Industrials

• Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%. 
• The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
• I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

• Four years ago, almost to the day, Bloomberg ran an article, “China Merchants Group Ltd. is exploring taking China Merchants Port Holdings private“. China Merchants Ports (144 HK) popped 23%.
• CMP gave back (most) of that gain a month later. Shares are up just ~10% since. 
• CMP’s implied stub is bouncing around a multi-year low; and the simple ratio (CMP/ Shanghai International Port Group (600018 CH)) is around an all-time low.

• Frontier Management (hereafter referred to as “the company”) is a consulting firm that operates in the three pillars of management consulting, M&A advisory, and business revitalization services, as well as an investment business that began in 2022.
• Founded by Mr. Shoichiro Onishi and Mr. Masahiro Matsuoka, both former employees of the Industrial Revitalization Corporation of Japan, the company has expanded its operations through proactive hiring.
• It is characterized by its lineup of specialists with diverse backgrounds and is able to solve a wide variety of management issues as a one-stop shop. Mr. Matsuoka retired as of the shareholders’ meeting held on March 27, 2024, leaving Mr. Onishi as the sole leader of the company.

• Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO.
• Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
• In this note, we talk about the not-so-positive aspects of the deal.

• Nextracker, Inc. posted strong third-quarter results for the fiscal year 2024.
• The company achieved record revenue, profits and backlog data for the quarter, with year-over-year revenue growth of 38% surpassing $700 million.
• Nextracker’s adjusted EBITDA also increased significantly to $168 million, doubling from the same period in the previous year.

Norcros’s disposal of Johnson Tiles is the latest strategic activity taken by management to better allocate capital to fit with priorities. Last year it closed its UK adhesives operation. Norcros has a compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. Its rating is low at 6.0x FY24e P/E, which is attractive, especially when compared to its yield of 5.4% on its well-covered dividend. We retain our estimates and value the shares at 246p, implying c 30% upside.

• Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%. 
• The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
• I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

• Four years ago, almost to the day, Bloomberg ran an article, “China Merchants Group Ltd. is exploring taking China Merchants Port Holdings private“. China Merchants Ports (144 HK) popped 23%.
• CMP gave back (most) of that gain a month later. Shares are up just ~10% since. 
• CMP’s implied stub is bouncing around a multi-year low; and the simple ratio (CMP/ Shanghai International Port Group (600018 CH)) is around an all-time low.

• Frontier Management (hereafter referred to as “the company”) is a consulting firm that operates in the three pillars of management consulting, M&A advisory, and business revitalization services, as well as an investment business that began in 2022.
• Founded by Mr. Shoichiro Onishi and Mr. Masahiro Matsuoka, both former employees of the Industrial Revitalization Corporation of Japan, the company has expanded its operations through proactive hiring.
• It is characterized by its lineup of specialists with diverse backgrounds and is able to solve a wide variety of management issues as a one-stop shop. Mr. Matsuoka retired as of the shareholders’ meeting held on March 27, 2024, leaving Mr. Onishi as the sole leader of the company.

• Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO.
• Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
• In this note, we talk about the not-so-positive aspects of the deal.

• Nextracker, Inc. posted strong third-quarter results for the fiscal year 2024.
• The company achieved record revenue, profits and backlog data for the quarter, with year-over-year revenue growth of 38% surpassing $700 million.
• Nextracker’s adjusted EBITDA also increased significantly to $168 million, doubling from the same period in the previous year.

Norcros’s disposal of Johnson Tiles is the latest strategic activity taken by management to better allocate capital to fit with priorities. Last year it closed its UK adhesives operation. Norcros has a compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. Its rating is low at 6.0x FY24e P/E, which is attractive, especially when compared to its yield of 5.4% on its well-covered dividend. We retain our estimates and value the shares at 246p, implying c 30% upside.

• HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range. 
• A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
• Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• Fanuc reported a -7% decline in revenue for FY3/24 and 26% decline in operating profit. 
• The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low
• The valuation of 30x EV / EBIT suggests the market was hoping for a turnaround in profits this year. That recovery has now been pushed back

• In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the June 2024 index rebal event.
• I see two regular changes for the F100 index during the June 2024 review. There are more names very close to triggering F100 index changes.
• I see eight other changes for F250 in the run up to the June 2024 review including three intra-review changes. One of those intra-review changes will be confirmed later today.

