Industrials

• Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
• SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
• The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.

• Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
• SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
• The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.

• All positives from management: strong demand, loads and yields strong, cargo improving, costs are high but can cope, big profits coming but have to redeem preference shares  
• The near-term future is a golden runaway for Cathay Pacific. All the parameters are in the right place and we think this will persist until 1H-2024 at the very least 
• Cathay Pacific is a value BUY, our target price of HK$9.90 (+21% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). 

• In Oct 23, Doosan Robotics (454910 KS) raised around US$318m through its Korean IPO, after pricing the IPO at the top end of the range at KRW26,000/share.
• Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
• In this note, we will talk about the company’s past performance and future prospects.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Agung Podomoro Land
2. China Jinmao Holdings
3. Geely Auto
4. First Pacific Co
5. Reliance Industries

and more…

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Modulaire’s ESG as “Adequate”, in line with its Governance score. The Environmental and Social scores are “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Modulaire is a leading pan-European service provider of modular space, remote accommodation and portable storage solutions, with a fleet comprising c. 267 k units.

• All positives from management: strong demand, loads and yields strong, cargo improving, costs are high but can cope, big profits coming but have to redeem preference shares  
• The near-term future is a golden runaway for Cathay Pacific. All the parameters are in the right place and we think this will persist until 1H-2024 at the very least 
• Cathay Pacific is a value BUY, our target price of HK$9.90 (+21% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). 

• In Oct 23, Doosan Robotics (454910 KS) raised around US$318m through its Korean IPO, after pricing the IPO at the top end of the range at KRW26,000/share.
• Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
• In this note, we will talk about the company’s past performance and future prospects.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Agung Podomoro Land
2. China Jinmao Holdings
3. Geely Auto
4. First Pacific Co
5. Reliance Industries

and more…

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Modulaire’s ESG as “Adequate”, in line with its Governance score. The Environmental and Social scores are “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Modulaire is a leading pan-European service provider of modular space, remote accommodation and portable storage solutions, with a fleet comprising c. 267 k units.

• There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
• The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
• HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

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
• Agung Podomoro Land

• LX International announced today that it will not participate in the main bidding to acquire HMM Co.
• This is likely to have a positive impact on LX International’s share price as many investors are relieved that company will not raise excessive amounts of capital to acquire HMM.
• In addition, by not acquiring HMM, LX International has enough financial resources to continue to pay high dividends. 

• BOC Aviation (2588 HK) (BOCA) is the highest-quality aircraft leasing company, with a young asset portfolio, quality clientele, cheapest credit facility, and superb risk management.      
• Outlook is attractive, strong demand and scarce supply ensures high lease rates and profits. Asset disposals have all recorded a healthy surplus, a potential earnings surprise. 
• Our TP of HKD70/share implies 0.94x FY24 (22% UPSIDE) potential 

• Cirrus Aircraft (0153126D US) is looking to raise up to US$200m in its upcoming HK IPO.
• Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
• We had covered the company’s performance in our earlier notes. In this note, we talk about its PHIP updates.

• 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 a 1,000+-tonne-a-year critical metals alloy powder manufacturing facility in Tennessee, USA with its initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry.
• The company has raised A$10m from new and existing institutional and sophisticated shareholders at $0.16/share, representing a 15.8% discount to the last traded price prior to the raise. 

• There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
• The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
• HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

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
• Agung Podomoro Land

• LX International announced today that it will not participate in the main bidding to acquire HMM Co.
• This is likely to have a positive impact on LX International’s share price as many investors are relieved that company will not raise excessive amounts of capital to acquire HMM.
• In addition, by not acquiring HMM, LX International has enough financial resources to continue to pay high dividends. 

