Industrials

• The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• There are 10 stocks in inclusion zone and 11 in deletion zone. There should be 10 changes since that is the cap for the maximum changes at a single rebalance.
• The potential adds and deletes are down between 37-47% over the last 6 months and a long/short trade could provide superior risk-adjusted returns.

• General Dynamics Corporation’s quarterly and full-year results for 2023 indicate a strong performance with increased revenues and operating earnings as well as modest earnings per share growth.
• However, the growth rate for earnings per share was slower than expected due to higher net income in the previous year.
• Sequentially, the company’s results improved significantly, with increases in revenue, operating earnings, net earnings, and earnings per share.

• We raise our forecasts to reflect the strength of International revenue at Aeromexico – we expect it to beat 2023 EBITDAR targets by 26%
• Aeromexico has been outperforming domestic competitors Volaris, Viva Aerobus due to international unit revenue gains – their forced capacity cuts due to GTF issues should help Aeromexico manage 2024 margins
• Fitting with the global theme of consolidation difficulties, the US has ruled the Delta/Aeromexico JV must terminate – this could be a double digit % risk to PBT

• iPower is expected to report its 2QFY24 results in mid-February. Investors will continue to focus on the company’s progress on key initiatives.
• While continuing to grow its key Amazon relationship, iPower is also expanding its distribution channels.
• We look for an update on the growth of its TikTok Shop business as well as developments with physical retailers.

Key points (machine generated)

• KBR’s Global Solutions segment offers various services to government clients globally, making it the company’s largest business.
• The Technology Solutions segment provides proprietary technologies and engineering services primarily for the energy, chemicals, and hydrocarbons industries.
• KBR’s stock is currently undervalued compared to its peers, presenting potential for significant upside if it can reach its target valuation. 

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.

• Textron Inc.’s strong performance and positive margins were highlighted in its fourth-quarter 2023 earnings call.
• The industrial conglomerate generated $3.9 billion in quarterly revenue, a rise from $3.6 billion posted in the fourth quarter of 2022.
• Textron’s segment profit was $384 million, $78 million higher than that of the fourth quarter of the previous year.

• CSX Corporation posted solid 2023 results, setting a strong precedent for 2024 due to its robust financial position and positive business momentum.
• Despite facing challenges like inclement weather, 2023 was marked by healthy volumes, favorable pricing measures, strong operating margins, and more.
• The company experienced setbacks due to higher interest rates and supply chain disruptions, but managed to mitigate these issues.

• The latest earnings from United Rentals highlight several points of growing interest for potential investors.
• The company achieved record-breaking results for the fourth quarter of the year, as noted by President and CEO Matt Flannery, through the continuation of a customer-centric approach to operational excellence and safety.
• The company’s achievements are marked by record revenue, earnings, and returns, underpinned by a strategic acquisition and the focus on integration.

• The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• There are 10 stocks in inclusion zone and 11 in deletion zone. There should be 10 changes since that is the cap for the maximum changes at a single rebalance.
• The potential adds and deletes are down between 37-47% over the last 6 months and a long/short trade could provide superior risk-adjusted returns.

• General Dynamics Corporation’s quarterly and full-year results for 2023 indicate a strong performance with increased revenues and operating earnings as well as modest earnings per share growth.
• However, the growth rate for earnings per share was slower than expected due to higher net income in the previous year.
• Sequentially, the company’s results improved significantly, with increases in revenue, operating earnings, net earnings, and earnings per share.

• We raise our forecasts to reflect the strength of International revenue at Aeromexico – we expect it to beat 2023 EBITDAR targets by 26%
• Aeromexico has been outperforming domestic competitors Volaris, Viva Aerobus due to international unit revenue gains – their forced capacity cuts due to GTF issues should help Aeromexico manage 2024 margins
• Fitting with the global theme of consolidation difficulties, the US has ruled the Delta/Aeromexico JV must terminate – this could be a double digit % risk to PBT

• iPower is expected to report its 2QFY24 results in mid-February. Investors will continue to focus on the company’s progress on key initiatives.
• While continuing to grow its key Amazon relationship, iPower is also expanding its distribution channels.
• We look for an update on the growth of its TikTok Shop business as well as developments with physical retailers.

Key points (machine generated)

• KBR’s Global Solutions segment offers various services to government clients globally, making it the company’s largest business.
• The Technology Solutions segment provides proprietary technologies and engineering services primarily for the energy, chemicals, and hydrocarbons industries.
• KBR’s stock is currently undervalued compared to its peers, presenting potential for significant upside if it can reach its target valuation. 

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.

