Industrials

• 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 undertake a peer comparison for its two largest verticals.

• 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 look at valuations for its main segments.

For our next Corporate Webinar we are glad to welcome Arwana Citramulia (ARNA IJ) CFO & Corporate Secretary, Rudy Sujanto.

In the upcoming webinar, Rudy will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst, Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 26 April 2022, 17:00 SGT.

• SK Shieldus (ABFHIZ KS) is looking to raise up to US$860m selling a mix of primary and secondary shares. The stock is expected to in the second half of May.
• The company will be valued at US$2.87bn at the top end of the IPO range and will not get Fast Entry to any of the major indices.
• Entry to the KOSPI2 INDEX is unlikely, MSCI inclusion could take place at the November SAIR, while FTSE inclusion could take place at the December QIR.

• Pacific Basin Shipping (2343 HK) stays positive towards the outlook of the bulk shipping market despite the Russia-Ukraine war, higher inflation and lockdowns in China.
• 1Q22 coverage rates are 117% and 122% higher YoY for its Handysize and Supramax fleet, resepctively, and coverage for 2Q22 is also promising, securing good 1H22 earnings.
• We expect it to turn into net cash by end-FY22, and even with such strong financial position, it will still generate over 30% ROE for the next two years.

• Park24 Co Ltd (4666 JP) aims to raise around JPY25.5bn (US$210m) via selling 16m new shares at a fixed price of JPY1,644, representing a 9.9% discount to last close.
• Proceeds from the deal will be geared towards digital investment towards improving the firm’s business efficiency and for expanding its mobility fleet.
• In this note, we will talk about the firm’s track record and run the deal through our ECM framework.

• As of February, TEL expected the global wafer fab equipment market to grow by nearly 20% in calendar 2022. This seems increasingly unlikely.
• Japanese data shows equipment demand leveling off while the economic situation deteriorates and semiconductor capacity expansion projects are delayed.
• The shares have dropped 22% since the beginning of January and are now selling at 20x management’s EPS guidance for FY Mar-22. Not cheap in historical terms.

• WK 1-3 Limited are now (as of a week ago) 17.34% of Toyo Construction’s share register. They bought 40+% of volume in the relevant period, as I suggested they might.
• On a realtime basis, they could be 20+%, but because no single entity is there they would not become top shareholder as a triumvirate.
• I offer consolidated thoughts and like the idea of buying the dip.

• Otis Worldwide Corp (OTIS US) increases its stake in Zardoya Otis SA (ZOT SM) to 95.51% after the takeover bid. The settlement date is 12 April.
• Otis has decided to proceed with the squeeze-out. Next 3 May will be the date.
• The outcome is in line with expectations and my recommendation to tender. Gross spread is 0.43%, and 6.31% is the estimated annualised return (assuming settlement on 6 May).

• Yangzijiang Shipbuilding (YZJSGD SP) is looking to spin-off its investment segment, Yangzijiang Financial Holding Ltd (YZJFH). The EGM is on 18 April and the book closure is 25 April.
• There will be no flows from the MSCI and FTSE trackers given that both stocks should continue to remain members of the MSCI Small Cap and FTSE All-World indices.
• There will be a deletion from the FTSE Straits Times Index (STI) (STI INDEX) though, where either YZJSGD, YZJFH or Comfortdelgro Corp (CD SP) will be deleted from the index.

• Following CCEP spin-off and share price decline, China Conch Venture (586 HK) is now at more attractive valuations relative to the stub, on sum-of-the-parts and on PER multiple. 
• Growth profile should improve in next two years and it has an optimistic expectation of of 76% increase in waste treatment and 79% growth in on-grid electricity for FY22.
• New business initiatives including anode and cathode materials of lithium iron phosphate and lithium batteries and used lithium batteries treatment may provide potential medium term upside.

• Parent company sales in March were 19.771bn yen (+17.4% YoY), slightly below the company’s monthly target
• The number of business days was 22, one day less than in March 2021. The sales growth rate per business day was +22.7% YoY (+21.4% for February).
• Sales to SMEs (monotaro.com) increased by around +13% YoY, below the company’s target.

