Industrials

• InterGlobe Aviation Ltd (INDIGO IN) (Indigo) has turnaround and is on path to achieve record profits in FY2024 on strong demand, stable FX and lower jet fuel prices 
• However, engine problems will hurt capacity deployment in 4QFY24 and FY2025, and the engine manufacturer has been very vague and unreliable in presenting its remedial plans 
• Share price near all-time high and valuations (PE, EV/EBITDAR) are expensive compared to global LCCs. TP of INR2,513 (14% DOWNSIDE) pegged to 15x FY2025 PE (top-end LCC cycle)  

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – REPT BATTERO Energy (1998104D CH) IPO and Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
• Event-Driven developments – Benefit One Inc (2412 JP), Shinko Electric Industries (6967 JP), Toyo Construction (1890 JP), CPMC Holdings (906 HK), Vinda International (3331 HK), Hollysys Automation Technologies (HOLI US). 

• M3 extends its Tender Offer for Benefit One (2412 JP). M3 can match Dai-Ichi Life proposal, financially, if backed. And Dai Ichi Life Insurance (8750 JP) can probably bump further. 
• Haier Electronics Group Co (1169 HK)‘s CEO and ORG Technology Co., Ltd. A (002701 CH) reckon they can trump SASAC’s Offer for CPMC Holdings (906 HK).
• First City of London Investment Management, then Palliser Capital and now Whitebox, urge Samsung C&T (028260 KS) to improve its cash spending, improve governance and communications and simplify its corporate structure

• InterGlobe Aviation Ltd (INDIGO IN) (Indigo) has turnaround and is on path to achieve record profits in FY2024 on strong demand, stable FX and lower jet fuel prices 
• However, engine problems will hurt capacity deployment in 4QFY24 and FY2025, and the engine manufacturer has been very vague and unreliable in presenting its remedial plans 
• Share price near all-time high and valuations (PE, EV/EBITDAR) are expensive compared to global LCCs. TP of INR2,513 (14% DOWNSIDE) pegged to 15x FY2025 PE (top-end LCC cycle)  

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – REPT BATTERO Energy (1998104D CH) IPO and Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
• Event-Driven developments – Benefit One Inc (2412 JP), Shinko Electric Industries (6967 JP), Toyo Construction (1890 JP), CPMC Holdings (906 HK), Vinda International (3331 HK), Hollysys Automation Technologies (HOLI US). 

• M3 extends its Tender Offer for Benefit One (2412 JP). M3 can match Dai-Ichi Life proposal, financially, if backed. And Dai Ichi Life Insurance (8750 JP) can probably bump further. 
• Haier Electronics Group Co (1169 HK)‘s CEO and ORG Technology Co., Ltd. A (002701 CH) reckon they can trump SASAC’s Offer for CPMC Holdings (906 HK).
• First City of London Investment Management, then Palliser Capital and now Whitebox, urge Samsung C&T (028260 KS) to improve its cash spending, improve governance and communications and simplify its corporate structure

• With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
• Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
• With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

• After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
• With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
• MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

• FedEx Corp (FDX US) (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  
• Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    
• Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx’s historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk 

• With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
• Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
• With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

• After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
• With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
• MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

• FedEx Corp (FDX US) (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  
• Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    
• Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx’s historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk 

• On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
• Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
• In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

• The Toyo Construction (1890 JP) Board has opposed YFO’s potential tender offer price of JPY1,255 per share but has kept the door open for an improved offer. 
• YFO is running out of options as a YFO candidate-heavy special committee opposed its proposal, and the share price is trading through terms. 
• YFO has three options: a hostile offer at an unchanged price, an improved price, or exit its position. Each option has issues suggesting a lack of short-term share price support.  

• INOX India Limited (INOX IN) is looking to raise up to US$175m in its Indian IPO.
• Inox India is a manufacturer of cryogenic equipment. As per CRISIL, the firm was the largest Indian exporter of cryogenic tanks in terms of FY23 sales.
• In our previous note, we looked at the company’s background. In this note, we talk about the company’s performance and share our quick thoughts on valuation.

Severfield’s H124 results highlighted profit growth despite declining revenue, and management continues to expect full-year results to be in line with previous guidance. The total order book has also remained at elevated levels despite the loss of a large studio contract, highlighting the quality of future work in the UK and Europe, and that it is a key indicator of future earnings visibility. The FY24e P/E rating of 7.0x is comfortably below the long-term average of c 10x, implying some risk is discounted in the rating. The stock yields nearly 6%, which is an added attraction.

