Industrials

• Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
• Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
• Outsourcing shares are down hard on this. -1.5% as I write. I examine.

• Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed. 
• Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer. 
• Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.

• Stylam Industries (SYIL IN) reported its best-ever EBITDA margin of 22.3% Vs 16.8% due to a raw material price decline. Revenues continued to remain soft, with growth of -8% YoY.
• The company completed its brownfield expansion to increase the plant capacity by 40% and is now embarking on a capacity expansion of 200 crores in FY25, effectively doubling its revenues. 
• Stylam Industries (SYIL IN) trades at 22x/19x FY24e/25e, with a potential for doubling of revenues over the next 3-5 years.

• Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
• Octillion’s main revenue driver has been its EV battery systems with battery cells over the track record period, with a healthy balance sheet to support its cash burn. 
• However, its revenue growth fell off a cliff in 1H23 due to its heavy reliance on a single customer, which doesn’t appear sustainable, in our view.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Selecta’s ESG as “Adequate”, in line with the Environmental and Governance scores, while the Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Selecta claims to be the leader in the European vending machine market. The company operates vending and coffee machines in workplaces, public areas (e.g. hospitals, universities, train stations, airports and petrol stations) and entertainment venues.

• Large-Cap indexes (S&P 500, Nasdaq 100) remain bullish, finding support at their respective 20-day MAs since November 2023, and we remain bullish
• The question is whether that will continue to be the case. Concerns are rising Treasury yields and the U.S. dollar (DXY), which have broken above short-term resistance levels on Feb13
• Friday’s PPI report should provide more clarity as to how concerned we should be about rising inflation

• Q1 FY9/24 results were at a record high for the company for a first quarter period, with the company benefitting from stronger-than-expected demand from the auto sector, together with a forex tailwind from a weak Japanese yen benefitting the Overseas Subsidiaries segment; this business saw a major uplift in profitability YoY with positive trading conditions in the Americas and Thailand for exported Japanese goods.
• Demand also remained firm in the company’s specialist areas of expertise such as bio-related and feed-related areas, and geothermal equipment.
• The company has maintained FY9/24 guidance, which indicates some expectations of auto demand normalizing from pronounced levels in Q1 FY9/24.

• Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
• Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
• Outsourcing shares are down hard on this. -1.5% as I write. I examine.

• Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed. 
• Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer. 
• Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.

• Stylam Industries (SYIL IN) reported its best-ever EBITDA margin of 22.3% Vs 16.8% due to a raw material price decline. Revenues continued to remain soft, with growth of -8% YoY.
• The company completed its brownfield expansion to increase the plant capacity by 40% and is now embarking on a capacity expansion of 200 crores in FY25, effectively doubling its revenues. 
• Stylam Industries (SYIL IN) trades at 22x/19x FY24e/25e, with a potential for doubling of revenues over the next 3-5 years.

• Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
• Octillion’s main revenue driver has been its EV battery systems with battery cells over the track record period, with a healthy balance sheet to support its cash burn. 
• However, its revenue growth fell off a cliff in 1H23 due to its heavy reliance on a single customer, which doesn’t appear sustainable, in our view.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Selecta’s ESG as “Adequate”, in line with the Environmental and Governance scores, while the Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Selecta claims to be the leader in the European vending machine market. The company operates vending and coffee machines in workplaces, public areas (e.g. hospitals, universities, train stations, airports and petrol stations) and entertainment venues.

• Large-Cap indexes (S&P 500, Nasdaq 100) remain bullish, finding support at their respective 20-day MAs since November 2023, and we remain bullish
• The question is whether that will continue to be the case. Concerns are rising Treasury yields and the U.S. dollar (DXY), which have broken above short-term resistance levels on Feb13
• Friday’s PPI report should provide more clarity as to how concerned we should be about rising inflation

• Q1 FY9/24 results were at a record high for the company for a first quarter period, with the company benefitting from stronger-than-expected demand from the auto sector, together with a forex tailwind from a weak Japanese yen benefitting the Overseas Subsidiaries segment; this business saw a major uplift in profitability YoY with positive trading conditions in the Americas and Thailand for exported Japanese goods.
• Demand also remained firm in the company’s specialist areas of expertise such as bio-related and feed-related areas, and geothermal equipment.
• The company has maintained FY9/24 guidance, which indicates some expectations of auto demand normalizing from pronounced levels in Q1 FY9/24.