• PSP Projects (PSPPL) – incorporated in 2008 and led by Mr. P.S. Patel (CMD & CEO), has been working in the Buildings & Factories construction business
• PSPPL has gradually expanded its construction reach starting from Gujarat to other geographies over the years.
• We recommend a Buy the stock for a target price of Rs 620/ implying an upside of 11% from CMP

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• We are bearish on Fanuc. Yaskawa’s robotics orders were strong but Fanuc is more correlated with machine tool orders
• Machine Tool orders have already turned south and Fanuc is losing momentum in its order growth
• If we are right on the cycle, we expect Fanuc to trade down to 2.3x book value, 20% downside risk from here

• #2 shareholder and erstwhile activist 3D Investment Partners writes a letter to Toshiba Corp (6502 JP)‘s Board demanding 3 measures before the AGM. 
• Pendal Group (PDL AU) is assessing Perpetual’s cash/scrip Offer provides an indicative price of $6.23/share; however, the wording in the announcement suggests the bid is opportunistic and will be rejected. 
• Because of rising regulatory requirements for NBFCs, a HDFC Bank (HDFCB IN) /HDFC Limited (HDFC IN) was to be expected at some point.

• Ecopro BM announced a ₩0.5T rights offer: 1.6M new ordinary shares at a preliminary offering price of ₩310,300. In addition, there will also be a 1-to-3 bonus share issuance.
• In outright Long trading aiming for a 20% discount, one thing to keep in mind is bonus issues. Post-bonus issue price correction will likely be more substantial this time.
• We should aim at outright shorting as moving into the bonus issue ex-rights date while watching Ecopro’s share price upward trend and volatility during this event.

• GIP/Brookfield/ACS weigh launching a €15 billion unsolicited offer for Atlantia. Blackstone may partner with the Benettons to acquire Atlantia at €24/share (26% premium ). Italian Government’s role will be key.
• Atlantia trades at higher multiples than ACS (EV/22e EBITDA: 12.8x vs 3.2x, Capital IQ consensus). A hypothetical ACS/Abertis would become a world leader in infrastructure, but leverage is key. 
• The opposition of Edizione makes the operation difficult/more expensive. A joint-bid Edizione/Blackstone, would force the GIP-led group to present an improved offer. Nearly 50% of Atlantia’s NAV is cash.

• VRL Logistics (VRLL) announced a capex plan of INR5.6b to purchase 1,600 trucks (~25,000t carrying capacity) spread over the next 12-18 months.
• This capex is essential to: a) replace its older fleet that moves out due to the vehicle scraping policy and b) capture the pick-up in demand in the LTL segment.
• We believe VRLL would be very well placed to capitalize on the growth opportunity after this capacity addition.

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SAEL Limited is roadshowing a USD 7NC4 green notes offering, with the proceeds to be used for refinancing all existing debt and capex of the restricted group (RG). The integrated player has three business lines: Renewable Energy, Warehousing Infrastructure, and Agri-processing & Solvent Extraction. 

We view SAEL as “Medium Risk” on our LARA scale. We note favourably the utility nature of the business, with contractual and visible revenue and cash flows for the RG that will hold SAEL’s renewable power plants (solar and waste-to-energy). Conversely, the credit is weighed down by the: [1] RG’s small scale and short track record of the associated assets (less than three years); [2] weak corporate governance, especially the private ownership; and [3] execution risk for the proposed organisational restructuring.

Our Credit Bias is “Stable”, given the revenue visibility and contractual cash flows under PPAs.

We expect the proposed notes to price at 7%.

• Yangzijiang Shipbuilding (YZJSGD SP) aims to spin off Yangzijiang Financial Holdings (YZJFH) through a dividend-in-specie of all the issued YZJFH shares to shareholders on a one-on-one basis.
• YZJFH shares will be listed on the SGX-ST by way of an introduction. The EGM to approve the spin-off will be held on 18 April at 4 pm.
• This transaction will unlock value. Our SoTP valuation is S$1.94 per share, which is a 22% upside to the last close price of S$1.59 per share.