• On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
• Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
• In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

• The Toyo Construction (1890 JP) Board has opposed YFO’s potential tender offer price of JPY1,255 per share but has kept the door open for an improved offer. 
• YFO is running out of options as a YFO candidate-heavy special committee opposed its proposal, and the share price is trading through terms. 
• YFO has three options: a hostile offer at an unchanged price, an improved price, or exit its position. Each option has issues suggesting a lack of short-term share price support.  

• INOX India Limited (INOX IN) is looking to raise up to US$175m in its Indian IPO.
• Inox India is a manufacturer of cryogenic equipment. As per CRISIL, the firm was the largest Indian exporter of cryogenic tanks in terms of FY23 sales.
• In our previous note, we looked at the company’s background. In this note, we talk about the company’s performance and share our quick thoughts on valuation.

Severfield’s H124 results highlighted profit growth despite declining revenue, and management continues to expect full-year results to be in line with previous guidance. The total order book has also remained at elevated levels despite the loss of a large studio contract, highlighting the quality of future work in the UK and Europe, and that it is a key indicator of future earnings visibility. The FY24e P/E rating of 7.0x is comfortably below the long-term average of c 10x, implying some risk is discounted in the rating. The stock yields nearly 6%, which is an added attraction.

• Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)). 
• It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. 
• Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

• DS Dansuk reported solid bookbuilding results. DS Dansuk IPO price has been determined at 100,000 won per share, which is 12.4% higher than high end of the IPO price range.
• A total of 1,843 institutional investors participated in this IPO book building. The demand ratio was 342 to 1. DS Dansuk IPO will start trading on 22 December.
• Given the strong IPO bookbuilding results, we believe shares of DS Dansuk are likely to trade above the high end of the IPO sensitivity analysis (137,877 won). 

• AKR Corporindo (AKRA IJ) recently hosted an analyst meeting where it provided some positive guidance for FY2024, with projections of double digit net profit growth with growth across all segments.
• The core trading and distribution business is expected to see positive growth in 2024 with  the real kicker to come from its JIIPE industrial Estate plus recurrent income from utilities.
• AKR Corporindo (AKRA IJ) is an increasingly holistic play on Indonesia’s growth through its fuel and chemical distribution, which is being hosted by smelters and the EV battery complex.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

• JWD Acquisition: Infroneer acquires Japan Wind Development for ¥200 billion, sparking a ¥75 billion market cap dip and concerns about potential overpayment.
• Valuation Analysis: Using DCF and comparable transaction values, estimates suggest JWD’s equity value may be far lower than the agreed-upon ¥200 billion.
• Need for Transparency: Infroneer’s claim of fair value requires scrutiny. Market suggests an estimated fair value of ¥125 billion, emphasizing the need for detailed information on the acquisition.

Elior’s turnround is gathering pace with a near doubling of target recurring annual EBITDA synergies (€56m vs €30m) by 2026 following its April 2023 integration with Derichebourg (DMS). Also, with deleveraging the priority, net debt/EBITDA is expected by management to fall from 5.4x in FY23 to 4x in the current year and below 3x in FY26. Current momentum in terms of pricing, cost control, cross-selling and voluntary contract exits as well as an easing of inflationary pressures look to justify this confidence, with FY24 guidance of c 2.5% adjusted EBITA margin (up from normalised 1.9%) and organic revenue growth of 4–5% (focus on profit, not volume). Consensus FY24e EV/EBITDA of 5.9x reflects the early stage of recovery and lower guidance for H223 rather than potential upside from a turnround.

• Positive dynamic changes being executed – Q1-2 FY3/2024 results were in line with upwardly revised company guidance and indicated that the company is making steadfast progress in its transformation initiatives via positive capital allocation.
• Investment into Smart Factory via RFID technology is being conducted as planned to drive future cost efficiencies, and the company raised its FY dividend forecast to ¥98 per share (initially forecast at ¥78) highlighting the company’s positive stance on returning cash to shareholders.
• The Food Group business continues to see robust growth at ‘Mister Donut’ restaurant chain, driven by increases in footfall, average spending, and store sales YoY.

• Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)). 
• It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. 
• Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

• DS Dansuk reported solid bookbuilding results. DS Dansuk IPO price has been determined at 100,000 won per share, which is 12.4% higher than high end of the IPO price range.
• A total of 1,843 institutional investors participated in this IPO book building. The demand ratio was 342 to 1. DS Dansuk IPO will start trading on 22 December.
• Given the strong IPO bookbuilding results, we believe shares of DS Dansuk are likely to trade above the high end of the IPO sensitivity analysis (137,877 won). 

