Industrials

• On April 9, J&T disclosed operating stats from Q124 — a positive surprise
• We welcome the disclosure, but J&T should also explain X-border’s demise
• We believe J&T’s China operation remains far less profitable than its peers’

• Comer Industries, an Italian family-owned company, specializes in producing mission-critical components for agricultural and construction vehicles.

• Operating under an asset-light assembler business model in an industry marked by consolidation and significant barriers to entry, Comer Industries has consistently delivered impressive returns on capital, boasting a ROCE exceeding 20% for the past three years.

• Despite its strong performance, the company’s shares trade at a normalized 12.4% free cash flow yield and a 7.2 EV/EBIT, considerably lower than industry peers.

• Norcros plc is a United Kingdom-based supplier of bathroom and kitchen products.
• The principal activities of the Company and its subsidiaries are the design, manufacture, and distribution of a range of bathroom and kitchen products, mainly in the United Kingdom and South Africa.
• In the United Kingdom, it offers a range of bathroom and kitchen products for domestic and commercial applications.

• Emerson has undergone significant portfolio transformations, reducing from five business lines to two by 2021
• Incoming CEO Lal Karsanbhai announced strategic actions including selling InSinkErator and a majority stake in Climate Tech, while acquiring stakes in AspenTech and National Instruments
• These moves aimed to further position Emerson as a provider of commercial refrigeration systems, consumer controls, software for process industries, and digital test equipment.

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.

• VLRS is Mexico’s largest ultra-low-cost carrier with Indigo Partners as a key shareholder, benefiting from favorable negotiated aircraft pricing with Airbus
• Despite a decline in stock price, the company’s business model and profit profile remain unchanged
• VLRS has faced temporary challenges but is positioned to benefit from a more rational airline market in Mexico following the demise of Interjet

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.

• L&T has expanded its focus to waste and environmental services, as well as facility services
• Despite temporary issues and lack of guidance, L&T remains competitively positioned in the local market
• The company plans to sell its low-margin Facility Services businesses, which could drive value realization and make it an attractive investment opportunity with potential for buyout interest.

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.

• LSI Industries, Inc. (LYTS) provides corporate visual image solutions in various markets through its Lighting and Graphic segments
• The company focuses on maintaining a strong balance sheet and generating sustainable free cash flow to drive up share price
• Management’s dedication to shareholder value makes LSI Industries an attractive investment opportunity with a double-digit FCF yield

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.

• On April 9, J&T disclosed operating stats from Q124 — a positive surprise
• We welcome the disclosure, but J&T should also explain X-border’s demise
• We believe J&T’s China operation remains far less profitable than its peers’

• Comer Industries, an Italian family-owned company, specializes in producing mission-critical components for agricultural and construction vehicles.

• Operating under an asset-light assembler business model in an industry marked by consolidation and significant barriers to entry, Comer Industries has consistently delivered impressive returns on capital, boasting a ROCE exceeding 20% for the past three years.

• Despite its strong performance, the company’s shares trade at a normalized 12.4% free cash flow yield and a 7.2 EV/EBIT, considerably lower than industry peers.

• Norcros plc is a United Kingdom-based supplier of bathroom and kitchen products.
• The principal activities of the Company and its subsidiaries are the design, manufacture, and distribution of a range of bathroom and kitchen products, mainly in the United Kingdom and South Africa.
• In the United Kingdom, it offers a range of bathroom and kitchen products for domestic and commercial applications.

• Emerson has undergone significant portfolio transformations, reducing from five business lines to two by 2021
• Incoming CEO Lal Karsanbhai announced strategic actions including selling InSinkErator and a majority stake in Climate Tech, while acquiring stakes in AspenTech and National Instruments
• These moves aimed to further position Emerson as a provider of commercial refrigeration systems, consumer controls, software for process industries, and digital test equipment.

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.

• VLRS is Mexico’s largest ultra-low-cost carrier with Indigo Partners as a key shareholder, benefiting from favorable negotiated aircraft pricing with Airbus
• Despite a decline in stock price, the company’s business model and profit profile remain unchanged
• VLRS has faced temporary challenges but is positioned to benefit from a more rational airline market in Mexico following the demise of Interjet

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.

• L&T has expanded its focus to waste and environmental services, as well as facility services
• Despite temporary issues and lack of guidance, L&T remains competitively positioned in the local market
• The company plans to sell its low-margin Facility Services businesses, which could drive value realization and make it an attractive investment opportunity with potential for buyout interest.

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.

• LSI Industries, Inc. (LYTS) provides corporate visual image solutions in various markets through its Lighting and Graphic segments
• The company focuses on maintaining a strong balance sheet and generating sustainable free cash flow to drive up share price
• Management’s dedication to shareholder value makes LSI Industries an attractive investment opportunity with a double-digit FCF yield

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.

• On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
• The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
• A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO. 
• On the placement front, there were deals across India, South Korea and Australia.

• Orient Overseas International (316 HK) saw 27.2% QoQ freight rate uptick in 1Q24. This is a positive start and we should not be too concerned about the 12% YoY decline.
• Its overall load factor also expanded 0.9pp YoY in the quarter, and this is the first YoY improvement since 2Q22. A better utilisation level is good for unit costs.
• At end-FY23, net cash equals 62.4% of the share price, dragging ROE to 7.5% for the next three years. But with such solid financials, its 0.7x P/B is not expensive.

• On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
• The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
• A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO. 
• On the placement front, there were deals across India, South Korea and Australia.

• Orient Overseas International (316 HK) saw 27.2% QoQ freight rate uptick in 1Q24. This is a positive start and we should not be too concerned about the 12% YoY decline.
• Its overall load factor also expanded 0.9pp YoY in the quarter, and this is the first YoY improvement since 2Q22. A better utilisation level is good for unit costs.
• At end-FY23, net cash equals 62.4% of the share price, dragging ROE to 7.5% for the next three years. But with such solid financials, its 0.7x P/B is not expensive.