• Next Thursday, the rebalancing trading of the WISE Secondary Cell Index will occur. The current AUM is ₩1.26T, and the AUM has slightly increased in the last two weeks.
• Six names (2 Longs & 4 Shorts) are screened: SK Innovation, LG Energy Solution, Posco Chemical, SKC Co Ltd, Iljin Materials, & Solus Advanced Materials. 
• Considering the 20-day price returns, long/short basket trading seems valid as the long targets have relatively outperformed. However, since Solus Advanced Materials is short-restricted, we need to exclude it.

• The VIX Index has turned up after declining by the same magnitudes as the previous two occasions
• This warns of another leg up over the coming days and weeks
• As a consequence it is a sign of renewed weakness on the S&P 500

• We think the recent price weakness of Dongfang Electric (1072 HK) is overdone, and there is strong value proposition on the stock based on its current multiples.
• DEC’s orderbook has well covered in the next two years, while we see cost management measures will help mitigating the pressure on margin. 
• It is well positioned to capture the wind power boom (26% of FY21 revenue) and remains the prime beneficiary of China’s hydrogen economy and pumped storage demand in the longer-term.

• I considered the article reported by Nikkei, “Halving the Number of In-House Directors to Three, Equal to Outside Directors. It was misleading because it didn’t consider the board composition.
• This change in the board composition is merely a measure to meet the listing criteria of prime market means and will not immediately lead to improved transparency of the board.
• It must be said that there are numerous issues to be improved for the Company, looking into the corporate practices in detail of the company.

• We downgrade PSL to HOLD rating while trim target price to Bt16.0 (Previous TP:Bt21.20) derived from 1.5xPBV’22E, Asia-ex-Japan transportation sector. We believe peak point of the market upcycle
• We anticipate a slowdown in demand for dry bulk commodities trading to continue at least until 1H22, which was mainly pressured by tension between Russia-Ukraine and China city lockdown.
• Supply side in short-term will still benefit from trend of containerized cargoes and issue over port congestion, but these factors are likely to fade in 2H22

• Air New Zealand (AIR NZ) is the latest airline do a Covid Recapitalisation with a “heavy rights issue” where 
• The dynamics will likely play out somewhat similarly to the way Singapore Air’s did. The initial squeeze and first leg down have. 
• But that means LOTS of opportunity here for long only, passive, and arbitrageurs alike.

• On 24 March, the EGM defeated both company and 3D Investment proposals. That night, a leak in the Nikkei said the company would pursue privatisation measures. Supply side interest. Check. 
• That same day, Bain signed a “Confirmation Agreement” with lead Toshiba shareholder Effissimo would tender into a Bain Tender Offer. Demand Side interest confirmed. Check. 
• Now we have a 3D public letter to the Board demanding 3 measures before the AGM. 

• S1 Corp is more giant in sales and ranks first in the local on-site security market, so it is tough to understand why SK Shieldus should receive a higher valuation. 
• If the growth story is sexier, the story may be different. Still, many investors will have doubts about whether SK Shieldus’ growth story is convincingly explained in the IPO prospectus.
• Even the lower end of the indicative price band is likely to be downwardly corrected in the post-IPO price-finding. Hence, I do not recommend an aggressive approach to this IPO.

• Current at 66 constituents, we expect to reach 80 HSI INDEX constituents by the end of the year before moving higher towards 100 index members in 2023.
• We list 10 stocks that could be added to the index in June – with one-way turnover close to 6%, the actual number of inclusions will be lower.
• We also list out another 8 stocks that could possibly be added in June, though the probability of a September/ December inclusion is higher.

• SK Shieldus (SKS) aims to raise around US$800m via a mix of issuing 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 talk about the postive aspects of the deal.

• Yangzijiang Shipbuilding (YZJSGD SP)‘s EGM will be held on 18 April to vote on the proposed spin-off and listing of the company’s investment segment, YZJ Financial Holdings Ltd (YZJFH).
• This spin-off involves an in-specie distribution of YSJFH, with a possible listing by month-end.
• YZJ’s shares have had a solid run since the initial restructuring announcement last November. There looks to be still more juice left in the trade. 

