Industrials

• Okuma Corp (6103 JP) is flagged as a good candidate to boost its shareholder value, it has a net cash balance sheet, P/BV of 0.9x and low PE of 10.7x  
• Management has elaborated a detailed plan to boost its P/BV ratio, with targets to boost revenues and profit margins, as well as a 35% dedicated payout for dividends 
• Okuma should trade at least 1x Book given its strong business positioning and brand name; we derive a fair value of JPY7,300 (11% UPSIDE) using FY2024’s forecast book value 

• GOL has filed for CH11 in a New York court and will look to restructure, as major competitors/peers LATAM Group, Avianca and Aeromexico did when COVID struck, disadvantaging GOL.
• To illustrate GOL’s disadvantage; in 9M23, GOL’s financing costs outweighed its EBITDAR to drive a negative PBT, whereas LATAM’s PBT represented 29% of EBITDAR, despite lower EBITDAR margins of 22%. 
• Based on recent precedents, we expect the process may take two years.

• EasyJet reported a strong 1Q24 (to December 2023) result, outperforming expectations, while issuing positive guidance on pricing prospects for the rest of winter and summer.
• Pricing for the rest of winter appears benign, but easyJet highlights summer pricing is “well ahead yoy”, calming concerns that pricing strength will roll over.
• Winter losses remain very difficult to manage, with easyJet likely to see a £3-4 per seat drag on pre-pandemic winter EBITDAR generation. Future opportunity and risk.

• Wizz Air held guidance for FY24 to March 2024, or net income of €350m-€400m, but only due to compensation from Pratt & Whitney.
• With no capacity growth in FY25 to March 2025, and costs apparently under control, Wizz Air should be able to drive significant earnings improvements.
• Wizz Air seems set to receive over €200m in P&W compensation for aircraft groundings in 4Q24 to March; read across for other airlines operating grounded GTFs.

• Coverage launch on Frontier Airlines, JetBlue and Spirit Airlines following the rejection of the JetBlue/Spirit deal by the US.
• High leverage and above-sector cost inflation put each carrier in a difficult competitive position, driving the need for significant structural earnings improvements to achieve financial sustainability
• We are 10% above consensus 2024 EBITDAR for Frontier, narrowly above for JetBlue but 17% below consensus for Spirit.

• The industry headwinds TriMas Corp. (TRS) experienced in 2023 are showing signs of abating and should result in TRS growing earnings in 2024
• TRS spent 2023 restructuring its packaging business after customers began to change their ordering habits in 2022.
• Recent quarterly results from Proctor & Gamble (PG) and preliminary sales from Inter Parfums (IPAR) shed positive light on unit volume growth in consumer packaging

Having completed its five-year growth plan a year ahead of schedule, despite the intervening pandemic, GlobalData has now set out its ambitions for the next three years. These build on the group’s strengths in platform and proprietary data across its three segments in healthcare (36% of FY23e revenue), consumer (36%) and tech (28%). M&A is a key element, with the group’s financial strength significantly bolstered by the deal with Inflexion in December, where Inflexion took a 40% stake in GlobalData’s healthcare business at an implied valuation equivalent to c 75% of the group’s then market capitalisation. The share price has yet to reflect the benefits of this deal or the value inherent in the rest of the GlobalData.

• Okuma Corp (6103 JP) is flagged as a good candidate to boost its shareholder value, it has a net cash balance sheet, P/BV of 0.9x and low PE of 10.7x  
• Management has elaborated a detailed plan to boost its P/BV ratio, with targets to boost revenues and profit margins, as well as a 35% dedicated payout for dividends 
• Okuma should trade at least 1x Book given its strong business positioning and brand name; we derive a fair value of JPY7,300 (11% UPSIDE) using FY2024’s forecast book value 

• GOL has filed for CH11 in a New York court and will look to restructure, as major competitors/peers LATAM Group, Avianca and Aeromexico did when COVID struck, disadvantaging GOL.
• To illustrate GOL’s disadvantage; in 9M23, GOL’s financing costs outweighed its EBITDAR to drive a negative PBT, whereas LATAM’s PBT represented 29% of EBITDAR, despite lower EBITDAR margins of 22%. 
• Based on recent precedents, we expect the process may take two years.

• EasyJet reported a strong 1Q24 (to December 2023) result, outperforming expectations, while issuing positive guidance on pricing prospects for the rest of winter and summer.
• Pricing for the rest of winter appears benign, but easyJet highlights summer pricing is “well ahead yoy”, calming concerns that pricing strength will roll over.
• Winter losses remain very difficult to manage, with easyJet likely to see a £3-4 per seat drag on pre-pandemic winter EBITDAR generation. Future opportunity and risk.

• Wizz Air held guidance for FY24 to March 2024, or net income of €350m-€400m, but only due to compensation from Pratt & Whitney.
• With no capacity growth in FY25 to March 2025, and costs apparently under control, Wizz Air should be able to drive significant earnings improvements.
• Wizz Air seems set to receive over €200m in P&W compensation for aircraft groundings in 4Q24 to March; read across for other airlines operating grounded GTFs.