• BOC Aviation (2588 HK) (BOCA) is the highest-quality aircraft leasing company, with a young asset portfolio, quality clientele, cheapest credit facility, and superb risk management.      
• Outlook is attractive, strong demand and scarce supply ensures high lease rates and profits. Asset disposals have all recorded a healthy surplus, a potential earnings surprise. 
• Our TP of HKD70/share implies 0.94x FY24 (22% UPSIDE) potential 

• Cirrus Aircraft (0153126D US) is looking to raise up to US$200m in its upcoming HK IPO.
• Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
• We had covered the company’s performance in our earlier notes. In this note, we talk about its PHIP updates.

• 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 a 1,000+-tonne-a-year critical metals alloy powder manufacturing facility in Tennessee, USA with its initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry.
• The company has raised A$10m from new and existing institutional and sophisticated shareholders at $0.16/share, representing a 15.8% discount to the last traded price prior to the raise. 

• Price momentum in October was negative, but decline moderated somewhat
• Disparate Q3 profitability trends reported by Maersk, Evergreen, and ZIM 
• As sentiment weakens (again), we also see signs of a cyclical bottom

• Sunpower reported 9M23 results which showed the company performing strongly as a 100% GI business.
• Revenues +15% and EBITDA +46% YoY. Earlier this month a competitor listed in China at a massive premium to Sunpower’s valuation.
• The uncertainty over the CB due in April 2025 will be an overhang but management believes there are multiple ways to resolve this in FY2024.

• Our base case valuation of DS Dansuk is 113,948 won per share which is 28% higher than the high end of the IPO price range (89,000 won). 
• We estimate bio energy to account for 64.7% of total sales, followed by battery recycle (21.5%), plastic recycle (6.7%), and others (7.1%) in 2023. 
• DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

Following the release of the delayed, but in-line FY23 results covering the period to February 2023, trading in Braemar shares recommenced on 21 November. Now that the internal investigation into the accounting treatment of historical transactions has concluded, Braemar is due to release its H124 results on 29 November. The company remains well-positioned to drive its future growth strategy, as previously outlined. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying profit estimate for FY24 and trimmed it for FY25, but retain our 520p/sh valuation.

• Price momentum in October was negative, but decline moderated somewhat
• Disparate Q3 profitability trends reported by Maersk, Evergreen, and ZIM 
• As sentiment weakens (again), we also see signs of a cyclical bottom

• Sunpower reported 9M23 results which showed the company performing strongly as a 100% GI business.
• Revenues +15% and EBITDA +46% YoY. Earlier this month a competitor listed in China at a massive premium to Sunpower’s valuation.
• The uncertainty over the CB due in April 2025 will be an overhang but management believes there are multiple ways to resolve this in FY2024.

• Our base case valuation of DS Dansuk is 113,948 won per share which is 28% higher than the high end of the IPO price range (89,000 won). 
• We estimate bio energy to account for 64.7% of total sales, followed by battery recycle (21.5%), plastic recycle (6.7%), and others (7.1%) in 2023. 
• DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

Following the release of the delayed, but in-line FY23 results covering the period to February 2023, trading in Braemar shares recommenced on 21 November. Now that the internal investigation into the accounting treatment of historical transactions has concluded, Braemar is due to release its H124 results on 29 November. The company remains well-positioned to drive its future growth strategy, as previously outlined. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying profit estimate for FY24 and trimmed it for FY25, but retain our 520p/sh valuation.

• The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
• If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
• There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.

• With P/B back to the 5-year average of 1.9x but ROE surpassing the last five years, Air China Ltd (753 HK) is our High Conviction pick for 2024.
• Lower US interest rates next year will reduce interest expenses as 18.7% of debt is USD-denominated. Potential Rmb appreciation vs. USD may bring significant exchange gain too.
• Supportive government policies will further drive domestic traffic. For international traffic, more capacity resumption will power recovery. Cathay Pacific Airways (293 HK) is another profit accelerator.