• 3D Investment Partners has sent another open letter to Toshiba’s Board of Directors once again pushing for privatisation options. 
• Once again, the fund’s claims and demands come across as rather shrill and potentially desperate. 
• 3D’s behaviour is a stark contrast with other activists who have been quieter and more skilful and could be the biggest risk to Toshiba in our view.

• SK Shieldus (SKS) aims to raise around US$800m via a mix of issuing 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 talk about the not so positive aspects of the deal.

• TCI has developed robust capabilities in multimodal Logistics via its presence across major transportation modes.
• The company has well-diversified service offerings from Road freight, integrated Supply Chain solutions, Sea freight, to a JV with CONCOR for Rail freight.
• These capabilities would be a key enabler for consistent growth in volumes and earnings for TCI over the next few years

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• Although this is a semi-annual IR, the number of additions won’t be large. At this point, only Hyundai Heavy Industries (329180 KS) and KT Corp (030200 KS) are screened.
• None of the exclusion candidates are below the lower buffer at this point. So, those with the lowest market caps during the review period will be excluded from the Index.
• Based on the current share prices, the following three existing constituents have the smallest market cap: Green Cross (006280 KS), Alteogen Inc (196170 KS), and SK Chemicals Co (285130 KS).

• Our valuation of SK Shieldus suggests target price of 44,892 won, which is 29% higher than the mid-point of the IPO price range of 34,900 won.
• We would subscribe to this IPO as the company has strong business moat, especially for the physical security business and its convergence security/cybersecurity businesses are enjoying excellent customer demand.
• Although we have a positive view of SK Shieldus, there will be some investors that stay away from this IPO due to its high debt levels and rising interest rates.

• SK Shieldus (ABFHIZ KS) is a leading South Korean security provider. It is pre-marketing a KRX IPO to raise up to US$0.9 billion.  
• In SK Shieldus IPO Initiation: Track and Shield, we noted that SK shieldus has attractive fundamentals with healthy growth and margins. The leverage is manageable due to good cash generation.  
• In this note, we look at the syndicate’s valuation methodology and present our valuation methodology. Our valuation analysis suggests that the IPO price range is attractive.

• Indonesia’s reopening has happened for some time but Jasa Marga (Persero) (JSMR IJ) share price has not moved much. 
• On-The-Ground sources told that the traffic is back, especially in Jakarta where Jasa Marga has the most toll roads. 
• Pre-COVID it was trading at 2-3x PBR and now it’s only 1.35x PBR, premium to Bluebird but has a bigger market capitalization that makes JSMR more investable. 

• SK Shieldus (ABFHIZ KS) is a leading South Korean security provider. It is pre-marketing a KRX IPO to raise up to US$0.9 billion.  
• SK shieldus is offering 27.1 million shares with a primary/secondary split of 53/47 at an indicative price range of KRW31,000- 38,800 per share.
• SK shieldus has attractive fundamentals with healthy growth and margins. The leverage is manageable due to good cash generation.

• Bumper upside; maintain BUY
• MYR2.7b, being LITRAK’s share of equity value
• Key take-aways from Gamuda’s investor briefing
• For LITRAK, it means an unlocking of value …

• MHI benefits from the structural themes of energy security and carbon neutrality
• MHI’s Energy Systems account for over 60% of operating profits
• The inevitable push to restart nuclear plants in Japan will be a catalyst for the share price

• ‘Win-win-win’ proposition; maintain BUY
• MYR2.33b, being Gamuda’s share of equity value
• Key differences with MoF’s offer in Jun 2019
• For Gamuda, it means an unlocking of value …

• Axis Top Picks basket has delivered an astounding return of 127% since its inception, notably beating the 89% return reported by the benchmark Nifty 50 Index over the same period
• Pick of the Week (PoW): PoW delivered an excellent monthly strike rate of 77% in Mar’22
• Axis Alpha: Axis Alpha continues to deliver robust returns with absolute profits of over 4.2 Lc since its inception. It reported a healthy cumulative strike rate of 68% in Mar’22.

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.