Industrials

• 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. 

• Today after the close, noted Japanese battery maker Gs Yuasa Corp (6674 JP) announced a public equity offering accompanied by a 3rd party placement to Honda Motor (7267 JP). 
• Total $300mm+ raise is nearly 20.0mm shares against ~80mm shares out now. That’s 20% EPS dilution at a still-decent discount to book value.
• This creates a weird situation of a low ROE stock becoming lower ROE, at a lower PBR, with “more growth ahead” in a hyper-competitive space.

• Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
• There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
• There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
• There are some key changes to expectations since my last TDIV insight as a consequence of changes in share prices and/or dividend expectations.
• I currently expect 6 ADDs and 5 DELs during the December 2023 review.

• Gs Yuasa Corp (6674 JP) (GSY) is looking to raise around US$240m via a public offering, along with placing shares via third-party allotment with Honda Motor (7267 JP) .
• The company formed a JV with Honda Motors earlier this year and will use the bulk of the proceeds for investments in the JV.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• DS Dansuk is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 79,000 won to 89,000 won. 
• The book building for the institutional investors will be from 5-11 December. The IPO offering amount is from 96.4 billion won to 108.6 billion won. 
• According to the bankers’ valuation, DS Dansuk’s valuation would range from 462 billion won to 522 billion won. 

• On 17 November, Hyun Jeong-Eun resigned from the Hyundai Elevator Co Board of Directors Chairwoman and internal director positions, mainly due to strong pressures from other major shareholders.
• With Hyun Jeong-Eun finally out of the company, Hyundai Elevator is likely to significantly emphasize on improving its corporate governance.
• Hyundai Elevator is considering new shareholder return policies, including a potential 50%+ dividend payout, higher share buybacks, and a mandatory minimum dividend yield.

• Led by international activity, CaiNiao booked +25% Y/Y revenue growth in FYQ2
• FYQ2 EBITA margin improved Y/Y and Q/Q, even as express companies struggled
• Result bolsters CaiNiao status as vehicle to access BABA’s international growth

• AZ-Com Maruwa Holdings (9090 JP) is looking to raise around US$206m in its mixed follow-on offering. 
• The deal will be a large one to digest, at 129 days of three month ADV, 5.5% dilution and 12.2% of current mcap.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• US Global Jets ETF (JETS US) surged by 6.6% last week, bringing the YTD to -2.1%. The strong move was in tandem with U.S. major indexes, but at 3x greater
• Positive fund inflow of US$92m, the second month in a row, reversing 17 months’ downtrend. Accumulation suggests the bottom is over, and investors turning positive on the aviation sector 
• Maintain TP of US$19 (+14% UPSIDE), but it might be a good idea to protect the downside with a short-term Put option, last week’s action was too fast and furious 

• Major change of gameplan – Q1-3 FY12/2023 results were weaker than expected with the company revising down FY guidance, and withdrawing both current medium and long-term plans given highly challenging business conditions.
• An overview plan of structural reforms has been unveiled, focusing on becoming a more resilient and profitable business, realigning product lines, and rebuilding sales and production setups.
• Although an ambitious initiative with a wide scope, we believe that this will have a positive impact of significantly accelerating transformation initiatives, and transitioning the company to a more optimal business model.

• Today after the close, noted Japanese battery maker Gs Yuasa Corp (6674 JP) announced a public equity offering accompanied by a 3rd party placement to Honda Motor (7267 JP). 
• Total $300mm+ raise is nearly 20.0mm shares against ~80mm shares out now. That’s 20% EPS dilution at a still-decent discount to book value.
• This creates a weird situation of a low ROE stock becoming lower ROE, at a lower PBR, with “more growth ahead” in a hyper-competitive space.

• Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
• There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
• There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
• There are some key changes to expectations since my last TDIV insight as a consequence of changes in share prices and/or dividend expectations.
• I currently expect 6 ADDs and 5 DELs during the December 2023 review.

• Gs Yuasa Corp (6674 JP) (GSY) is looking to raise around US$240m via a public offering, along with placing shares via third-party allotment with Honda Motor (7267 JP) .
• The company formed a JV with Honda Motors earlier this year and will use the bulk of the proceeds for investments in the JV.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• DS Dansuk is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 79,000 won to 89,000 won. 
• The book building for the institutional investors will be from 5-11 December. The IPO offering amount is from 96.4 billion won to 108.6 billion won. 
• According to the bankers’ valuation, DS Dansuk’s valuation would range from 462 billion won to 522 billion won. 

• On 17 November, Hyun Jeong-Eun resigned from the Hyundai Elevator Co Board of Directors Chairwoman and internal director positions, mainly due to strong pressures from other major shareholders.
• With Hyun Jeong-Eun finally out of the company, Hyundai Elevator is likely to significantly emphasize on improving its corporate governance.
• Hyundai Elevator is considering new shareholder return policies, including a potential 50%+ dividend payout, higher share buybacks, and a mandatory minimum dividend yield.

• Led by international activity, CaiNiao booked +25% Y/Y revenue growth in FYQ2
• FYQ2 EBITA margin improved Y/Y and Q/Q, even as express companies struggled
• Result bolsters CaiNiao status as vehicle to access BABA’s international growth

• AZ-Com Maruwa Holdings (9090 JP) is looking to raise around US$206m in its mixed follow-on offering. 
• The deal will be a large one to digest, at 129 days of three month ADV, 5.5% dilution and 12.2% of current mcap.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• US Global Jets ETF (JETS US) surged by 6.6% last week, bringing the YTD to -2.1%. The strong move was in tandem with U.S. major indexes, but at 3x greater
• Positive fund inflow of US$92m, the second month in a row, reversing 17 months’ downtrend. Accumulation suggests the bottom is over, and investors turning positive on the aviation sector 
• Maintain TP of US$19 (+14% UPSIDE), but it might be a good idea to protect the downside with a short-term Put option, last week’s action was too fast and furious 

• Major change of gameplan – Q1-3 FY12/2023 results were weaker than expected with the company revising down FY guidance, and withdrawing both current medium and long-term plans given highly challenging business conditions.
• An overview plan of structural reforms has been unveiled, focusing on becoming a more resilient and profitable business, realigning product lines, and rebuilding sales and production setups.
• Although an ambitious initiative with a wide scope, we believe that this will have a positive impact of significantly accelerating transformation initiatives, and transitioning the company to a more optimal business model.