Industrials

• On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
• The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
• The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels.  I’d be looking to unwind the stub here. 

• TRYT (9164 JP) was listed on the TSE on 22nd July 2023. The IPO had been a 100% secondary offering. 
• TRYT offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• Coming up for six-month lockup is the sole pre-IPO investor who had sold some of its stake earlier in the IPO.

• Medi Assist Healthcare Services (0886371D IN) is looking to raise around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• In this note, we will look at the firm’s past performance, and share our thoughts on valuation.

Key points (machine generated)

• Ryanair Holdings is the largest and best capitalized airline in Europe with a low-cost business model.
• Despite being in an industry known for destroying capital, Ryanair has been able to achieve attractive returns on capital and successful growth.
• The author believes Ryanair is a profitable investment option, but recommends readers to conduct their own research before making any investment decisions.

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.

• On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
• The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
• The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels.  I’d be looking to unwind the stub here. 

• TRYT (9164 JP) was listed on the TSE on 22nd July 2023. The IPO had been a 100% secondary offering. 
• TRYT offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• Coming up for six-month lockup is the sole pre-IPO investor who had sold some of its stake earlier in the IPO.

• Medi Assist Healthcare Services (0886371D IN) is looking to raise around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• In this note, we will look at the firm’s past performance, and share our thoughts on valuation.

Key points (machine generated)

• Ryanair Holdings is the largest and best capitalized airline in Europe with a low-cost business model.
• Despite being in an industry known for destroying capital, Ryanair has been able to achieve attractive returns on capital and successful growth.
• The author believes Ryanair is a profitable investment option, but recommends readers to conduct their own research before making any investment decisions.

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.

• Spot container rates have surged, owing to conflict near Red Sea / Suez Canal
• On top of higher spot rates, imposition of new fees also boosting carrier revenue
• Evergreen’s average monthly US$ revenue increased from Q123 to Q423

• Spot container rates have surged, owing to conflict near Red Sea / Suez Canal
• On top of higher spot rates, imposition of new fees also boosting carrier revenue
• Evergreen’s average monthly US$ revenue increased from Q123 to Q423

• Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana’s cargo business.
• The EC had set a preliminary decision deadline of 14 February.
• US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.

• Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana’s cargo business.
• The EC had set a preliminary decision deadline of 14 February.
• US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.

• We are most ahead of consensus for IAG in 2024, and recognising Lufthansa’s highest-in-group double-digit capacity growth rate in 2024 may render its earnings most difficult to forecast/vulnerable to disappointment.
• For AF-KLM 2024 seems a crucial year to demonstrate it can grow earnings in more challenging conditions if it is to increase confidence it can reach near-€4bn EBIT by 2028.
• Delta reports 2023 results today, and its outlook commentary will be important to frame 1Q24 prospects on the Transatlantic, which should encourage that 2024 will prove resilient.

Key points (machine generated)

• Arcosa is a high-quality equity investment benefiting from secular trends and government spending, with underappreciated secondary businesses experiencing rapid growth.
• The IRA tax credits are expected to act as a significant catalyst for Arcosa, pushing its numbers higher than anticipated.
• Despite its strong balance sheet, excellent management, and successful capital allocation history, Arcosa has zero hedge fund ownership, making it an attractive opportunity.

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.

• Mexico’s Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.
• However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).
• This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.

• FedEx Corporation delivered disappointing results as the company could not meet Wall Street’s revenue and earnings expectations.
• Despite a 3% decline in total revenue, the enterprise achieved a 17% improvement in adjusted operating income and a 110 basis points expansion in adjusted margin compared to the previous year.
• The Ground segment exhibited outstanding performance with a 57% increase in adjusted operating income and a remarkable 370 basis points expansion in adjusted margin.

• FuelCell Energy, Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• In the recently disclosed fourth quarter and full-year results, the company celebrates substantial progress in major projects, the evolution of solid oxide power generation, and electrolysis hydrogen platforms.
• Collaborating with major corporations, such as ExxonMobil, Toyota, Pfizer, EDF Energy, and IBM, FuelCell has made substantial strides in carbon capture solutions, distributed hydrogen, microgrid development, and innovative collaborations using AI.

• HEICO Corporation delivered an all-around beat in the previous quarter, with operating income and net sales reaching unprecedented heights.
• The fourth quarter of fiscal ’23 witnessed a remarkable 29% surge in consolidated operating income and a 54% increase in net sales compared to the same period in fiscal ’22.
• The Flight Support Group achieved significant net sales of $601.7 million in the fourth quarter of fiscal year ’23, marking a 74% increase from the same period in fiscal year ’22.