• AKR Corporindo (AKRA IJ) recently hosted an analyst meeting where it provided some positive guidance for FY2024, with projections of double digit net profit growth with growth across all segments.
• The core trading and distribution business is expected to see positive growth in 2024 with  the real kicker to come from its JIIPE industrial Estate plus recurrent income from utilities.
• AKR Corporindo (AKRA IJ) is an increasingly holistic play on Indonesia’s growth through its fuel and chemical distribution, which is being hosted by smelters and the EV battery complex.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

• JWD Acquisition: Infroneer acquires Japan Wind Development for ¥200 billion, sparking a ¥75 billion market cap dip and concerns about potential overpayment.
• Valuation Analysis: Using DCF and comparable transaction values, estimates suggest JWD’s equity value may be far lower than the agreed-upon ¥200 billion.
• Need for Transparency: Infroneer’s claim of fair value requires scrutiny. Market suggests an estimated fair value of ¥125 billion, emphasizing the need for detailed information on the acquisition.

Elior’s turnround is gathering pace with a near doubling of target recurring annual EBITDA synergies (€56m vs €30m) by 2026 following its April 2023 integration with Derichebourg (DMS). Also, with deleveraging the priority, net debt/EBITDA is expected by management to fall from 5.4x in FY23 to 4x in the current year and below 3x in FY26. Current momentum in terms of pricing, cost control, cross-selling and voluntary contract exits as well as an easing of inflationary pressures look to justify this confidence, with FY24 guidance of c 2.5% adjusted EBITA margin (up from normalised 1.9%) and organic revenue growth of 4–5% (focus on profit, not volume). Consensus FY24e EV/EBITDA of 5.9x reflects the early stage of recovery and lower guidance for H223 rather than potential upside from a turnround.

• Positive dynamic changes being executed – Q1-2 FY3/2024 results were in line with upwardly revised company guidance and indicated that the company is making steadfast progress in its transformation initiatives via positive capital allocation.
• Investment into Smart Factory via RFID technology is being conducted as planned to drive future cost efficiencies, and the company raised its FY dividend forecast to ¥98 per share (initially forecast at ¥78) highlighting the company’s positive stance on returning cash to shareholders.
• The Food Group business continues to see robust growth at ‘Mister Donut’ restaurant chain, driven by increases in footfall, average spending, and store sales YoY.

• Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
• To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
• This tells us a bunch of things. It is worth thinking about what happened to get here.

• EcoPro Materials and Doosan Robotics, recent IPOs, join the Large category. Their inclusion signals at least two Large stocks, CS Wind Corp and BGF Retail, shifting to Mid.
• There’s a chance three Mid-stocks will transition to Large: Ssangyong Cement, Hyundai Electric, and LOTTE Corp. Conversely, LS Corp, Hotel Shilla, and Kepco E&C will move from Large to Mid.
• With ample time left in the screening period, cautious monitoring is essential. Still, Large→Mid candidates, with a notable gap from the ₩2.95T cutoff, warrant a focus on proactive setups.

• WILL GROUP unveiled its new MTP “WILL-being 2026” this May.
• The aim of the previous MTP “WORK SHIFT Strategy” was to boost profit margins by increasing the weight of high-margin permanent placement and temporary staffing in highly specialized fields, and the Company focused on developing strategic investment domains such as nursing care domain support, support for construction management engineers, and HR support for start-up companies.
• In the previous MTP, although the profit margin improved, Domestic Working Business stagnated. 

• Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
• To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
• This tells us a bunch of things. It is worth thinking about what happened to get here.

• EcoPro Materials and Doosan Robotics, recent IPOs, join the Large category. Their inclusion signals at least two Large stocks, CS Wind Corp and BGF Retail, shifting to Mid.
• There’s a chance three Mid-stocks will transition to Large: Ssangyong Cement, Hyundai Electric, and LOTTE Corp. Conversely, LS Corp, Hotel Shilla, and Kepco E&C will move from Large to Mid.
• With ample time left in the screening period, cautious monitoring is essential. Still, Large→Mid candidates, with a notable gap from the ₩2.95T cutoff, warrant a focus on proactive setups.

• WILL GROUP unveiled its new MTP “WILL-being 2026” this May.
• The aim of the previous MTP “WORK SHIFT Strategy” was to boost profit margins by increasing the weight of high-margin permanent placement and temporary staffing in highly specialized fields, and the Company focused on developing strategic investment domains such as nursing care domain support, support for construction management engineers, and HR support for start-up companies.
• In the previous MTP, although the profit margin improved, Domestic Working Business stagnated.