• Textron Inc.’s strong performance and positive margins were highlighted in its fourth-quarter 2023 earnings call.
• The industrial conglomerate generated $3.9 billion in quarterly revenue, a rise from $3.6 billion posted in the fourth quarter of 2022.
• Textron’s segment profit was $384 million, $78 million higher than that of the fourth quarter of the previous year.

• CSX Corporation posted solid 2023 results, setting a strong precedent for 2024 due to its robust financial position and positive business momentum.
• Despite facing challenges like inclement weather, 2023 was marked by healthy volumes, favorable pricing measures, strong operating margins, and more.
• The company experienced setbacks due to higher interest rates and supply chain disruptions, but managed to mitigate these issues.

• The latest earnings from United Rentals highlight several points of growing interest for potential investors.
• The company achieved record-breaking results for the fourth quarter of the year, as noted by President and CEO Matt Flannery, through the continuation of a customer-centric approach to operational excellence and safety.
• The company’s achievements are marked by record revenue, earnings, and returns, underpinned by a strategic acquisition and the focus on integration.

• There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
• The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
• BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.

• Sai Gon Cargo Service (SCS VN) is a cargo handling business, majority owned by the Airports Corporation Of Viet Nam (ACV VN) and Gemadept Corp (GMD VN) .  
• Net cash (16% of market cap), trading at 11.5x FY24e PE, with ~7% dividend yield (assuming 80% payout ratio), >75% EBITDA margins/>70% net margins, and 5 Yr Avg-ROEs  >40%. 
• We see long-term structural growth drivers with the construction of the Long Thanh Airport, and in the short term, we see an impending cargo volume recovery.

• Apollo had last week improved its offer price to €10.65/share of Applus Services SA (APPS SM) and acquired 21.85% of the share capital. Amber Equity signaled it continued in the race.
• Amber Equity has raised to €11/share, 3.3% above Apollo’s last offer, for an implied equity value of c. €1,420 million, implied EV of €2,412 million, 6.8x EV/NTM Fwd EBITDA.
• After the CNMV authorises the bid from Amber Equity, a 30-day acceptance period will open. Two most likely scenarios are either winner’s curse or the funds agree a 50-50 split.

• There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
• The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
• BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.

• Sai Gon Cargo Service (SCS VN) is a cargo handling business, majority owned by the Airports Corporation Of Viet Nam (ACV VN) and Gemadept Corp (GMD VN) .  
• Net cash (16% of market cap), trading at 11.5x FY24e PE, with ~7% dividend yield (assuming 80% payout ratio), >75% EBITDA margins/>70% net margins, and 5 Yr Avg-ROEs  >40%. 
• We see long-term structural growth drivers with the construction of the Long Thanh Airport, and in the short term, we see an impending cargo volume recovery.

• Apollo had last week improved its offer price to €10.65/share of Applus Services SA (APPS SM) and acquired 21.85% of the share capital. Amber Equity signaled it continued in the race.
• Amber Equity has raised to €11/share, 3.3% above Apollo’s last offer, for an implied equity value of c. €1,420 million, implied EV of €2,412 million, 6.8x EV/NTM Fwd EBITDA.
• After the CNMV authorises the bid from Amber Equity, a 30-day acceptance period will open. Two most likely scenarios are either winner’s curse or the funds agree a 50-50 split.

• The share price was up 4.4% on Friday – and up 2.3x since the end of October – raising forward valuations to the high side of their usual range.
• Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.
• Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.

• Samhyun is getting ready to complete its IPO on the KOSDAQ exchange in March. The IPO total offering amount is 40 billion won to 50 billion won. 
• The company generated sales of 99.8 billion won (up 45.5% YoY) and operating profit of 9.8 billion won (up 250% YoY) in 2023.
• Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time. 

• I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deals discussed this week on Smartkarma: The all-scrip Offer for QV Equities Ltd (QVE AU) from WAM Leaders Ltd (WLE AU).
• Key updates took place on: Orecorp Ltd (ORR AU), Benesse Holdings (9783 JP), Glosel (9995 JP) and Outsourcing Inc (2427 JP).

• Lockheed Martin Corporation held its fourth quarter and year-end earnings conference call for 2023, outlining its performance, financial results, and future expectations.
• The company emphasized strong performance in 2023, driven by considerable demand for its aircraft, helicopters, satellites, radar systems, and other products and services.
• Lockheed Martin reported a record backlog of $161 billion, with sales for the full year of $67.6 billion, reflecting a 2% year-on year growth.

• 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 – Amer Sports (AS US) is up 15% since listing. Ola Electric (1700674D IN) and FirstCry (0172540D IN) IPOs.
• Event-Driven developments – Benefit One Inc (2412 JP), Benesse Holdings (9783 JP), Glosel (9995 JP), Outsourcing Inc (2427 JP), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU). 

