliveries through Anteraja.

• 20 months ago, Temasek walked away from a deal to buy control of Keppel Corp (KEP SP) as the O&M business saw large writedowns and covid stoppage losses.
• The story? A possible Keppel O&M and Sembcorp Marine (SMM SP) merger. SMM was recapped and spun out of Sembcorp Industries (SCI SP) then recapped again. 
• Now it’s crunch time. Keppel & SMM hope to update investors on a merger plan by end of April. This insight looks at what to look out for.

• Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn. 
• This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view. 
• Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.

• The Nikkei Leak Article of the Hitachi Transport takeover price is out. That suggests board meetings and deal announcement are imminent
• The price suggested in the article comes out to be just under ¥8,000. 
• Past deals between KKR and Hitachi for Hitachi subs (and the language of the article on deal structure) suggest the minority Tender Offer Price could be different.

• After the market close today, SK Shieldus revised its IPO filing, especially for the valuation comps. However, it maintained the same IPO price range of 31,000 won to 38,800 won.
• Bankers included two new comps (Taiwan Secom and Cyberone). Bankers excluded ADT Inc, Alarm.com, and Qualys as comps.
• Our valuation of SK Shieldus suggests market cap of 4.1 trillion won or target price of 44,892 won (28.6% higher than the mid-point of the IPO price range). 

• The contracts, presence in airports and relationships make John Menzies a difficult business to replicate. NAS has a direct stake of 19% and undertakings and letters of intent for 33.3%.
• The 608p final offer represents a 107% premium to the 3-month VWAP and 6.1x EV/Fwd EBITDA, and is 10% above my fair-value estimate (551p/share, DCF based WACC 9.0%, 4.5x EBITDA exit multiple).
• The offer is highly likely to close. Gross spread is 1.48% with an estimated annual return of 4.78% (assuming settlement by 15 August). Reiterate long MNZS LN.

• Nidec is the best stock in Japan to play the rising adoption of EVs
• The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale
• We think the company can hit its mid-term targets and see over 30% upside for the stock

• Maintain BUY and MYR5.58 TP
• FPSO Anna Nery project on track
• 3 strong bids, realistically targets 2
• Rights issue and value-unlocking proposals

Its Anna Nery FPSO project in China is 90% completed; on track to meet its delivery deadline. Meanwhile, its PDB and Enauta projects are still at preliminary stages, thus not affected by the latest Covid-19 lockdown. Yinson remains well-entrenched to capitalise on this FPSO upcycle. With 6 prospects in the horizon, it targets 2 wins over the next 12 months. It is also exploring options to unlock FPSO assets by undertaking an IPO route, or bringing in a strategic investor. Our TP is SOP-based.

• Yesterday the Nikkei published an article featuring Bain MD Yuji Sugimoto who also featured heavily during their bid for Kioxia. 
• Sugimoto commented that in the event of a buyout there would be no break-up of Toshiba. 
• While plausibly a PR move directed at employees that stance raises the question of exactly how they would unlock value.

• The AFR is reporting that KKR is preparing an Offer for waste management outfit Cleanaway Waste Management (CWY AU). No price has been revealed. 
• This is a business KKR understands. It bought, and shortly thereafter sold, Cleanaway 15 years ago. 
• KKR also recently sought to acquire Waste Management New Zealand.

• Consensus expectations for Nidec have drifted towards more reasonable levels in the last few months and a guidance miss is now baked in. 
• However, our data analysis suggests that while revenue may exceed consensus expectations OP could miss. 
• Guidance on the other hand could be strong, but with multiples elevated that does not mean there is upside risk here.

• Cutting container throughput forecasts
• Expecting a contraction in 1H22 container volume
• Rising port call duration = lower port efficiencies
• Maintain HOLD on balanced risk-reward

• The BOJ looks increasingly trapped between a rapidly depreciating yen and a stated desire to hold rates low. 
• We believe that the BOJ will eventually have to compromise on its 0.25% ceiling for the ten year JGB once inflation data gives them cover to do so. 
• However, we believe Japan Post Holdings could potentially benefit from both macro forces and consider it one of the best risk-reward positions in Japan and perhaps globally.