• At the last close, GMR Airports Infrastructure (GMRI IN) has a market cap of US$6.23bn and a free float market cap of US$2.48bn.
• Passive global trackers are estimated to need to buy 223.33m shares (US$230m; 4.4x ADV) of GMR Airports Infrastructure (GMRI IN) at the close on 29 February.
• GQG Partners (GQG AU) has been a big buyer since December and holds 4.98% of the company. The stock could run up for a few more weeks.

Key points (machine generated)

• Vestis is in a favorable position to capitalize on the growth opportunities in the uniform rental and workplace supplies industry.
• The company has implemented operational improvements and expanded its salesforce, which will likely lead to improved margins.
• With a new Board of Directors and a refreshed management team, Vestis is expected to catch up with its competitors in terms of growth and profitability. The analysts project a 30% internal rate of return and a target price of $39/share by the end of 2025.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• At the last close, GMR Airports Infrastructure (GMRI IN) has a market cap of US$6.23bn and a free float market cap of US$2.48bn.
• Passive global trackers are estimated to need to buy 223.33m shares (US$230m; 4.4x ADV) of GMR Airports Infrastructure (GMRI IN) at the close on 29 February.
• GQG Partners (GQG AU) has been a big buyer since December and holds 4.98% of the company. The stock could run up for a few more weeks.

Key points (machine generated)

• Vestis is in a favorable position to capitalize on the growth opportunities in the uniform rental and workplace supplies industry.
• The company has implemented operational improvements and expanded its salesforce, which will likely lead to improved margins.
• With a new Board of Directors and a refreshed management team, Vestis is expected to catch up with its competitors in terms of growth and profitability. The analysts project a 30% internal rate of return and a target price of $39/share by the end of 2025.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year. 
• At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024. 
• Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average. 

• Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.
• Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.
• The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on Recruit Holdings (6098 JP) ’s earnings in the near term.

• Q423 earnings fell sharply, but were sufficient to hit FY23 guidance
• FY24 guidance also lower, but allows for a very wide range of outcomes
• Management raised concerns about Red Sea impact, L-T excess supply issues

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product replacements, should bolster its medium-term target for ROIC to exceed 17%, which would surpass the average of UK defence peers.

• W.W. Grainger had a robust fourth quarter and full year for 2023, securing record sales and earnings for the year.
• The firm’s strategic focus on delivering optimum customer experience and service played a substantial role in this success.
• Grainger invested heavily in technology and supply chain enhancements to support its operations, particularly in its High-Touch Solutions model, which has seen a significant digital transformation.

• We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year. 
• At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024. 
• Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average. 

• Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.
• Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.
• The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on Recruit Holdings (6098 JP) ’s earnings in the near term.

• Q423 earnings fell sharply, but were sufficient to hit FY23 guidance
• FY24 guidance also lower, but allows for a very wide range of outcomes
• Management raised concerns about Red Sea impact, L-T excess supply issues

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product replacements, should bolster its medium-term target for ROIC to exceed 17%, which would surpass the average of UK defence peers.

• W.W. Grainger had a robust fourth quarter and full year for 2023, securing record sales and earnings for the year.
• The firm’s strategic focus on delivering optimum customer experience and service played a substantial role in this success.
• Grainger invested heavily in technology and supply chain enhancements to support its operations, particularly in its High-Touch Solutions model, which has seen a significant digital transformation.

