Industrials

• Colour me perplexed. Murakami Group ran up Mitsui Matsushima (1518 JP)‘s share price in acquiring 29%. The pattern was clear, but one assumes everyone in-group was on the same page.
• The earliest buyer was NOMURA Aya. She bought early, slowly, then aggressively, then onshore buyers bought aggressively at higher prices. But she has now sold 6 days straight.
• The pattern is confusing but it will become clearer in coming days.

• There could be 13 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
• If all changes are on expected lines, one-way turnover is estimated at 48.8% and that will result in a one-way trade of INR 35.5bn (US$426m).
• Since January, the potential adds to the index have outperformed the potential deletes by a big margin. Watch out for the general election results on 4 June for momentum change.

• Chilled & Frozen Logistics Holdings (9099 JP) asked AZ-Com Maruwa Holdings (9090 JP) repeatedly to respond to its entreaties, and delay the start of its tender offer until end-May.  
• C&F was running a process and wanted to be transparent. When AZ-Com announced, C&F said “we have counter-bidders” and the stock went up. Then a Nikkei article propelled it higher.
• AZ-Com then asked, twice, for clarity from C&F, saying investors deserved more information. The shoe was on the other foot. Now C&F has responded. Again. 

• Impending block deals which generally create supply over-hang on the stock leads to a negative impact on the stock
• These block deals generally include selling promoters and big funds at a price discount to its current market price
• Historically, such events suggest once the block deal is done; stock reacts positively creating a Special Situation Opportunity

• On 29 May, the last day of the extended PUSU deadline, Royal Mail owner International Distributions Services (IDS LN) agreed to a £3,568 million takeover offer (73% premium) from EP Group.
• The IDS board has obtained legally binding guarantees to safeguard customers, employees, and stakeholders, including support from Labour Party (likely winner of next UK general elections).
• Investors remain uncertain about the deal’s success, given a gross spread of 9.46%, although much of this may be attributed to the anticipated delay in receiving funds. Long at 335p.

• Our bullish outlook (since early-November 2023) remains intact. Few things are more bullish than indexes (SPX, NDX) breaking out to all-time highs following a major correction we had in 2022
• Last week (5/21/24) we discussed how it is a very bullish sign that there have been three upside gaps in May on the S&P 500, with all gaps left unfilled.
• Important short-term gap supports we are watching on SPX include 5250-5263, 5127-5142, and 5073-5101; so far 5250-5263 support has held. Also downgrading Industrials (XLI) to market weight

Electro Optic Systems (EOS) is a specialist defence company leveraging its optic technology within specific military applications, primarily remote weapons systems and maritime communications. It is benefiting from growth in global defence spend and, with its latest Counter-Uncrewed Aerial Systems (C-UAS) capabilities, an increase in drone warfare. A new management team, an improved commercial focus and a broadening product portfolio should assist in winning a greater share of these markets, driving growth and profitability.

• We are reiterating our Buy rating, projections and price target for urban-gro after meeting with management at their Centennial, CO headquarters.
• After a period where the company has repositioned the business model around the commercial real estate space, urban-gro is optimistic on the prospects for a return to growth for Controlled Environment Agriculture (“CEA”), driven by the pending reclassification of cannabis by the Drug Enforcement Administration and the potential for Florida to legalize recreational cannabis in November.
• Further, management is breaking down silos between functions to be able to offer more services and register stronger overall returns.

• Colour me perplexed. Murakami Group ran up Mitsui Matsushima (1518 JP)‘s share price in acquiring 29%. The pattern was clear, but one assumes everyone in-group was on the same page.
• The earliest buyer was NOMURA Aya. She bought early, slowly, then aggressively, then onshore buyers bought aggressively at higher prices. But she has now sold 6 days straight.
• The pattern is confusing but it will become clearer in coming days.

• There could be 13 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
• If all changes are on expected lines, one-way turnover is estimated at 48.8% and that will result in a one-way trade of INR 35.5bn (US$426m).
• Since January, the potential adds to the index have outperformed the potential deletes by a big margin. Watch out for the general election results on 4 June for momentum change.

• Chilled & Frozen Logistics Holdings (9099 JP) asked AZ-Com Maruwa Holdings (9090 JP) repeatedly to respond to its entreaties, and delay the start of its tender offer until end-May.  
• C&F was running a process and wanted to be transparent. When AZ-Com announced, C&F said “we have counter-bidders” and the stock went up. Then a Nikkei article propelled it higher.
• AZ-Com then asked, twice, for clarity from C&F, saying investors deserved more information. The shoe was on the other foot. Now C&F has responded. Again. 