• An AFR article claimed that KKR & Co Inc (KKR US) is preparing an offer for Cleanaway Waste Management (CWY AU). The shares rose 5.9% to close at A$3.24.
• KKR has a long history with Cleanaway. Private equity has recently acquired waste management companies that are increasingly viewed as “infrastructure-like’’. 
• Cleanaway’s scale, cash generation and modest leverage make it a target. A forward EV/EBITDA multiple of 15.8x, in line with Bingo Industries (BIN AU)’s acquisition multiple, would imply A$3.92.

• We believe strong orders and backlog, increase in installed capacity and development of new business initiatives are the key drivers for brighter outlook of China Energy Engineering (3996 HK). 
• Its new orders grew 51% YoY in FY21, with its backlog is enough to cover the revenue more than the next three years mean solid earnings security and visibility.
• Development of hydrogen energy and pumped storage businesses may take longer to contribute, but they also represent significant upside when enter into commercial launch. 

• On 19 April, the US CDC stated that the national mask requirement on public transportation is no longer in effect in the United States.
• The CDC lifting the mask mandate is a key catalyst and other major countries are likely to follow the US in the coming months.
• Will the world likely to become more like Shanghai and enforce even greater lockdown policies or will they become more like the US and drop social distancing and mask mandates? 

• The Fed Funds Rate went higher than the inflation rate to tame it, the Fed Funds rate went higher in the past fifty years.
• The Fed has made some adjustments, are optimistic about the COVID-affected names, and are confident in the lineup we have today.

• Spreads have generally tightened across our liquid universe, in line with the recent market gains.
• Recommendations Long ords / short prefs: Fuchs Petrolub, Svenska Handelsbanken, Ericsson.
• Recommendations Long prefs / short ords: Danieli, Sixt, Atlas Copco, Grifols, Telecom Italia, Volvo AB, Volkswagen, Schroders.

• We expect the company to report net profit of Bt400m in 1Q22. (+1%QoQ+31%YoY), the highest level in the past five quarters.YoY expansion will be due to effective operating cost management
• Expect daily ridership to reach 70% of pre-COVID19 level by 3Q22, under assumption that there will be no major restriction measures induced by the virus outbreak. Furthermore, we expect ridership 
• Earlier-Than-Expected bidding for Orange line will be the re-rating catalyst (previously expected to take place within 1H22). We estimate upsides from this project at Bt1.90 per share.

• Maintain BUY rating with a new TP of B66.00 (down 8% from previous TP),based on 30.8xPE’22E which is close to its -1SD of 3-years trailing average. We believe, SCGP’s 24%
• We expect 1Q22E core profit to be the bottom quarter at Bt1.7bn (-21%YoY,-21%QoQ). Excluding one-time gain from the acquisition of Go-Pak adjustment, its recurring profit should rise 23%QoQ.
• We believe earnings momentum to recover in  2Q22 onwards by raising product prices in wake of costs turbulence, but would drop YoY due to fall from high base. 

• The typical approach for the MSCI rebalancing trading is to close the position around the announcement. However, HHI is waiting for another passive inflow event right after MSCI SAIR.
• KOSPI 200 rebalancing trading usually starts six weeks before implementation. It means early May, which coincides with the closing timing of the MSCI rebalancing trading position.
• Suppose the sentiment for the local shipbuilding sector will remain neutral. In that case, KOSPI 200 flow makes us consider pushing back the position closing for the MSCI flow trading.

• Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
• We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar. 
• Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.

• On 14 April, a consortium led by Edizione launched a defensive delisting takeover bid for Atlantia for €23/share (which won’t be adjusted for the €0.74 dividend payable before end of acceptance).
• The premium is 24.4% (before takeover rumors), and represents 8.9x EV/Fwd Revenue and 14.1x EV/Fwd EBITDA (Capital IQ consensus). The offer price is 16% higher than my SOTP valuation (€19.82/share).
• It is almost a knock-out bid with minimal interloper risk. Gross spread to the aggregate amount is 4%, annualised return is 18% (assuming 13 July settlement). Recommendation is long ATL IM.