• On Thursday after the close, an entity tied to Polaris Capital announced an MBO of Welbe Inc (6556 JP). (Note this is Welbe not Welby Inc (4438 JP)). 
• The MBO by Tender Offer is set at ¥1,089/share is at a 29.952% premium to Thursday’s last trade. Coincidentally. It is well below where it traded 3-5 years ago.
• If large domestic financial investors want a bump, we might see some fun, but I expect there is enough ownership willing to tender to get this over the hump.

• Dover Management’s Q4 2023 earnings indicated a generally positive company performance in a challenging market context.
• CEO Richard Tobin and CFO Brad Cerepak conveyed a forward looking stance based on Q4’s market conditions following on from Q3, focusing on maintaining production levels to balance channel inventories.
• 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.

• Stanley Black & Decker Management has expressed an optimistic outlook on their financial performance for the year 2024.
• Despite facing challenging market conditions during 2023, the company demonstrated solid performance, with significant progress in two of their most important focus areas—generating above $850 million free cash flow and the continuous improvement of adjusted gross margin through each quarter.
• 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.

• Trading in the shares of Spanish rolling stock manufacturer Talgo SA (TLGO SM) is suspended pending a possible €5/share takeover offer from Hungarian group Magyar Vagon.
• Stock market performance of Talgo has been lacklustre. Now, at €4.79, the shares are trading above comparables, in line with my fair value estimate (DCF-based) of €4.76/share. 
• Top investors (>45%) seem very willing to cash in and I would imagine that Magyar Vagon has had the time to seek green light assurances from the Spanish Government. Long.

• On Thursday after the close, an entity tied to Polaris Capital announced an MBO of Welbe Inc (6556 JP). (Note this is Welbe not Welby Inc (4438 JP)). 
• The MBO by Tender Offer is set at ¥1,089/share is at a 29.952% premium to Thursday’s last trade. Coincidentally. It is well below where it traded 3-5 years ago.
• If large domestic financial investors want a bump, we might see some fun, but I expect there is enough ownership willing to tender to get this over the hump.

• Dover Management’s Q4 2023 earnings indicated a generally positive company performance in a challenging market context.
• CEO Richard Tobin and CFO Brad Cerepak conveyed a forward looking stance based on Q4’s market conditions following on from Q3, focusing on maintaining production levels to balance channel inventories.
• 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.

• Stanley Black & Decker Management has expressed an optimistic outlook on their financial performance for the year 2024.
• Despite facing challenging market conditions during 2023, the company demonstrated solid performance, with significant progress in two of their most important focus areas—generating above $850 million free cash flow and the continuous improvement of adjusted gross margin through each quarter.
• 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.

• Trading in the shares of Spanish rolling stock manufacturer Talgo SA (TLGO SM) is suspended pending a possible €5/share takeover offer from Hungarian group Magyar Vagon.
• Stock market performance of Talgo has been lacklustre. Now, at €4.79, the shares are trading above comparables, in line with my fair value estimate (DCF-based) of €4.76/share. 
• Top investors (>45%) seem very willing to cash in and I would imagine that Magyar Vagon has had the time to seek green light assurances from the Spanish Government. Long.

• I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals discussed this week on Smartkarma: Red 5 (RED AU)/Silver Lake Resources (SLR AU) merger; Ssangyong Cement Industrial (003410 KS)‘s Tender Offer; and Lawson (2651 JP) Tender Offer.
• Key updates took place on: Symbio (SYM AU), Bwp Trust (BWP AU), Vinda (3331 HK), JSR Corp (4185 JP), Benefit One (2412 JP), Kerry Express Thailand (KEX TB), Hollysys (HOLI US) 

• The fourth quarter 2023 earnings for Honeywell International took place in a dynamic backdrop; the company delivered on its 2023 commitments despite this.
• Honeywell’s Accelerator operating system and differentiated technologies allowed it to meet the full year guidance for organic growth, adjusted earnings per share, and free cash flow.
• As a result of leadership changes, Vimal Kapur, CEO, has been elected to additionally serve as Chairman, starting from June after the current Executive Chairman, Darius Adamczyk, retires.

