Industrials

DNOW’s FY23 financial results benefited from the initiatives management put in place several years ago to position the company as a strategic supply chain partner for its vendors and customers.
FY23 revenue increased 9% Y/Y, including +20% and +11% gains in its drilling and production and fittings and flanges product lines.
Capital spending cycles across all segments of the energy industry drive the majority of DNOW’s revenue.

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Apr 04

Daily Brief Industrials: HD Hyundai Marine Solution , NOW Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
DNOW, Inc. – Customer-Driven Model Drives Market Share Gains

HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting

By Ethan Aw

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m 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 note, we talked about the company’s historical performance. In this note, we talk about peer comparison.

DNOW, Inc. – Customer-Driven Model Drives Market Share Gains

DNOW’s FY23 financial results benefited from the initiatives management put in place several years ago to position the company as a strategic supply chain partner for its vendors and customers.
FY23 revenue increased 9% Y/Y, including +20% and +11% gains in its drilling and production and fittings and flanges product lines.
Capital spending cycles across all segments of the energy industry drive the majority of DNOW’s revenue.

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Apr 03

Daily Brief Industrials: HD Hyundai Marine Solution , Austal Ltd, China Communications Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

HD Hyundai Marine Solutions IPO: Valuation Insights
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter
China Comm Const (1800 HK): A Nice Surprise

HD Hyundai Marine Solutions IPO: Valuation Insights

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.

What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene

By Sanghyun Park

Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.

Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter

By David Blennerhassett

Perth-Based shipbuilder Austal Ltd (ASB AU) has confirmed a A$2.825/share non-binding indicative proposal, by way of a Scheme, from Hanwha Ocean (042660 KS). That’s a 28.4% premium to last close.
Austal designs and builds defence vessels for the Australian and US navies. Austal believes Hanwha is unlikely to secure necessary approvals from the Australian and US governments.
Hanwha considers this view to be baseless, that it is a credible buyer, and its capabilities and investment are aligned with government objectives in Australia, the US and South Korea.

China Comm Const (1800 HK): A Nice Surprise

China Communications Construction (1800 HK) believes its FY24 new contracts and revenue growth can be faster than FY23, particularly fuelled by strategic new industries and overseas.
Its end-FY23 contract backlog of Rmb3.45trn (+1.8% YoY) translates into coverage of 4.1x of FY24F revenue, providing a secured stream of revenue over the next few years.
Its improving cash flow allows for a 1pp increase in the payout ratio. Efforts in realising underlying asset value should narrow its 82% discount to book value.

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Apr 03

Daily Brief Industrials: HD Hyundai Marine Solution , Austal Ltd, China Communications Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

HD Hyundai Marine Solutions IPO: Valuation Insights
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter
China Comm Const (1800 HK): A Nice Surprise

HD Hyundai Marine Solutions IPO: Valuation Insights

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.

What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene

By Sanghyun Park

Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.

Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter

By David Blennerhassett

Perth-Based shipbuilder Austal Ltd (ASB AU) has confirmed a A$2.825/share non-binding indicative proposal, by way of a Scheme, from Hanwha Ocean (042660 KS). That’s a 28.4% premium to last close.
Austal designs and builds defence vessels for the Australian and US navies. Austal believes Hanwha is unlikely to secure necessary approvals from the Australian and US governments.
Hanwha considers this view to be baseless, that it is a credible buyer, and its capabilities and investment are aligned with government objectives in Australia, the US and South Korea.

China Comm Const (1800 HK): A Nice Surprise

China Communications Construction (1800 HK) believes its FY24 new contracts and revenue growth can be faster than FY23, particularly fuelled by strategic new industries and overseas.
Its end-FY23 contract backlog of Rmb3.45trn (+1.8% YoY) translates into coverage of 4.1x of FY24F revenue, providing a secured stream of revenue over the next few years.
Its improving cash flow allows for a 1pp increase in the payout ratio. Efforts in realising underlying asset value should narrow its 82% discount to book value.