• The review period for the MSCI May SAIR starts on Monday, 18 April and will run for 10 trading days, though MSCI usually selects one of the first five days.
• GoTo (GOTO IJ) listed during the last week and could be a Fast Entry to the IDX indices. The Yangzijiang Shipbuilding (YZJSGD SP) spinoff has index implications.
• Relatively large inflows into China focused ETFs during the week, while there were outflows from Korea focused ETFs.

• The war has already had impacts on commodities, intermediate products, and the supply chain.
• If higher interest rates and inflation characterize the landscape for the next several years, it likely spells the end of the era of unbridled speculation and high multiples.

• There are 35 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal. 
• Two new deals this week: WT Microelectronics (3036 TT)‘s tilt for Excelpoint Technology (EXLP SP); Bain’s MBO for Tri Stage Inc (2178 JP).
• Key updates took place for: Toyo Construction (1890 JP), Uniti Group Ltd (UWL AU), Western Areas (WSA AU), and Suchuang Gas Corp (1430 HK).

• FMI’s equity investing strategies apply a value discipline, with a focused approach firmly rooted in fundamental research.
• The FMI International portfolios’ exposure to Russia and Ukraine is quite limited, with no direct investments in either country.

• The Palm Valley Capital Fund invests in small cap stocks.
• The Fund is new, its underlying return-based investment strategy is not.
• The past year was the first time ever that aggregate small cap earnings actually achieved the forward estimates established by analysts one year earlier.

• Small cap growth stocks entered bear market territory during the quarter, buffeted by the prospects of monetary tightening, spiking inflation and the uncertainties wrought by Russia’s invasion of Ukraine.

• A Nikkei article this morning says the mystery bidder behind WK1/2/3 Limited is Nintendo founding family’s Yamauchi No.10 Family Office. This changes things more than just knowing their identity does.
• To start, their website is the most fun investment management company website I have come across. It’s great.  https://y-n10.com/. It’s also well worth reading. It’s also worth noting their history.
• Understanding the parameters here is key to understanding possible next steps.

• Investing in factory automation, power semiconductors and electric vehicle motors on a long-term view while interest rates rise and the economy weakens.
• Difficult operating environment now: Factory automation turning down; automotive hit by high materials costs and the semiconductor shortage.
• Share price down 25% from its 52-week high. Selling at 14x FY Mar-22 EPS guidance after a downward revision, which compares with a 9x – 20x 5-year P/E range.

• Baycurrent Consulting (6532 JP) reported 4QFY02/2022 results today. Revenue grew 30.9% YoY to JPY16.2bn while OP increased 61.3% YoY to JPY6.8bn.
• Full-Year FY02/2022 revenues grew 34.4% YoY to JPY57.6bn and OP increased 58.7% YoY to JPY21.5bn. Both revenue and OP beat guidance by 1.9% and 2.4% respectively.
• BayCurrent’s shares are down 30% since its peak in September 2021, and we think current share price offers a good entry point.

• Another excellent set of results which supports our bullish view on the stock 
• BayCurrent is a key enabler of DX in Japan and a beneficiary of the tight labour market 
• The stock is down around 30% from its all-time high. Growth investors should be picking up stock  

• International equities were faced with numerous risks in the first quarter, ranging from resurging COVID-19 cases in large geographies like China to inflation and potential monetary tightening globally
• Europe was most directly impacted by the conflict as crude oil and natural gas prices spiked and already-challenged supply chains were further pressured
• One of the key drivers of the rotation from growth to value stocks was action in the bond market

• ClearBridge is a leading global asset manager committed to active management.
• ClearBridge believes Europe has the support structures and spending capacity to avoid a recession and keep an incipient post-COVID-19 recovery intact.
• We were active in repositioning the portfolio to better manage the volatile risk/reward environment in international markets.

• ClearBridge is a leading global asset manager committed to active management.
• The Strategy underperformed the benchmark as elevated levels of uncertainty and volatility during the quarter put pressure on mid cap stocks.
• We are confident in our current portfolio construction and believe our holdings will persevere through these short- term challenges.