• Although the 1Q24 revenue of CIMC Enric Holdings (3899 HK) has edged down by 6.8%, this is not a concern as its order backlog suggested a resilient pipeline.
• New orders signed increased by 35.7% with that for clean energy surged 100.2%. Order backlog of Rmb26.9bn represents a growth of 41.9% YoY and 17.8% against end-FY23.
• Management also commented that there is a marked improvement in gross margin for 1Q24 and expects this trend to continue. Its 10.8x PER is inexpensive.

• Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO. 
• Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
• In this note, we talk about the positive aspects of the deal. 

• HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range. 
• A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
• Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• Fanuc reported a -7% decline in revenue for FY3/24 and 26% decline in operating profit. 
• The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low
• The valuation of 30x EV / EBIT suggests the market was hoping for a turnaround in profits this year. That recovery has now been pushed back

• In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the June 2024 index rebal event.
• I see two regular changes for the F100 index during the June 2024 review. There are more names very close to triggering F100 index changes.
• I see eight other changes for F250 in the run up to the June 2024 review including three intra-review changes. One of those intra-review changes will be confirmed later today.

• Although the 1Q24 revenue of CIMC Enric Holdings (3899 HK) has edged down by 6.8%, this is not a concern as its order backlog suggested a resilient pipeline.
• New orders signed increased by 35.7% with that for clean energy surged 100.2%. Order backlog of Rmb26.9bn represents a growth of 41.9% YoY and 17.8% against end-FY23.
• Management also commented that there is a marked improvement in gross margin for 1Q24 and expects this trend to continue. Its 10.8x PER is inexpensive.

• Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO. 
• Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
• In this note, we talk about the positive aspects of the deal. 

• Pasona (2168.JP) is a long investment opportunity due to its ownership of a majority stake in Benefit One (2412.JP), which is the subject of a bidding war between M3 (2413.JP) and Dai-Ichi Life (8750.JP).
• Potential bids for Benefit One could result in a significant cash windfall for Pasona, estimated at around 50% more than its current enterprise value, as well as an operating business valued at an additional 50% of its current EV.
• With the founder of Pasona being 71 years old, the bidding war could lead to a management buy-out or a substantial return of capital program for the company.

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.

• Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
• A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
• The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

• Nidec reported a solid set of quarterly numbers, except for another huge structural loss in its EV business. 
• Nidec saw sales growth and operating profitability improvements in all other segments
• We continue to think that Nidec is attractively priced at under 20x EV/ EBIT given structural growth drivers

• Until the “parent-subsidiary (affiliate) listing” is resolved, the value of parent company isn’t  usually reflected. If Keisei has some business interest in holding OLC shares, it’s responsible for explaining it.
• If OLC shares were mostly sold, there’d be nothing left for Keisei, which couldn’t find strategy for using cash, so the decision of not losing the growing affiliate isn’t bad.
• This small sale is to buy time until a clear growth strategy is found, but once the ratio of foreign shareholders exceeds 1/3, building time will likely become more difficult.

• Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
• Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
• Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. 

• We are reiterating our Buy rating, $8 price target and projections for urban-gro with the company reporting 1Q24 (March) results after the close on Tuesday.
• We believe, given the timing of the initial guidance (March 28th), management will achieve 1Q results and reiterate initial 2024 guidance of revenue over $84 million and positive Adjusted EBITDA. Further we expect continued positives in terms of backlog and the potential for closed environment agriculture (“CEA”) to eventually shift into a positive driver.
• Given prior quarterly misses, we believe “making” guidance will be considered a positive by investors, and we look forward to urban-gro hopefully moving on the offensive later in 2024 as their integrated business model captures further cannabis and non-cannabis market share.