• Impending block deals which generally create supply over-hang on the stock leads to a negative impact on the stock
• These block deals generally include selling promoters and big funds at a price discount to its current market price
• Historically, such events suggest once the block deal is done; stock reacts positively creating a Special Situation Opportunity

• On 29 May, the last day of the extended PUSU deadline, Royal Mail owner International Distributions Services (IDS LN) agreed to a £3,568 million takeover offer (73% premium) from EP Group.
• The IDS board has obtained legally binding guarantees to safeguard customers, employees, and stakeholders, including support from Labour Party (likely winner of next UK general elections).
• Investors remain uncertain about the deal’s success, given a gross spread of 9.46%, although much of this may be attributed to the anticipated delay in receiving funds. Long at 335p.

• Our bullish outlook (since early-November 2023) remains intact. Few things are more bullish than indexes (SPX, NDX) breaking out to all-time highs following a major correction we had in 2022
• Last week (5/21/24) we discussed how it is a very bullish sign that there have been three upside gaps in May on the S&P 500, with all gaps left unfilled.
• Important short-term gap supports we are watching on SPX include 5250-5263, 5127-5142, and 5073-5101; so far 5250-5263 support has held. Also downgrading Industrials (XLI) to market weight

Electro Optic Systems (EOS) is a specialist defence company leveraging its optic technology within specific military applications, primarily remote weapons systems and maritime communications. It is benefiting from growth in global defence spend and, with its latest Counter-Uncrewed Aerial Systems (C-UAS) capabilities, an increase in drone warfare. A new management team, an improved commercial focus and a broadening product portfolio should assist in winning a greater share of these markets, driving growth and profitability.

• We are reiterating our Buy rating, projections and price target for urban-gro after meeting with management at their Centennial, CO headquarters.
• After a period where the company has repositioned the business model around the commercial real estate space, urban-gro is optimistic on the prospects for a return to growth for Controlled Environment Agriculture (“CEA”), driven by the pending reclassification of cannabis by the Drug Enforcement Administration and the potential for Florida to legalize recreational cannabis in November.
• Further, management is breaking down silos between functions to be able to offer more services and register stronger overall returns.

• After the market close on 28 May, it was announced that Stonebridge Capital plans to conduct a block deal sale of a portion of its stake in DS Dansuk.
• This deal involves 210,000 to 290,000 shares of DS Dansuk. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount.
• After this second block deal, there will be further overhang concerns about additional sales of DS Dansuk by Stonebridge Capital in the coming months. 

• ENAV’s stock trades at a lower multiple compared to peers in the European airport concession industry
• Shareholder activism could potentially influence board decisions despite majority ownership by the Italian government
• ENAV’s cash flow is expected to improve, offering a potential 15% free cash flow yield by 2025 and presents minimal downside risk with significant upside potential if it trades closer to historical valuation multiples

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.

Norcros is the UK’s leading design-led sustainable kitchen and bathroom products group. Its compelling investment case was highlighted at its May 2024 capital markets day (CMD), where its unique, asset-light, design-led model was clearly illustrated. The CMD also indicated the enormous scale of the opportunity that is available in terms of entering adjacent unaddressed markets in the UK and South Africa, as well as the potential presented by other attractive geographies. Furthermore, revised medium-term targets were introduced that should further excite investors. Our profit forecasts are unchanged, but we have raised our valuation from 246p to 251p as we have rolled forward our P/E valuation and increased our FY25 dividend estimate.

• The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.
• Management now expects FY24 revenue to increase in the mid- to high single digits range from FY23 and for adjusted EBITDA margin to be in line with FY23.
• Management lifted its FY24 free cash flow outlook to ~$200 million from ~$150 million.

• After the market close on 28 May, it was announced that Stonebridge Capital plans to conduct a block deal sale of a portion of its stake in DS Dansuk.
• This deal involves 210,000 to 290,000 shares of DS Dansuk. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount.
• After this second block deal, there will be further overhang concerns about additional sales of DS Dansuk by Stonebridge Capital in the coming months. 

• ENAV’s stock trades at a lower multiple compared to peers in the European airport concession industry
• Shareholder activism could potentially influence board decisions despite majority ownership by the Italian government
• ENAV’s cash flow is expected to improve, offering a potential 15% free cash flow yield by 2025 and presents minimal downside risk with significant upside potential if it trades closer to historical valuation multiples

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.

Norcros is the UK’s leading design-led sustainable kitchen and bathroom products group. Its compelling investment case was highlighted at its May 2024 capital markets day (CMD), where its unique, asset-light, design-led model was clearly illustrated. The CMD also indicated the enormous scale of the opportunity that is available in terms of entering adjacent unaddressed markets in the UK and South Africa, as well as the potential presented by other attractive geographies. Furthermore, revised medium-term targets were introduced that should further excite investors. Our profit forecasts are unchanged, but we have raised our valuation from 246p to 251p as we have rolled forward our P/E valuation and increased our FY25 dividend estimate.