• As totally expected, Dai Ichi Life Insurance (8750 JP) extended its expected start date for the Tender Offer on Benefit One Inc (2412 JP).
• The possibility of a fourth Offer attempt by the Queks is raised as Elliott surprisingly exits its position in Guoco Group Ltd (53 HK).
• Outsourcing Inc (2427 JP) is eminently bumpable, But unless investors force the issue, don’t expect a bump.

• 3M has shown solid operational improvements in its fourth-quarter results, which could translate into an exciting year ahead for the company, despite the ongoing pandemic-related challenges.
• The company reported strong adjusted EPS growth of 11% and operating margin expansion of 180 basis points, with significant contributions from its restructuring program aimed at streamlining operations, reducing costs and improving productivity.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• PACCAR, a leading American truck manufacturing company, showcased impressive performance in their fourth quarter 2023 earnings conference call.
• The company reported record annual revenues of $35.1 billion and a net income of $4.6 billion, marking an impressive after-tax return on revenue of 13.1%.
• This positive trend was primarily driven by record deliveries of the company’s DAF, Kenworth and Peterbilt trucks, strong results in its parts division and consistent financial services performance.

• RTX Corporation held its Q4 2023 earnings conference call with senior executives such as Chairman and CEO Greg Hayes, incoming CEO Chris Calio and Chief Financial Officer Neil Mitchill.
• The call highlighted a leadership change with the transition of current CEO, Greg Hayes, to Executive Chairman, and Chris Calio assuming the role of CEO.
• The company reported strong full-year results with $74.3 billion in adjusted sales, a growth of 11% organically, and adjusted EPS of $5.06, a growth of 6% year-over-year.

• The share price was up 4.4% on Friday – and up 2.3x since the end of October – raising forward valuations to the high side of their usual range.
• Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.
• Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.

• Samhyun is getting ready to complete its IPO on the KOSDAQ exchange in March. The IPO total offering amount is 40 billion won to 50 billion won. 
• The company generated sales of 99.8 billion won (up 45.5% YoY) and operating profit of 9.8 billion won (up 250% YoY) in 2023.
• Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time. 

• I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deals discussed this week on Smartkarma: The all-scrip Offer for QV Equities Ltd (QVE AU) from WAM Leaders Ltd (WLE AU).
• Key updates took place on: Orecorp Ltd (ORR AU), Benesse Holdings (9783 JP), Glosel (9995 JP) and Outsourcing Inc (2427 JP).

• Lockheed Martin Corporation held its fourth quarter and year-end earnings conference call for 2023, outlining its performance, financial results, and future expectations.
• The company emphasized strong performance in 2023, driven by considerable demand for its aircraft, helicopters, satellites, radar systems, and other products and services.
• Lockheed Martin reported a record backlog of $161 billion, with sales for the full year of $67.6 billion, reflecting a 2% year-on year growth.

• 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 – Amer Sports (AS US) is up 15% since listing. Ola Electric (1700674D IN) and FirstCry (0172540D IN) IPOs.
• Event-Driven developments – Benefit One Inc (2412 JP), Benesse Holdings (9783 JP), Glosel (9995 JP), Outsourcing Inc (2427 JP), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU). 

• As totally expected, Dai Ichi Life Insurance (8750 JP) extended its expected start date for the Tender Offer on Benefit One Inc (2412 JP).
• The possibility of a fourth Offer attempt by the Queks is raised as Elliott surprisingly exits its position in Guoco Group Ltd (53 HK).
• Outsourcing Inc (2427 JP) is eminently bumpable, But unless investors force the issue, don’t expect a bump.

• 3M has shown solid operational improvements in its fourth-quarter results, which could translate into an exciting year ahead for the company, despite the ongoing pandemic-related challenges.
• The company reported strong adjusted EPS growth of 11% and operating margin expansion of 180 basis points, with significant contributions from its restructuring program aimed at streamlining operations, reducing costs and improving productivity.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• PACCAR, a leading American truck manufacturing company, showcased impressive performance in their fourth quarter 2023 earnings conference call.
• The company reported record annual revenues of $35.1 billion and a net income of $4.6 billion, marking an impressive after-tax return on revenue of 13.1%.
• This positive trend was primarily driven by record deliveries of the company’s DAF, Kenworth and Peterbilt trucks, strong results in its parts division and consistent financial services performance.

• RTX Corporation held its Q4 2023 earnings conference call with senior executives such as Chairman and CEO Greg Hayes, incoming CEO Chris Calio and Chief Financial Officer Neil Mitchill.
• The call highlighted a leadership change with the transition of current CEO, Greg Hayes, to Executive Chairman, and Chris Calio assuming the role of CEO.
• The company reported strong full-year results with $74.3 billion in adjusted sales, a growth of 11% organically, and adjusted EPS of $5.06, a growth of 6% year-over-year.