• Cintas Corporation delivered a positive result and managed an all-around beat in the last quarter, reaching $2.38 billion compared to the previous year’s $2.1 billion.
• The gross margin for the quarter reached $1.14 billion, marking an 11.6% increase from the previous year.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Plug Power Inc.’s results were a major disappointment as the company failed to meet the revenue and earnings expectations both of Wall Street.
• Difficulties arose due to plant downtimes, notably at the Tennessee facility, causing temporary outages across the hydrogen network.
• Plug Power’s diversified business model is evident, with fourth-quarter revenue from new ventures expected to surpass traditional business revenue.

• Sunrun Inc. delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
• The storage attachment rate surged to over 33% of installations in Q3, a significant rise from 15% at the beginning of the year.
• Despite challenges in the Californian market due to policy changes, Sunrun launched its new add-on storage product for solar clients in California.

• United Rentals, Inc. delivered an all-around beat in the most recent quarterly result, witnessing a substantial 23% year-over-year surge in total revenue, reaching an unprecedented $3.8 billion.
• The company’s Adjusted EBITDA soared by 22%, achieving a third-quarter high of $1.85 billion, resulting in a margin exceeding 49%.
• The strategic addition of personnel is highlighted as a key factor in successfully assimilating companies into United Rentals.

• We are most ahead of consensus for IAG in 2024, and recognising Lufthansa’s highest-in-group double-digit capacity growth rate in 2024 may render its earnings most difficult to forecast/vulnerable to disappointment.
• For AF-KLM 2024 seems a crucial year to demonstrate it can grow earnings in more challenging conditions if it is to increase confidence it can reach near-€4bn EBIT by 2028.
• Delta reports 2023 results today, and its outlook commentary will be important to frame 1Q24 prospects on the Transatlantic, which should encourage that 2024 will prove resilient.

Key points (machine generated)

• Arcosa is a high-quality equity investment benefiting from secular trends and government spending, with underappreciated secondary businesses experiencing rapid growth.
• The IRA tax credits are expected to act as a significant catalyst for Arcosa, pushing its numbers higher than anticipated.
• Despite its strong balance sheet, excellent management, and successful capital allocation history, Arcosa has zero hedge fund ownership, making it an attractive opportunity.

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.

• Mexico’s Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.
• However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).
• This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.

• FedEx Corporation delivered disappointing results as the company could not meet Wall Street’s revenue and earnings expectations.
• Despite a 3% decline in total revenue, the enterprise achieved a 17% improvement in adjusted operating income and a 110 basis points expansion in adjusted margin compared to the previous year.
• The Ground segment exhibited outstanding performance with a 57% increase in adjusted operating income and a remarkable 370 basis points expansion in adjusted margin.

• FuelCell Energy, Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• In the recently disclosed fourth quarter and full-year results, the company celebrates substantial progress in major projects, the evolution of solid oxide power generation, and electrolysis hydrogen platforms.
• Collaborating with major corporations, such as ExxonMobil, Toyota, Pfizer, EDF Energy, and IBM, FuelCell has made substantial strides in carbon capture solutions, distributed hydrogen, microgrid development, and innovative collaborations using AI.

• HEICO Corporation delivered an all-around beat in the previous quarter, with operating income and net sales reaching unprecedented heights.
• The fourth quarter of fiscal ’23 witnessed a remarkable 29% surge in consolidated operating income and a 54% increase in net sales compared to the same period in fiscal ’22.
• The Flight Support Group achieved significant net sales of $601.7 million in the fourth quarter of fiscal year ’23, marking a 74% increase from the same period in fiscal year ’22.

• Cintas Corporation delivered a positive result and managed an all-around beat in the last quarter, reaching $2.38 billion compared to the previous year’s $2.1 billion.
• The gross margin for the quarter reached $1.14 billion, marking an 11.6% increase from the previous year.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Plug Power Inc.’s results were a major disappointment as the company failed to meet the revenue and earnings expectations both of Wall Street.
• Difficulties arose due to plant downtimes, notably at the Tennessee facility, causing temporary outages across the hydrogen network.
• Plug Power’s diversified business model is evident, with fourth-quarter revenue from new ventures expected to surpass traditional business revenue.

• Sunrun Inc. delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
• The storage attachment rate surged to over 33% of installations in Q3, a significant rise from 15% at the beginning of the year.
• Despite challenges in the Californian market due to policy changes, Sunrun launched its new add-on storage product for solar clients in California.

• United Rentals, Inc. delivered an all-around beat in the most recent quarterly result, witnessing a substantial 23% year-over-year surge in total revenue, reaching an unprecedented $3.8 billion.
• The company’s Adjusted EBITDA soared by 22%, achieving a third-quarter high of $1.85 billion, resulting in a margin exceeding 49%.
• The strategic addition of personnel is highlighted as a key factor in successfully assimilating companies into United Rentals.