• Pasona (2168.JP) is a long investment opportunity due to its ownership of a majority stake in Benefit One (2412.JP), which is the subject of a bidding war between M3 (2413.JP) and Dai-Ichi Life (8750.JP).
• Potential bids for Benefit One could result in a significant cash windfall for Pasona, estimated at around 50% more than its current enterprise value, as well as an operating business valued at an additional 50% of its current EV.
• With the founder of Pasona being 71 years old, the bidding war could lead to a management buy-out or a substantial return of capital program for the company.

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.

• Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
• A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
• The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

• Nidec reported a solid set of quarterly numbers, except for another huge structural loss in its EV business. 
• Nidec saw sales growth and operating profitability improvements in all other segments
• We continue to think that Nidec is attractively priced at under 20x EV/ EBIT given structural growth drivers

• Until the “parent-subsidiary (affiliate) listing” is resolved, the value of parent company isn’t  usually reflected. If Keisei has some business interest in holding OLC shares, it’s responsible for explaining it.
• If OLC shares were mostly sold, there’d be nothing left for Keisei, which couldn’t find strategy for using cash, so the decision of not losing the growing affiliate isn’t bad.
• This small sale is to buy time until a clear growth strategy is found, but once the ratio of foreign shareholders exceeds 1/3, building time will likely become more difficult.

• Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
• Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
• Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. 

• We are reiterating our Buy rating, $8 price target and projections for urban-gro with the company reporting 1Q24 (March) results after the close on Tuesday.
• We believe, given the timing of the initial guidance (March 28th), management will achieve 1Q results and reiterate initial 2024 guidance of revenue over $84 million and positive Adjusted EBITDA. Further we expect continued positives in terms of backlog and the potential for closed environment agriculture (“CEA”) to eventually shift into a positive driver.
• Given prior quarterly misses, we believe “making” guidance will be considered a positive by investors, and we look forward to urban-gro hopefully moving on the offensive later in 2024 as their integrated business model captures further cannabis and non-cannabis market share.

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the June 2024 index rebal event.
• According to our estimates, there are currently no expected index changes for the T50 index.
• However, there could be five changes for the T50 and one of the expected DELs  Bizlink Holding (3665 TT) could also be deleted from the TDIV index. 

Ceres Power Holdings’ innovative technology uses electrolysis to produce green hydrogen and solid oxide fuel cells to generate power. In a year where it moved to the Main Market of the London Stock Exchange, it recorded revenue growth of 13% and gross margin expansion to 61% (the highest in the sector, according to management), but is yet to record an operating profit (FY23 operating loss of £59.4m versus £54.0m in FY22). Ceres continued its strategy to drive innovation and technology across solid oxide fuel cells (SOFC) and hydrogen electrolysers (SOEC), increasing its R&D spending by 11% y-o-y to £54m (FY22: £48.5m). Management guides for FY24 revenue to be double that achieved in FY23, based on existing contacts. Net cash, including short term investments, was £140m at the end of FY23.

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the June 2024 index rebal event.
• According to our estimates, there are currently no expected index changes for the T50 index.
• However, there could be five changes for the T50 and one of the expected DELs  Bizlink Holding (3665 TT) could also be deleted from the TDIV index. 

Ceres Power Holdings’ innovative technology uses electrolysis to produce green hydrogen and solid oxide fuel cells to generate power. In a year where it moved to the Main Market of the London Stock Exchange, it recorded revenue growth of 13% and gross margin expansion to 61% (the highest in the sector, according to management), but is yet to record an operating profit (FY23 operating loss of £59.4m versus £54.0m in FY22). Ceres continued its strategy to drive innovation and technology across solid oxide fuel cells (SOFC) and hydrogen electrolysers (SOEC), increasing its R&D spending by 11% y-o-y to £54m (FY22: £48.5m). Management guides for FY24 revenue to be double that achieved in FY23, based on existing contacts. Net cash, including short term investments, was £140m at the end of FY23.

• ASPs remain under pressure as STO, J&T gain volume share in ground segment
• March showed a surprising slowdown in pace of international volume growth
• We believe Q423 and Q124 company-level profitability will mostly disappoint

• ASPs remain under pressure as STO, J&T gain volume share in ground segment
• March showed a surprising slowdown in pace of international volume growth
• We believe Q423 and Q124 company-level profitability will mostly disappoint