• DX Group PLC (DX/ LN) agreed to a 47.5p/share offer (plus 1p dividend, ex-dividend 16 November) from H.I.G., 33% premium, 8.8x 2023a EBITDA, to be conducted via scheme of arrangement.
• DX had a substantial improvement in revenue and profitability in 2018-2023. Although irrevocables represent 33.1% of the share capital, some shareholders have some doubts and letters of intent total 21.5%.
• Some shareholders will try to extract more: DCF-based 50p could be defended, 5.2% above current offer. Spread 1.05%/3% (gross/annualised, assuming 30 March settlement). I’d be long in case of bump-up.

• Kantsu is a logistics company that supports the high-growth e-commerce industry, specializing in warehouse logistics and handling the entire upstream logistics process, from order processing to delivery.
• The company is also creating a highly profitable business by selling its in-house developed IT system that boosts efficiency to external customers.
• In 1H FY24/2, Kantsu reported net sales of ¥5,619 mn (+10.0% YoY), operating profit of ¥164 mn (-14.1% YoY), ordinary profit of ¥162 mn (-7.4% YoY), and profit attributable to owners of the parent of ¥115 mn (+2.3% YoY).

• Upside risk to company guidance – Q1-3 FY12/2023 results were ahead of guidance and a positive surprise in our view.
• Operating profit grew 25.8% YoY, driven by a major improvement in profitability in the Advertising segment, continued robust demand for ESG services, and management’s prudent cost control (with SG&A margins stable YoY).
• The mainstay Premium Benefits Club service saw 2 net additional customers QoQ for Q3 FY12/2023, rising to 89 customers – the service is experiencing a positive trend of demand from an increasing number of retail shareholders, and a hike in spending by companies on shareholder benefits program. 

• The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
• If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
• There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.

• With P/B back to the 5-year average of 1.9x but ROE surpassing the last five years, Air China Ltd (753 HK) is our High Conviction pick for 2024.
• Lower US interest rates next year will reduce interest expenses as 18.7% of debt is USD-denominated. Potential Rmb appreciation vs. USD may bring significant exchange gain too.
• Supportive government policies will further drive domestic traffic. For international traffic, more capacity resumption will power recovery. Cathay Pacific Airways (293 HK) is another profit accelerator.

• DX Group PLC (DX/ LN) agreed to a 47.5p/share offer (plus 1p dividend, ex-dividend 16 November) from H.I.G., 33% premium, 8.8x 2023a EBITDA, to be conducted via scheme of arrangement.
• DX had a substantial improvement in revenue and profitability in 2018-2023. Although irrevocables represent 33.1% of the share capital, some shareholders have some doubts and letters of intent total 21.5%.
• Some shareholders will try to extract more: DCF-based 50p could be defended, 5.2% above current offer. Spread 1.05%/3% (gross/annualised, assuming 30 March settlement). I’d be long in case of bump-up.

• Kantsu is a logistics company that supports the high-growth e-commerce industry, specializing in warehouse logistics and handling the entire upstream logistics process, from order processing to delivery.
• The company is also creating a highly profitable business by selling its in-house developed IT system that boosts efficiency to external customers.
• In 1H FY24/2, Kantsu reported net sales of ¥5,619 mn (+10.0% YoY), operating profit of ¥164 mn (-14.1% YoY), ordinary profit of ¥162 mn (-7.4% YoY), and profit attributable to owners of the parent of ¥115 mn (+2.3% YoY).

• Upside risk to company guidance – Q1-3 FY12/2023 results were ahead of guidance and a positive surprise in our view.
• Operating profit grew 25.8% YoY, driven by a major improvement in profitability in the Advertising segment, continued robust demand for ESG services, and management’s prudent cost control (with SG&A margins stable YoY).
• The mainstay Premium Benefits Club service saw 2 net additional customers QoQ for Q3 FY12/2023, rising to 89 customers – the service is experiencing a positive trend of demand from an increasing number of retail shareholders, and a hike in spending by companies on shareholder benefits program.