• Polycab India (POLYCAB IN) is in the limelight on the back of Income Tax investigation carried in December 2023 which revealed several accounted transactions.
• In a circular, it is hinted that the IT department has detected unaccounted cash sales worth INR 10 bn, unaccounted cash payments made by distributors, and some non-genuine expenses.
• However our forensics framework does not hint at any alarming red flags, apart from low FA turnover ratio, stock with third parties and board composition.

• Taiwan High Speed Rail (2633 TT) (THSR) solid traffic growth and high utilization rate are driving strong profits and cashflows which will be mostly paid out as dividends       
• We view THSR as a government-backed perpetual bond masked as equity as it has a minimum profit guarantee, a firm dividend mandate, and impetus to disperse excess cash to shareholders 
• The current yield margin against the 10-year bond is the widest since its IPO and is forecasted to widen further with strong profit growth. Attractive for alternative fixed-income investors 

• I continue to believe events in Ukraine, Israel, and China have broader implications than are appreciated by markets today.
• For now, my takeaways are simple (from most to least confident): own defense stocks and broad reshoring winners, and don’t get caught off-guard by tail events.
• Some notable additions (all long): Chemring (UK-based defense company that Upslope previously owned and re-added), North West Co (Canadian specialty retailer), nVent Electric (electrical connection/protection supplier), and Intel (leading semiconductor device manufacturer). Upslope also exited Man Group (UK-based alt. asset manager).

XP Power closed FY23 with higher-than-expected revenue, benefiting from the delay to relocation of its California facility, which pulled shipments worth c £5m into Q423 and pushed c £12m capex into Q124. Q423 order intake was higher than we forecast, with upside from semiconductor equipment customers partially offset by weaker demand from healthcare and industrial customers. Timing issues and currency resulted in lower-than-expected gearing at end-FY23, although it is expected to rise in H124 before reducing again in H224. Management expects market conditions to improve through 2024, with results weighted to H2. We maintain our forecasts pending FY23 results in March.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors.
• The company is developing an 800+-tonne a year critical metals alloy powder manufacturing facility in Tennessee, USA, with the initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry, strategic metals and satellites.
• The company is moving apace with its planned commercialisation, recently announcing it had secured A$7.5m in corporate financing and that it had executed a binding purchase order for its second gas atomiser, the next generation Electrode Induction Melting Inert Gas Atomiser (or EIGA premium). 

• Polycab India (POLYCAB IN) is in the limelight on the back of Income Tax investigation carried in December 2023 which revealed several accounted transactions.
• In a circular, it is hinted that the IT department has detected unaccounted cash sales worth INR 10 bn, unaccounted cash payments made by distributors, and some non-genuine expenses.
• However our forensics framework does not hint at any alarming red flags, apart from low FA turnover ratio, stock with third parties and board composition.

• Taiwan High Speed Rail (2633 TT) (THSR) solid traffic growth and high utilization rate are driving strong profits and cashflows which will be mostly paid out as dividends       
• We view THSR as a government-backed perpetual bond masked as equity as it has a minimum profit guarantee, a firm dividend mandate, and impetus to disperse excess cash to shareholders 
• The current yield margin against the 10-year bond is the widest since its IPO and is forecasted to widen further with strong profit growth. Attractive for alternative fixed-income investors 

• I continue to believe events in Ukraine, Israel, and China have broader implications than are appreciated by markets today.
• For now, my takeaways are simple (from most to least confident): own defense stocks and broad reshoring winners, and don’t get caught off-guard by tail events.
• Some notable additions (all long): Chemring (UK-based defense company that Upslope previously owned and re-added), North West Co (Canadian specialty retailer), nVent Electric (electrical connection/protection supplier), and Intel (leading semiconductor device manufacturer). Upslope also exited Man Group (UK-based alt. asset manager).

XP Power closed FY23 with higher-than-expected revenue, benefiting from the delay to relocation of its California facility, which pulled shipments worth c £5m into Q423 and pushed c £12m capex into Q124. Q423 order intake was higher than we forecast, with upside from semiconductor equipment customers partially offset by weaker demand from healthcare and industrial customers. Timing issues and currency resulted in lower-than-expected gearing at end-FY23, although it is expected to rise in H124 before reducing again in H224. Management expects market conditions to improve through 2024, with results weighted to H2. We maintain our forecasts pending FY23 results in March.

• Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors.
• The company is developing an 800+-tonne a year critical metals alloy powder manufacturing facility in Tennessee, USA, with the initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry, strategic metals and satellites.
• The company is moving apace with its planned commercialisation, recently announcing it had secured A$7.5m in corporate financing and that it had executed a binding purchase order for its second gas atomiser, the next generation Electrode Induction Melting Inert Gas Atomiser (or EIGA premium).