• The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.
• Management now expects FY24 revenue to increase in the mid- to high single digits range from FY23 and for adjusted EBITDA margin to be in line with FY23.
• Management lifted its FY24 free cash flow outlook to ~$200 million from ~$150 million.

• In this insight, we take a look at our final expectations for ADDs/DELs for the T50 and T100 indices for the June 2024 index rebal event.
• Today is the base date for the T50/100 June 2024 index review and there are some changes to our expectations since my last insight roughly a month ago.
• We see one change for the T50 index and three changes for the T100 index.

• An overlooked old economy sector in Asia ripe for a comeback
• Industry dynamics will provide  a long-term tailwind for the company
• Opportunity created by  deletion from an index and corporate restructuring

• Deere & Co.’s Q2 results revealed a decline in net sales and revenues with a noticeable impact from more challenging market conditions, particularly in the agriculture sector.
• Net sales have gone down by 15% to $13.61 billion while net income attributable to the company reached $2.37 billion or $8.53 per diluted share.
• Breaking it down by business segments, the Production and Precision Ag business reported net sales of $6.581 billion, a decline of 16% compared to the same period last year.

• Grab, a Singapore-based technology company offering ride-hailing transport, food delivery, and payment solutions, leveraged its vast user base of more than 2 million drivers and 63 million downloads in the fourth quarter of 2021.
• Its financial performance for the first quarter of 2024 shows strong growth in several key areas, such as its delivery and mobility services, its financial services, and its strategic initiatives to sustain and generate growth.
• In the first quarter of 2024, Grab’s revenue grew by 24% year over year and 29% in constant currency terms, reaching $653 million.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• GMR Hyderabad International Airport
• Lippo Karawaci

• Copart, Inc., reported Q3 fiscal 2024 results showing a promising trend in the total loss frequency rate, driven by a decrease in used vehicle prices and an increase in repair costs.
• This rate reverted to pre-pandemic levels during Q3 as used vehicle prices fell by 14% YoY, while repair costs remained high due to labor challenges and the complexity of vehicle repairs.
• The company’s Insurance business has grown its volume by 6.8% YoY, as the frequency and magnitude of storm-related activity have increased.

• RaaS has published an update report on IP services group QANTM Intellectual Property (ASX:QIP) following its update on earnings guidance, incorporating the impact of transaction costs on reported EPS in FY24.
• QIP said that as a result of transaction costs it expects to incur up to 30 June in relation to the Scheme of Arrangement with Adamantem Capital, FY24 EPS is now expected to be from $0.075 to $0.08/share.
• The company also provided a new underlying EBITDA range of $33.0m to $33.5m, noting there has been no material change to underlying trading conditions.

• In this insight, we take a look at our final expectations for ADDs/DELs for the T50 and T100 indices for the June 2024 index rebal event.
• Today is the base date for the T50/100 June 2024 index review and there are some changes to our expectations since my last insight roughly a month ago.
• We see one change for the T50 index and three changes for the T100 index.

• An overlooked old economy sector in Asia ripe for a comeback
• Industry dynamics will provide  a long-term tailwind for the company
• Opportunity created by  deletion from an index and corporate restructuring

• Deere & Co.’s Q2 results revealed a decline in net sales and revenues with a noticeable impact from more challenging market conditions, particularly in the agriculture sector.
• Net sales have gone down by 15% to $13.61 billion while net income attributable to the company reached $2.37 billion or $8.53 per diluted share.
• Breaking it down by business segments, the Production and Precision Ag business reported net sales of $6.581 billion, a decline of 16% compared to the same period last year.

• Grab, a Singapore-based technology company offering ride-hailing transport, food delivery, and payment solutions, leveraged its vast user base of more than 2 million drivers and 63 million downloads in the fourth quarter of 2021.
• Its financial performance for the first quarter of 2024 shows strong growth in several key areas, such as its delivery and mobility services, its financial services, and its strategic initiatives to sustain and generate growth.
• In the first quarter of 2024, Grab’s revenue grew by 24% year over year and 29% in constant currency terms, reaching $653 million.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• GMR Hyderabad International Airport
• Lippo Karawaci

• Copart, Inc., reported Q3 fiscal 2024 results showing a promising trend in the total loss frequency rate, driven by a decrease in used vehicle prices and an increase in repair costs.
• This rate reverted to pre-pandemic levels during Q3 as used vehicle prices fell by 14% YoY, while repair costs remained high due to labor challenges and the complexity of vehicle repairs.
• The company’s Insurance business has grown its volume by 6.8% YoY, as the frequency and magnitude of storm-related activity have increased.