• Coverage launch on Frontier Airlines, JetBlue and Spirit Airlines following the rejection of the JetBlue/Spirit deal by the US.
• High leverage and above-sector cost inflation put each carrier in a difficult competitive position, driving the need for significant structural earnings improvements to achieve financial sustainability
• We are 10% above consensus 2024 EBITDAR for Frontier, narrowly above for JetBlue but 17% below consensus for Spirit.

• The industry headwinds TriMas Corp. (TRS) experienced in 2023 are showing signs of abating and should result in TRS growing earnings in 2024
• TRS spent 2023 restructuring its packaging business after customers began to change their ordering habits in 2022.
• Recent quarterly results from Proctor & Gamble (PG) and preliminary sales from Inter Parfums (IPAR) shed positive light on unit volume growth in consumer packaging

Having completed its five-year growth plan a year ahead of schedule, despite the intervening pandemic, GlobalData has now set out its ambitions for the next three years. These build on the group’s strengths in platform and proprietary data across its three segments in healthcare (36% of FY23e revenue), consumer (36%) and tech (28%). M&A is a key element, with the group’s financial strength significantly bolstered by the deal with Inflexion in December, where Inflexion took a 40% stake in GlobalData’s healthcare business at an implied valuation equivalent to c 75% of the group’s then market capitalisation. The share price has yet to reflect the benefits of this deal or the value inherent in the rest of the GlobalData.

• Consolidated net sales increased by +4.4% YoY to ¥594,026 million
• Operating profit increased by 90% YoY to ¥53,562 million, but were down 3.7% QoQ.
• Full-Year guidance for OP was revised down by 20% to ¥180,000 million. We remain bullish on long-term structural electrification thesis

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.

• Adani Ports & Special Economic Zone

• Apollo has acquired 21.85% of Applus Services SA (APPS SM) from risk arb funds and raised the offer price by 12% to €10.65/share, 9% above I Squared/TDR’s offer.
• The competing consortium should counterbid to stay in the game. My fair value estimate is €10.92. The shares are trading at €10.88 in the hope of a counteroffer.
• If you have not been holding the shares since the outset (I have been positive about the shares since May), I would probably weight the risk/reward before getting involved.

• December was best reading from our momentum tracker since November 2022
• Improvement driven by rising spot rates, new fees, and stronger volume growth
• Even before Red Sea / Suez capacity squeeze, conditions were bottoming

• On 9 January, the Scheme was approved at the Court Meeting, and the resolution to implement it was approved at the GM. Court sanction will take place on 25 January.
• Settlement should take place by 12 February. Several risk arbs have been jumping on this deal, in spite of the low liquidity. 
• A done deal. Gross spread is 0.42%, while the annualised return is 8.81%. Reiterate BUY.

• HEVI announced the addition of Amerit Fleet Solutions as an Authorized Service Provider to support the company’s electric powered heavy industrial equipment.
• Amerit Fleet Solutions, which has more than 800 locations nationwide, joins Mid-Atlantic-focused Quality Truck Center as the second multi- location service company that has partnered with HEVI to support customers with its equipment.
• The addition of another service provider should help boost the growth of HEVI’s products. In addition to expanding awareness of the brand, this should help alleviate any concerns that potential customers might have about supporting and servicing their equipment.

• Consolidated net sales increased by +4.4% YoY to ¥594,026 million
• Operating profit increased by 90% YoY to ¥53,562 million, but were down 3.7% QoQ.
• Full-Year guidance for OP was revised down by 20% to ¥180,000 million. We remain bullish on long-term structural electrification thesis

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.

• Adani Ports & Special Economic Zone

• Apollo has acquired 21.85% of Applus Services SA (APPS SM) from risk arb funds and raised the offer price by 12% to €10.65/share, 9% above I Squared/TDR’s offer.
• The competing consortium should counterbid to stay in the game. My fair value estimate is €10.92. The shares are trading at €10.88 in the hope of a counteroffer.
• If you have not been holding the shares since the outset (I have been positive about the shares since May), I would probably weight the risk/reward before getting involved.

• December was best reading from our momentum tracker since November 2022
• Improvement driven by rising spot rates, new fees, and stronger volume growth
• Even before Red Sea / Suez capacity squeeze, conditions were bottoming

• On 9 January, the Scheme was approved at the Court Meeting, and the resolution to implement it was approved at the GM. Court sanction will take place on 25 January.
• Settlement should take place by 12 February. Several risk arbs have been jumping on this deal, in spite of the low liquidity. 
• A done deal. Gross spread is 0.42%, while the annualised return is 8.81%. Reiterate BUY.

• HEVI announced the addition of Amerit Fleet Solutions as an Authorized Service Provider to support the company’s electric powered heavy industrial equipment.
• Amerit Fleet Solutions, which has more than 800 locations nationwide, joins Mid-Atlantic-focused Quality Truck Center as the second multi- location service company that has partnered with HEVI to support customers with its equipment.
• The addition of another service provider should help boost the growth of HEVI’s products. In addition to expanding awareness of the brand, this should help alleviate any concerns that potential customers might have about supporting and servicing their equipment.