Key points (machine generated)

• Janus International Group is a leading manufacturer and provider of self-storage doors and locks, operating in three main sales channels.
• The company is a pioneer in smart lock technology with its Noke wireless solution, giving it a competitive advantage.
• Janus has a strong value proposition due to the high cost of failure of its products, which are considered mission-critical, allowing the company to capture high margins and outpace market growth in a recession-proof industry.

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.

Ocean Wilsons Holdings’ (OCN’s) strategic review remains ongoing. Despite the review and the potential for value realisation, OCN still trades at a c 51% discount to its value, which we believe is 2,564p.

Key points (machine generated)

• TransUnion has diversified its offerings beyond credit reporting, reducing its sensitivity to the consumer credit cycle.
• The company has a strong competitive advantage and generates high margins and free cash flow.
• Despite a recent decline in share price and a soft Q3 earnings report, the current valuation presents a good entry point for long-term investors.

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.

Key points (machine generated)

• Janus International Group is a leading manufacturer and provider of self-storage doors and locks, operating in three main sales channels.
• The company is a pioneer in smart lock technology with its Noke wireless solution, giving it a competitive advantage.
• Janus has a strong value proposition due to the high cost of failure of its products, which are considered mission-critical, allowing the company to capture high margins and outpace market growth in a recession-proof industry.

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.

Ocean Wilsons Holdings’ (OCN’s) strategic review remains ongoing. Despite the review and the potential for value realisation, OCN still trades at a c 51% discount to its value, which we believe is 2,564p.

Key points (machine generated)

• TransUnion has diversified its offerings beyond credit reporting, reducing its sensitivity to the consumer credit cycle.
• The company has a strong competitive advantage and generates high margins and free cash flow.
• Despite a recent decline in share price and a soft Q3 earnings report, the current valuation presents a good entry point for long-term investors.

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 31 January 2024, Outsourcing Inc (2427 JP) put out a notice to the Exchange regarding progress towards Execution of the Tender Offer by Bain.
• All preconditions for the commencement of the Tender Offer except for the acquisition of clearance of EU Regulations on foreign subsidies affecting the EU market. 
• This process appears to be “as expected” given Outsourcing’s multinational presence and the new Foreign Subsidies Regulation which went into effect in the EU 28 weeks ago.

• Battery giant Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ -0.92%) has set up a battery swapping joint venture (JV) with ride-hailing company Didi Global Inc. to service Didi’s expanding fleet of electric vehicles (EVs).
• The tie-up is CATL’s latest foray into battery swapping — dominated by EV-maker Nio Inc. — as it aims to expand beyond production and into downstream businesses that make use of its products.
• It comes as the world’s No. 1 producer of EV batteries by installed capacity faces growing competition from rivals such as BYD Co. Ltd. (002594.SZ +0.69%), which produces both vehicles and their batteries.

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

• Revenue in FY2022 reached £19.33 million compared to £18.27 million in FY2021, an annual increase of 5.8%.
• We estimate that revenue will increase to £20.68 million in FY2023 and £22.13 million in FY2024.
• Gross profit for FY2022 was £4.4 million compared to £3.71 million in 2021, an annual increase of 18.69%. 

• On 31 January 2024, Outsourcing Inc (2427 JP) put out a notice to the Exchange regarding progress towards Execution of the Tender Offer by Bain.
• All preconditions for the commencement of the Tender Offer except for the acquisition of clearance of EU Regulations on foreign subsidies affecting the EU market. 
• This process appears to be “as expected” given Outsourcing’s multinational presence and the new Foreign Subsidies Regulation which went into effect in the EU 28 weeks ago.

• Battery giant Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ -0.92%) has set up a battery swapping joint venture (JV) with ride-hailing company Didi Global Inc. to service Didi’s expanding fleet of electric vehicles (EVs).
• The tie-up is CATL’s latest foray into battery swapping — dominated by EV-maker Nio Inc. — as it aims to expand beyond production and into downstream businesses that make use of its products.
• It comes as the world’s No. 1 producer of EV batteries by installed capacity faces growing competition from rivals such as BYD Co. Ltd. (002594.SZ +0.69%), which produces both vehicles and their batteries.

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

• Revenue in FY2022 reached £19.33 million compared to £18.27 million in FY2021, an annual increase of 5.8%.
• We estimate that revenue will increase to £20.68 million in FY2023 and £22.13 million in FY2024.
• Gross profit for FY2022 was £4.4 million compared to £3.71 million in 2021, an annual increase of 18.69%.