Industrials

• With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
• The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.

• The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
• We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX). 
• Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

• Interview discusses the offtake agreement and opportunity to expand beyond the current arrangement, the $20m capital raised and outlook for future funding needs, update on strategic equity/debt in the US and milestones to expect over the next six months.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors, developing a critical metals alloy powder manufacturing facility in Tennessee, USA. The company has secured a binding offtake agreement for the supply of C103 additive manufacturing powder, a key milestone in the development of its critical metals powder manufacturing presence in the US. Concurrently, Amaero has raised $20m by way of a placement to institutional investors, which the company anticipates will be the last equity capital raise in the Australian market.
• Going forward, Amaero says it intends to seek equity capital from strategic US investors.
• We continue to incorporate Amaero’s guidance that it expects to report an EBITDA loss of $14m in CY2024 and to break-even in CY2025.

• Fluence Corporation (ASX:FLC) provides water and wastewater treatment, and reuse solutions, for the municipal, commercial, and industrial markets worldwide.
• The company has a proven suite of products and expertise, both proprietary and otherwise, which it has used to deliver more than 850 projects globally.
• After some historical missteps, FLC has now been completely rejuvenated through the appointment of a highly regarded and proven US-based management team and reinvigorated board.

• Industry needs batteries and batteries need metals. As numerous studies have concluded, even with slightly slower than previously anticipated growth in EV adoption and renewable energy (wind and solar) buildout, demand for metals going into lithium batteries is expected to exceed current estimates for said metals’ production as early as 2026-28.
• The implied need to find and develop sufficient new resources of these metals to satisfy the expected demand has become a major focus for battery and auto OEMs, as well as governments set on the path to electrification of their economies.
• More plentiful, less harmful. Many industry and investment banks’ reports also conclude that traditional terrestrial resources in the development or even exploration phase currently are not sufficient to meet the expected demand, suggesting other unconventional resources require commercial development.

• With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
• The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.

• The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
• We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX). 
• Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

• Interview discusses the offtake agreement and opportunity to expand beyond the current arrangement, the $20m capital raised and outlook for future funding needs, update on strategic equity/debt in the US and milestones to expect over the next six months.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors, developing a critical metals alloy powder manufacturing facility in Tennessee, USA. The company has secured a binding offtake agreement for the supply of C103 additive manufacturing powder, a key milestone in the development of its critical metals powder manufacturing presence in the US. Concurrently, Amaero has raised $20m by way of a placement to institutional investors, which the company anticipates will be the last equity capital raise in the Australian market.
• Going forward, Amaero says it intends to seek equity capital from strategic US investors.
• We continue to incorporate Amaero’s guidance that it expects to report an EBITDA loss of $14m in CY2024 and to break-even in CY2025.

• Fluence Corporation (ASX:FLC) provides water and wastewater treatment, and reuse solutions, for the municipal, commercial, and industrial markets worldwide.
• The company has a proven suite of products and expertise, both proprietary and otherwise, which it has used to deliver more than 850 projects globally.
• After some historical missteps, FLC has now been completely rejuvenated through the appointment of a highly regarded and proven US-based management team and reinvigorated board.

• Industry needs batteries and batteries need metals. As numerous studies have concluded, even with slightly slower than previously anticipated growth in EV adoption and renewable energy (wind and solar) buildout, demand for metals going into lithium batteries is expected to exceed current estimates for said metals’ production as early as 2026-28.
• The implied need to find and develop sufficient new resources of these metals to satisfy the expected demand has become a major focus for battery and auto OEMs, as well as governments set on the path to electrification of their economies.
• More plentiful, less harmful. Many industry and investment banks’ reports also conclude that traditional terrestrial resources in the development or even exploration phase currently are not sufficient to meet the expected demand, suggesting other unconventional resources require commercial development.

• J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
• The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
• J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued. 

• Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
• Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
• Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.

• On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“. 
• Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
• A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

• J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
• The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
• J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued. 

• Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
• Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
• Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.

• On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“. 
• Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
• A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

• The outlook for factory automation is improving with inventory clearance, the upturn in the semiconductor industry and an AI-enhanced response to the labor shortage.
• Yaskawa’s margins should continue to rise with renewed growth in Robotics, efficiency gains and an upgraded product line. 
• Valuation stretched at 30x EPS guidance for FY Feb-25, but current weakness looks like a long term buying opportunity.