• With respect to Parker-Hannifin’s latest earnings, a few distinctive factors paint a broad picture of the company’s current status and future prospects.
• With record sales of $4.8 billion in Q2, a 3% progression from the previous year, the company has expressed confidence in sustaining incrementals of over 100% and expanding upon the adjusted segment operating margin which stood at a record 24.5%, marking a 3% increase on a year-to-year basis.
• This strong performance has primarily been driven by their Aerospace Systems, while both Industrial Silos also made valuable contributions.

• C.H. Robinson delivered mixed quarter four results for 2023 with gross profits of $618.6 million, down by 20% YoY due to a difficult freight market according to the company.
• Total revenue was also down to $4.2 billion.
• In terms of productivity initiatives, some improvements were made with a 17% improvement in North American Surface Transportation (NAST) and a 20% improvement in Global Forwarding.

• In the Q4 and full year 2023 earnings call of Fortive Corporation, executives reported that Fortive delivered strong operational performance throughout 2023, displaying consistent performance amid a mixed macroeconomic environment.
• Its adjusted operating margins approached 26%, a record high, pointing to the company’s resilience and successful execution of strategic planning.
• Fortive also saw significant capital deployment across its segments.

• In the Rockwell Automation results, it’s important to start by appreciating that the company registered first quarter growth, even amidst the challenging economic landscape.
• Rockwell Automation registered a 3.6% year-over-year increase in total sales led by North America.
• This performance is attributable partly to the company’s broad business portfolio which has helped spread risk.

• I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals discussed this week on Smartkarma: Red 5 (RED AU)/Silver Lake Resources (SLR AU) merger; Ssangyong Cement Industrial (003410 KS)‘s Tender Offer; and Lawson (2651 JP) Tender Offer.
• Key updates took place on: Symbio (SYM AU), Bwp Trust (BWP AU), Vinda (3331 HK), JSR Corp (4185 JP), Benefit One (2412 JP), Kerry Express Thailand (KEX TB), Hollysys (HOLI US) 

• The fourth quarter 2023 earnings for Honeywell International took place in a dynamic backdrop; the company delivered on its 2023 commitments despite this.
• Honeywell’s Accelerator operating system and differentiated technologies allowed it to meet the full year guidance for organic growth, adjusted earnings per share, and free cash flow.
• As a result of leadership changes, Vimal Kapur, CEO, has been elected to additionally serve as Chairman, starting from June after the current Executive Chairman, Darius Adamczyk, retires.

• With respect to Parker-Hannifin’s latest earnings, a few distinctive factors paint a broad picture of the company’s current status and future prospects.
• With record sales of $4.8 billion in Q2, a 3% progression from the previous year, the company has expressed confidence in sustaining incrementals of over 100% and expanding upon the adjusted segment operating margin which stood at a record 24.5%, marking a 3% increase on a year-to-year basis.
• This strong performance has primarily been driven by their Aerospace Systems, while both Industrial Silos also made valuable contributions.

• C.H. Robinson delivered mixed quarter four results for 2023 with gross profits of $618.6 million, down by 20% YoY due to a difficult freight market according to the company.
• Total revenue was also down to $4.2 billion.
• In terms of productivity initiatives, some improvements were made with a 17% improvement in North American Surface Transportation (NAST) and a 20% improvement in Global Forwarding.

• In the Q4 and full year 2023 earnings call of Fortive Corporation, executives reported that Fortive delivered strong operational performance throughout 2023, displaying consistent performance amid a mixed macroeconomic environment.
• Its adjusted operating margins approached 26%, a record high, pointing to the company’s resilience and successful execution of strategic planning.
• Fortive also saw significant capital deployment across its segments.

• In the Rockwell Automation results, it’s important to start by appreciating that the company registered first quarter growth, even amidst the challenging economic landscape.
• Rockwell Automation registered a 3.6% year-over-year increase in total sales led by North America.
• This performance is attributable partly to the company’s broad business portfolio which has helped spread risk.