• The Supply/ Demand imbalance in tankers will persist for longer, supporting earnings
• A beneficiary of increased global tensions and higher oil and gas prices
• Proposed Stock option scheme incentives management in the right way

• Nitto Kogyo Corporation (Nitto Kogyo) is a leading manufacturer of distribution boards and panel boards for electrical and telecommunications infrastructure, as well as enclosures that house telecommunications and precision equipment.
• The company has 45 sales offices and nine factories in Japan, including the new Seto Plant, which will begin operating in spring, 2024, and is working to expand its business in ASEAN countries, with overseas production and sales bases in China, Thailand, and Singapore.
• In the renewable energy field, the company is focusing on EMS-related businesses such as solar power generation systems, EV recharging stations, and self-contained industrial solar power storage battery systems.

FY24 trading underpins Norcros’s 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. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares at 246p, implying c 40% upside.

• The Supply/ Demand imbalance in tankers will persist for longer, supporting earnings
• A beneficiary of increased global tensions and higher oil and gas prices
• Proposed Stock option scheme incentives management in the right way

• Nitto Kogyo Corporation (Nitto Kogyo) is a leading manufacturer of distribution boards and panel boards for electrical and telecommunications infrastructure, as well as enclosures that house telecommunications and precision equipment.
• The company has 45 sales offices and nine factories in Japan, including the new Seto Plant, which will begin operating in spring, 2024, and is working to expand its business in ASEAN countries, with overseas production and sales bases in China, Thailand, and Singapore.
• In the renewable energy field, the company is focusing on EMS-related businesses such as solar power generation systems, EV recharging stations, and self-contained industrial solar power storage battery systems.

FY24 trading underpins Norcros’s 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. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares at 246p, implying c 40% upside.

• In this insight, we highlight some of the important industry factors impacting HD Hyundai Marine Solution. 
• Eco-Friendly ships are high-value-added ships that require more parts than conventional ships and are mechanically more complex, so the unit cost of parts is higher than that of conventional ships. 
• Therefore, the ship AM (aftermarket) is a key industry that is expected to benefit from higher customer demand and increase service prices.

• Despite YTD strengths in share price, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is still cheap at 5.7x PER and 0.9x P/B.
• VLCC is forecast to stay undersupplied in FY24 and FY25, supporting the rates and CSET’s profitability. YTD, the VLCC rates have recovered by 19.5%.
• LNG transportation generated 19% of FY23 earnings. With 40 more vessels on order, compared with a current fleet of 43, there is immense upside from this segment.

• Builders FirstSource focuses on value-added and specialty products
• Maintains industry-leading gross margins of 35%
• Expands reach and solidifies position through strategic acquisitions and strong customer base

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.

• Sixt is focused on increasing its market share and expanding into key markets such as Germany and Europe
• The company’s strategy includes focusing on premium vehicles, strong relationships with OEMs, and utilizing franchise operations for global expansion
• The Sixt family’s involvement and significant ownership stake indicate a commitment to the company’s success and continuity in leadership

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.

• Market gaining confidence in DSGR’s management and growth strategy for potential multiple expansion
• Strong acquisition pipeline and track record of successful integrations positioning DSGR for long-term success
• DSGR offers an attractive investment opportunity with potential for significant upside due to recent developments and discounted valuation

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.

• In this insight, we highlight some of the important industry factors impacting HD Hyundai Marine Solution. 
• Eco-Friendly ships are high-value-added ships that require more parts than conventional ships and are mechanically more complex, so the unit cost of parts is higher than that of conventional ships. 
• Therefore, the ship AM (aftermarket) is a key industry that is expected to benefit from higher customer demand and increase service prices.

• Despite YTD strengths in share price, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is still cheap at 5.7x PER and 0.9x P/B.
• VLCC is forecast to stay undersupplied in FY24 and FY25, supporting the rates and CSET’s profitability. YTD, the VLCC rates have recovered by 19.5%.
• LNG transportation generated 19% of FY23 earnings. With 40 more vessels on order, compared with a current fleet of 43, there is immense upside from this segment.

• Builders FirstSource focuses on value-added and specialty products
• Maintains industry-leading gross margins of 35%
• Expands reach and solidifies position through strategic acquisitions and strong customer base

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.

• Sixt is focused on increasing its market share and expanding into key markets such as Germany and Europe
• The company’s strategy includes focusing on premium vehicles, strong relationships with OEMs, and utilizing franchise operations for global expansion
• The Sixt family’s involvement and significant ownership stake indicate a commitment to the company’s success and continuity in leadership

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.

• Market gaining confidence in DSGR’s management and growth strategy for potential multiple expansion
• Strong acquisition pipeline and track record of successful integrations positioning DSGR for long-term success
• DSGR offers an attractive investment opportunity with potential for significant upside due to recent developments and discounted valuation

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.

• The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
• The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
• Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump. 

• BQE will be reporting Q4 & 2023 financial results in ~2 weeks, we are expecting proportional revenue of $4.2M, gross margin of 45%, and adj. EBITDA of $0.6M (14% margin).
• Metals prices have been rising steadily over the last month with copper up 9%.
• BQE’s China JV has leverage to the copper price as it sells recovered metals.

• The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
• The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
• Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump. 

• BQE will be reporting Q4 & 2023 financial results in ~2 weeks, we are expecting proportional revenue of $4.2M, gross margin of 45%, and adj. EBITDA of $0.6M (14% margin).
• Metals prices have been rising steadily over the last month with copper up 9%.
• BQE’s China JV has leverage to the copper price as it sells recovered metals.