• RaaS has published an update report on IP services group QANTM Intellectual Property (ASX:QIP) following its update on earnings guidance, incorporating the impact of transaction costs on reported EPS in FY24.
• QIP said that as a result of transaction costs it expects to incur up to 30 June in relation to the Scheme of Arrangement with Adamantem Capital, FY24 EPS is now expected to be from $0.075 to $0.08/share.
• The company also provided a new underlying EBITDA range of $33.0m to $33.5m, noting there has been no material change to underlying trading conditions.

• Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders. 
• The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies. 
• AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.

• Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
• COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH). 
• There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.

• Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
• Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term. 
• Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.

• 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 0.8bn of A-shares on lower gross volumes. NORTHBOUND bought CATL, China Yangtze Power, and Luxshare. AH Premia bounced, but net volumes are suspect.
• There is some question as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected.

• Our index shows April pricing momentum remained positive in deep-sea trades
• Evergreen Marine posted strong revenue and earnings growth in Q124
• Container carriers have performed well YTD in 2024; we expect convergence

• Pluxee is a spin-off company with a strong business model, offering an attractive investment opportunity.
• The company’s undervalued stock price and potential for growth make it a compelling choice for investors.
• With large insider ownership, new initiatives, and the Bellon family as controlling shareholders, Pluxee is expected to see improvements and long-term success.

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.

• Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders. 
• The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies. 
• AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.

• Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
• COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH). 
• There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.

• Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
• Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term. 
• Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.

• 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 0.8bn of A-shares on lower gross volumes. NORTHBOUND bought CATL, China Yangtze Power, and Luxshare. AH Premia bounced, but net volumes are suspect.
• There is some question as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected.

• Our index shows April pricing momentum remained positive in deep-sea trades
• Evergreen Marine posted strong revenue and earnings growth in Q124
• Container carriers have performed well YTD in 2024; we expect convergence

• Pluxee is a spin-off company with a strong business model, offering an attractive investment opportunity.
• The company’s undervalued stock price and potential for growth make it a compelling choice for investors.
• With large insider ownership, new initiatives, and the Bellon family as controlling shareholders, Pluxee is expected to see improvements and long-term success.

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.

• SharkNinja’s first quarter 2024 earnings revealed a company with strong financial performance, a robust global supply chain, and a commitment to a growth strategy that has yielded positive results.
• In the first quarter, the company saw adjusted net sales increase by 28% and adjusted EBITDA grow by 30%.
• This can be attributed to significant investments in selling and marketing initiatives aimed at expanding the company’s presence in emerging international markets and driving global awareness of their new products.

• Plug Power reported its first quarter 2024 earnings and the quarter was identified as one with key strategic decisions focused on enhancing cash management strategies and intensifying sales growth.
• To reinforce its leadership in the green hydrogen economy, significant strides were made in scaling up operations.
• The company’s production facilities in Georgia and Tennessee were reported to be operating at full capacity, while the commissioning of a new plant in Louisiana was eagerly expected.

• The first quarter 2024 earnings of Trex Company Inc. showed robust financial results surpassing the high-end guidance range.
• This superior performance was attributed to the company’s strong position in the growing outdoor living category, effective organizational execution, and a surge in demand for Trex-branded decking and railing products.
• A shift in the early buy season and product restocking by channel partners ahead of the season resulted in an injection of approximately $75 million incremental sales in the first quarter.

• SharkNinja’s first quarter 2024 earnings revealed a company with strong financial performance, a robust global supply chain, and a commitment to a growth strategy that has yielded positive results.
• In the first quarter, the company saw adjusted net sales increase by 28% and adjusted EBITDA grow by 30%.
• This can be attributed to significant investments in selling and marketing initiatives aimed at expanding the company’s presence in emerging international markets and driving global awareness of their new products.

• Plug Power reported its first quarter 2024 earnings and the quarter was identified as one with key strategic decisions focused on enhancing cash management strategies and intensifying sales growth.
• To reinforce its leadership in the green hydrogen economy, significant strides were made in scaling up operations.
• The company’s production facilities in Georgia and Tennessee were reported to be operating at full capacity, while the commissioning of a new plant in Louisiana was eagerly expected.

• The first quarter 2024 earnings of Trex Company Inc. showed robust financial results surpassing the high-end guidance range.
• This superior performance was attributed to the company’s strong position in the growing outdoor living category, effective organizational execution, and a surge in demand for Trex-branded decking and railing products.
• A shift in the early buy season and product restocking by channel partners ahead of the season resulted in an injection of approximately $75 million incremental sales in the first quarter.