• Recruit’s share price had rallied 38% since November 2023 driven by the stake acquisition by the hedge fund ValueAct despite there being a decline in the company’s earnings.
• Labour markets have further weakened in the December quarter while web traffic on Recruit’s job platforms Indeed and Glassdoor have significantly declined during the quarter.
• Though Recruit Holdings (6098 JP) has guided for a decline in earnings, we think there is further downside to the company’s guidance.

• QANTM Intellectual Property Ltd (ASX:QIP) owns a group of intellectual property (IP) services businesses operating under the independent brands of Davies Collison Cave (DCC), FPA Patent Attorneys, and Sortify.tm.
• It is a major player in the mature and regulated Australian patent, trade marks and IP legal services market, and has a diversified mix of local and foreign clients (~45%/55% split; ~50% US$ revenue).
• The company has provided a trading update that it expects underlying EBITDA (post AASB 16) to be between 8% and 10% higher than the analyst estimate of $31m and that reported EPS will be between 20% and 25% higher than the analyst estimate of $0.081/share. 

• Recruit’s share price had rallied 38% since November 2023 driven by the stake acquisition by the hedge fund ValueAct despite there being a decline in the company’s earnings.
• Labour markets have further weakened in the December quarter while web traffic on Recruit’s job platforms Indeed and Glassdoor have significantly declined during the quarter.
• Though Recruit Holdings (6098 JP) has guided for a decline in earnings, we think there is further downside to the company’s guidance.

• QANTM Intellectual Property Ltd (ASX:QIP) owns a group of intellectual property (IP) services businesses operating under the independent brands of Davies Collison Cave (DCC), FPA Patent Attorneys, and Sortify.tm.
• It is a major player in the mature and regulated Australian patent, trade marks and IP legal services market, and has a diversified mix of local and foreign clients (~45%/55% split; ~50% US$ revenue).
• The company has provided a trading update that it expects underlying EBITDA (post AASB 16) to be between 8% and 10% higher than the analyst estimate of $31m and that reported EPS will be between 20% and 25% higher than the analyst estimate of $0.081/share. 

• Plummeting ASPs likely pushed STO and Yunda OpInc margins below 0% in Q423
• The companies’ operating cash flow may be insufficient to fund needed capex
• Reduced investment could lead to slower growth, consolidation pressure in ’24

• Plummeting ASPs likely pushed STO and Yunda OpInc margins below 0% in Q423
• The companies’ operating cash flow may be insufficient to fund needed capex
• Reduced investment could lead to slower growth, consolidation pressure in ’24

• 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 SELL RMB 23.5bn of A-shares on strong average activity. Big net selling on Weds. National Team stepped in Thurs. NORTHBOUND stepped in to sell Friday.
• Renewables were a bit more mixed this week but still a net sell by NORTHBOUND. It is not clear what stops persistent net selling. 

• With three-quarters of the review period nearly complete, there could be 12 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) in June.
• We estimate one-way turnover of 1.3% at the June rebalance leading to a one-way trade of CNY 5.06bn. There are a lot of stocks with over 1x ADV to trade.
• There have been big ETF inflows to the CSI 300 Index trackers, but the potential adds have still outperformed the index and the potential deletes.

• Medi Assist Healthcare Services (0886371D IN) raised around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• While the 2H23 result of Lonking Holdings (3339 HK) may disappoint due to a plunge in sales volume, it is a yield play given the high historical payout ratio.
• Assuming a DPS of HK$0.10 for FY23-25 as in FY22, yielding 8.3%, the total dividend will amount to Rmb1.2bn. This only equals 22% of its net cash (including short-term investments).
• Its controlling shareholders bought 7.3m shares since 27 Dec, raising the stake by 0.13pp to 56.2%, demonstrating their positive view on the share’s value and long-term outlook. 

• 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 SELL RMB 23.5bn of A-shares on strong average activity. Big net selling on Weds. National Team stepped in Thurs. NORTHBOUND stepped in to sell Friday.
• Renewables were a bit more mixed this week but still a net sell by NORTHBOUND. It is not clear what stops persistent net selling. 

• With three-quarters of the review period nearly complete, there could be 12 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) in June.
• We estimate one-way turnover of 1.3% at the June rebalance leading to a one-way trade of CNY 5.06bn. There are a lot of stocks with over 1x ADV to trade.
• There have been big ETF inflows to the CSI 300 Index trackers, but the potential adds have still outperformed the index and the potential deletes.

• Medi Assist Healthcare Services (0886371D IN) raised around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• While the 2H23 result of Lonking Holdings (3339 HK) may disappoint due to a plunge in sales volume, it is a yield play given the high historical payout ratio.
• Assuming a DPS of HK$0.10 for FY23-25 as in FY22, yielding 8.3%, the total dividend will amount to Rmb1.2bn. This only equals 22% of its net cash (including short-term investments).
• Its controlling shareholders bought 7.3m shares since 27 Dec, raising the stake by 0.13pp to 56.2%, demonstrating their positive view on the share’s value and long-term outlook.