• The outlook for factory automation is improving with inventory clearance, the upturn in the semiconductor industry and an AI-enhanced response to the labor shortage.
• Yaskawa’s margins should continue to rise with renewed growth in Robotics, efficiency gains and an upgraded product line. 
• Valuation stretched at 30x EPS guidance for FY Feb-25, but current weakness looks like a long term buying opportunity.

• AKR Corporindo (AKRA IJ) booked an impressive finish to the year despite slower revenue growth from its trading & distribution business boosted by strong industrial plot sales at JIIPE.
• The company expects trading & industrial volumes to improve in 2024, with retail petroleum becoming more significant with JIIPE expected to see increasing recurrent utilities earnings starting in 2H2024. 
• AKR Corporindo has a strong pipeline of potential tenants for JIIPE and expects to expand its BP JV retail petrol stations by 40-50 this year. Valuations remain attractive.

• On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue. 
• We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
• Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin. 

• One of a basket of Hong Kong commodity stocks we like
• One off issues in 2023 which should reverse in 2024
• Can also be viewed as  a tangential play on India’s industrial growth

• Fragmented industry with growth opportunities
• Successful acquisitions and expansion
• Focus on customer service and reputation for excellence

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Gibraltar Industries’ Q4 2023 financial results presented a robust year-end performance.
• The company’s leadership positions were expanded, the quality of earnings improved, and strong cash flows were generated.
• Both Residential and Infrastructure perform strongly, and although the Renewable segment faced industry headwinds, it demonstrated excellent margin expansion.

• Ganz Mavag, a public/private consortium, requests authorisation for its €5/share offer for 100% of Talgo SA (TLGO SM). It needs approvals from Spain and seven other EMEA regulators.
• Yesterday’s close remains similar to the announcement date (7 March), gross spread of 11.3%, indicating uncertainty regarding timeline and development. The market is pricing a 48% probability of deal completion.
• The Spanish Government will delay the authorization process. Vs. comparables and considering uncertainties regarding backlog execution, investing in the company seems somewhat risky. The risk/reward ratio is not particularly attractive.

• AKR Corporindo (AKRA IJ) booked an impressive finish to the year despite slower revenue growth from its trading & distribution business boosted by strong industrial plot sales at JIIPE.
• The company expects trading & industrial volumes to improve in 2024, with retail petroleum becoming more significant with JIIPE expected to see increasing recurrent utilities earnings starting in 2H2024. 
• AKR Corporindo has a strong pipeline of potential tenants for JIIPE and expects to expand its BP JV retail petrol stations by 40-50 this year. Valuations remain attractive.

• On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue. 
• We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
• Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin. 

• One of a basket of Hong Kong commodity stocks we like
• One off issues in 2023 which should reverse in 2024
• Can also be viewed as  a tangential play on India’s industrial growth

• Fragmented industry with growth opportunities
• Successful acquisitions and expansion
• Focus on customer service and reputation for excellence

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Gibraltar Industries’ Q4 2023 financial results presented a robust year-end performance.
• The company’s leadership positions were expanded, the quality of earnings improved, and strong cash flows were generated.
• Both Residential and Infrastructure perform strongly, and although the Renewable segment faced industry headwinds, it demonstrated excellent margin expansion.

• Ganz Mavag, a public/private consortium, requests authorisation for its €5/share offer for 100% of Talgo SA (TLGO SM). It needs approvals from Spain and seven other EMEA regulators.
• Yesterday’s close remains similar to the announcement date (7 March), gross spread of 11.3%, indicating uncertainty regarding timeline and development. The market is pricing a 48% probability of deal completion.
• The Spanish Government will delay the authorization process. Vs. comparables and considering uncertainties regarding backlog execution, investing in the company seems somewhat risky. The risk/reward ratio is not particularly attractive.

• Nidec faces challenges amid global EV sales decline, with shares and valuations reflecting market pessimism.
• Anticipated catalysts include forthcoming guidance, potential MTP reassessment, and a strategic acquisition opportunity.
• At 18x EBIT, Nidec looks a compelling play on secular themes of electrification, automation, and energy efficiency.

• HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
• HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
• In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.

• In the third quarter of 2023, PGT Innovations displayed a strong financial performance despite operating in an unpredictable market environment.
• The company’s balanced exposure to new construction and repair and remodeling channels has enabled them to deliver consistent record sales and impressive profits over the year.
• By combining a continued focus on operational efficiency and productivity, PGT Innovations managed to achieve a total revenue of $400 million and an adjusted EBITDA of $78 million in the third quarter.

• Sai Gon Cargo Service (SCS VN) announced an increase in its pricing (details in note) effective April 1st, with a 10% increase across most categories. 
• March cargo numbers showed a substantial 47% YoY increase, as cooperation with Qatar Airways got underway in February. Q1 FY24 numbers were up 34% YoY.
• The stock trades at 12.5x FY24e numbers with an 8% yield, assuming a 20%YoY revenue and profit growth (and a 100% payout), with an upside to these conservative numbers.

• We publish quarterly earnings bridges through 1Q-4Q24 for Air France-KLM, IAG and Lufthansa, which illustrate 1Q will be difficult yoy.
• This renders forward commentary extremely important and summer pricing prospects are encouraging. Delta kicks off airline reporting season globally on 10 April and is likely to set a bullish tone
• However the European low cost carriers easyJet, Ryanair and Wizz Air are seeing greater earnings momentum than the flag carriers given short haul fare strength.

• SiteOne Landscape Supply Inc. ended the year 2023 with notable growth in their 4th quarter, coupled with a modest increase in adjusted EBITDA, an 8% growth in net sales, and a record operating cash flow.
• The company also made 11 acquisitions, adding companies with strong customer relationships while also expanding their product lines.
• However, 2023 presented some challenges including lower market demand, mounting operating costs, gross margin normalization, and commodity price deflation.

• Zongmu Technology (1491595D CH) is looking to raise up to US$150m in its upcoming HK IPO. The deal will be run by Huatai and BNP Paribas.
• Zongmu Technology is a Chinese advanced driver assistance system (ADAS) solutions provider, offering solutions with comprehensive autonomous driving functions. 
• As a Tier 1 supplier, it undertakes software design, hardware design, system design and the integration of these components to develop solutions for mass deployment.

• Nidec faces challenges amid global EV sales decline, with shares and valuations reflecting market pessimism.
• Anticipated catalysts include forthcoming guidance, potential MTP reassessment, and a strategic acquisition opportunity.
• At 18x EBIT, Nidec looks a compelling play on secular themes of electrification, automation, and energy efficiency.

• HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
• HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
• In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.

• In the third quarter of 2023, PGT Innovations displayed a strong financial performance despite operating in an unpredictable market environment.
• The company’s balanced exposure to new construction and repair and remodeling channels has enabled them to deliver consistent record sales and impressive profits over the year.
• By combining a continued focus on operational efficiency and productivity, PGT Innovations managed to achieve a total revenue of $400 million and an adjusted EBITDA of $78 million in the third quarter.

• Sai Gon Cargo Service (SCS VN) announced an increase in its pricing (details in note) effective April 1st, with a 10% increase across most categories. 
• March cargo numbers showed a substantial 47% YoY increase, as cooperation with Qatar Airways got underway in February. Q1 FY24 numbers were up 34% YoY.
• The stock trades at 12.5x FY24e numbers with an 8% yield, assuming a 20%YoY revenue and profit growth (and a 100% payout), with an upside to these conservative numbers.

• We publish quarterly earnings bridges through 1Q-4Q24 for Air France-KLM, IAG and Lufthansa, which illustrate 1Q will be difficult yoy.
• This renders forward commentary extremely important and summer pricing prospects are encouraging. Delta kicks off airline reporting season globally on 10 April and is likely to set a bullish tone
• However the European low cost carriers easyJet, Ryanair and Wizz Air are seeing greater earnings momentum than the flag carriers given short haul fare strength.

• SiteOne Landscape Supply Inc. ended the year 2023 with notable growth in their 4th quarter, coupled with a modest increase in adjusted EBITDA, an 8% growth in net sales, and a record operating cash flow.
• The company also made 11 acquisitions, adding companies with strong customer relationships while also expanding their product lines.
• However, 2023 presented some challenges including lower market demand, mounting operating costs, gross margin normalization, and commodity price deflation.

• Zongmu Technology (1491595D CH) is looking to raise up to US$150m in its upcoming HK IPO. The deal will be run by Huatai and BNP Paribas.
• Zongmu Technology is a Chinese advanced driver assistance system (ADAS) solutions provider, offering solutions with comprehensive autonomous driving functions. 
• As a Tier 1 supplier, it undertakes software design, hardware design, system design and the integration of these components to develop solutions for mass deployment.