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Apr 02

Daily Brief Industrials: HDC Hyundai Development Co-Engineering & Construction, Shenzhen International, Lindbergh SpA, Dongfang Electric, GMS Inc, Griffon Corp, MillerKnoll and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
Shenzhen Intl (152 HK): A Decent Rebound
Portfolio Update: March 2024
Dongfang Electric (1072 HK): Good Profit, Record Orders
GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers
Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts
MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].

Shenzhen Intl (152 HK): A Decent Rebound

Shenzhen International (152 HK) saw its FY23 earnings reaccelerated, supported by gains from the logistics park transformation business. Earnings even surged 169.1% YoY in 2H23.
REIT issuance on two logistics assets, increase in areas of logistics projects, gains from South China Logistics Park transformation, and better Shenzhen Expressway (548 HK) will fuel FY24.
A better debt structure will save finance costs. Its 0.45x P/B, or 1.5SD below the 5-year average, is cheap given its proven ability to realise underlying asset value.

Portfolio Update: March 2024

By Contrarian Cashflows

I recently had a conversation with a close friend and fellow investor, during which he shared his current research interest in the dollar store concept.
He emphasized that this business model aligns with criteria conducive to long-term shareholder returns.
Given the scarce presence of dollar stores in Germany, primarily due to socioeconomic factors, I sought clarification on the underlying concept from him.

Dongfang Electric (1072 HK): Good Profit, Record Orders

Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.

GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers

This is our first report on GMS Inc. Despite facing adverse weather conditions and steel price deflation, GMS reported a growth in net sales and lauded the volume growth across all its major product categories owing to its organic efforts and recent acquisitions.
Still, the company reported a net income of $51.9 million and adjusted EBITDA of $128 million, indicating robust financial performance.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts

This is our first report on Griffon Corporation.
The company’s latest earnings for fiscal 2024’s first quarter showcased a company navigating the complexities of market demands, supply chain logistics, and strategic growth initiatives.
The company reported a commendable start to the fiscal year, marked by a robust free cash flow of $133 million, underscoring its operational efficiency and financial prudence.

MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses

As noted earlier, MillerKnoll’s 3QFY24 EPS beat expectations but revenue missed widely. 4QFY24 guidance was also below pre-report estimates.
With the misses, the stock gapped down by the mid-teens (~$5.00), closing at $24.76, thereby truncating and halting its recent rebound.
Y/Y revenue comparisons were negative in all three segments: Americas Contract (AC) at -9% to $441 million, International Contract & Specialty (IC&S) at -10.4% to $217 million, and Global Retail (GR) at -17% to $214 million.

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✓ Company Data and News
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Apr 02

Daily Brief Industrials: HDC Hyundai Development Co-Engineering & Construction, Shenzhen International, Lindbergh SpA, Dongfang Electric, GMS Inc, Griffon Corp, MillerKnoll and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
Shenzhen Intl (152 HK): A Decent Rebound
Portfolio Update: March 2024
Dongfang Electric (1072 HK): Good Profit, Record Orders
GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers
Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts
MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].

Shenzhen Intl (152 HK): A Decent Rebound

Shenzhen International (152 HK) saw its FY23 earnings reaccelerated, supported by gains from the logistics park transformation business. Earnings even surged 169.1% YoY in 2H23.
REIT issuance on two logistics assets, increase in areas of logistics projects, gains from South China Logistics Park transformation, and better Shenzhen Expressway (548 HK) will fuel FY24.
A better debt structure will save finance costs. Its 0.45x P/B, or 1.5SD below the 5-year average, is cheap given its proven ability to realise underlying asset value.

Portfolio Update: March 2024

By Contrarian Cashflows

I recently had a conversation with a close friend and fellow investor, during which he shared his current research interest in the dollar store concept.
He emphasized that this business model aligns with criteria conducive to long-term shareholder returns.
Given the scarce presence of dollar stores in Germany, primarily due to socioeconomic factors, I sought clarification on the underlying concept from him.

Dongfang Electric (1072 HK): Good Profit, Record Orders

Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.

GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers

This is our first report on GMS Inc. Despite facing adverse weather conditions and steel price deflation, GMS reported a growth in net sales and lauded the volume growth across all its major product categories owing to its organic efforts and recent acquisitions.
Still, the company reported a net income of $51.9 million and adjusted EBITDA of $128 million, indicating robust financial performance.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts

This is our first report on Griffon Corporation.
The company’s latest earnings for fiscal 2024’s first quarter showcased a company navigating the complexities of market demands, supply chain logistics, and strategic growth initiatives.
The company reported a commendable start to the fiscal year, marked by a robust free cash flow of $133 million, underscoring its operational efficiency and financial prudence.

MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses

As noted earlier, MillerKnoll’s 3QFY24 EPS beat expectations but revenue missed widely. 4QFY24 guidance was also below pre-report estimates.
With the misses, the stock gapped down by the mid-teens (~$5.00), closing at $24.76, thereby truncating and halting its recent rebound.
Y/Y revenue comparisons were negative in all three segments: Americas Contract (AC) at -9% to $441 million, International Contract & Specialty (IC&S) at -10.4% to $217 million, and Global Retail (GR) at -17% to $214 million.

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Apr 01

Daily Brief Industrials: Zhuzhou CRRC Times Electric Co., Ltd., HD Hyundai Marine Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide
HD Hyundai Marine Solutions IPO: The Investment Case

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market. 7 recommendations this week.

HD Hyundai Marine Solutions IPO: The Investment Case

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
The international book-building will run from 8 to 22 April, while the domestic book will open from 16 to 22 April. Pricing will be announced on 24 April.
The investment case rests on solid top-line growth, a healthy order book, rising margins, cash generation, and modest leverage.

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Apr 01

Daily Brief Industrials: Zhuzhou CRRC Times Electric Co., Ltd., HD Hyundai Marine Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide
HD Hyundai Marine Solutions IPO: The Investment Case

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market. 7 recommendations this week.

HD Hyundai Marine Solutions IPO: The Investment Case

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
The international book-building will run from 8 to 22 April, while the domestic book will open from 16 to 22 April. Pricing will be announced on 24 April.
The investment case rests on solid top-line growth, a healthy order book, rising margins, cash generation, and modest leverage.

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The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

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✓ Company Data and News
✓ Events & Webinars

Mar 31

Daily Brief Industrials: Samsung C&T, Contemporary Amperex Technology (CATL) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?
Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

On 29 March, it was reported that Lee Seo-Hyun has been appointed as the President of Samsung C&T (028260 KS), returning to the company after more than five years.
Lee Seo-Hyun is the third child of the late Samsung Chairman Lee Kun-Hee. She will be in charge of the overall strategic planning of Samsung C&T.
Many investors will likely to question this move, since they may question her ability to make strategic decisions that are in the best interests of all the minority investors.

Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net BUY RMB 5.4bn of A-shares on decent volume after buying RMB 25bn net the two weeks before.
The volume is still chasing momentum, and dip buying on the buys. Selling dips on losers. CATL the big buy, and less passive-feeling than last week.

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Mar 31

Daily Brief Industrials: Samsung C&T, Contemporary Amperex Technology (CATL) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?
Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

On 29 March, it was reported that Lee Seo-Hyun has been appointed as the President of Samsung C&T (028260 KS), returning to the company after more than five years.
Lee Seo-Hyun is the third child of the late Samsung Chairman Lee Kun-Hee. She will be in charge of the overall strategic planning of Samsung C&T.
Many investors will likely to question this move, since they may question her ability to make strategic decisions that are in the best interests of all the minority investors.

Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic