Industrials

Cainiao Smart Logistics (1437124D HK), a global leader in e-commerce logistics, has filed for a HKEx IPO to raise at least US$1 billion at a US$15-20 billion valuation.
In Cainiao Smart Logistics IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on declining global cross-border market share, China logistics decelerating growth, high related-party transactions, and FCF burn.

CIMC Enric (3899 HK): Surge in Overall New Order Momentum

By Osbert Tang, CFA

CIMC Enric Holdings (3899 HK) has a solid 3Q23 with excellent new order pick-up, surging by 52.8% YoY on the back of strengths in clean energy and liquid food segments.
Hydrogen energy revenue is on target to reach Rmb700m in FY23. Meanwhile, management revealed that there is a slight gross margin expansion so far this year.
With order backlog rising 27.6% YoY to Rmb22.2bn at end-9M23, earnings outlook is well protected. Its net cash position is another credit, making its premium multiples justified.

Monthly Container Shipping Tracker | Rebound in NAM Volume Could Be Inflection Point (October 2023)

By Daniel Hellberg

Price momentum stagnant, but could North American volume surge be an inflection point?
Fuel price hasn’t risen since outbreak of violence in mideast, but no longer a tailwind, either
Look to Maersk results on November 3 for guidance, US inventory de-stocking commentary

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Oct 30

Daily Brief Industrials: Cainiao Smart Logistics, CIMC Enric Holdings, Evergreen Marine Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Cainiao Smart Logistics IPO: The Bear Case
CIMC Enric (3899 HK): Surge in Overall New Order Momentum
Monthly Container Shipping Tracker | Rebound in NAM Volume Could Be Inflection Point (October 2023)

Cainiao Smart Logistics IPO: The Bear Case

Cainiao Smart Logistics (1437124D HK), a global leader in e-commerce logistics, has filed for a HKEx IPO to raise at least US$1 billion at a US$15-20 billion valuation.
In Cainiao Smart Logistics IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on declining global cross-border market share, China logistics decelerating growth, high related-party transactions, and FCF burn.

CIMC Enric (3899 HK): Surge in Overall New Order Momentum

By Osbert Tang, CFA

CIMC Enric Holdings (3899 HK) has a solid 3Q23 with excellent new order pick-up, surging by 52.8% YoY on the back of strengths in clean energy and liquid food segments.
Hydrogen energy revenue is on target to reach Rmb700m in FY23. Meanwhile, management revealed that there is a slight gross margin expansion so far this year.
With order backlog rising 27.6% YoY to Rmb22.2bn at end-9M23, earnings outlook is well protected. Its net cash position is another credit, making its premium multiples justified.

Monthly Container Shipping Tracker | Rebound in NAM Volume Could Be Inflection Point (October 2023)

By Daniel Hellberg

Price momentum stagnant, but could North American volume surge be an inflection point?
Fuel price hasn’t risen since outbreak of violence in mideast, but no longer a tailwind, either
Look to Maersk results on November 3 for guidance, US inventory de-stocking commentary

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Oct 28

Daily Brief Industrials: Misumi Group and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted

Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted

By Scott Foster

Total sales remained weak in September, dropping 3.5% YoY. In 1H of FY Mar-24, sales were down 4.3%. Month-to-month, though, they have been trending sideways.
Die Components have been holding up best, followed by Factory Automation. The VONA e-commerce business has been more volatile, but still shows a lack of traction.
Operating profit dropped 31% in 1H, but management is guiding for a 23% increase in 2H. This looks optimistic, but most of the bad news should be in the price.

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Oct 28

Daily Brief Industrials: Misumi Group and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted

Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted

By Scott Foster

Total sales remained weak in September, dropping 3.5% YoY. In 1H of FY Mar-24, sales were down 4.3%. Month-to-month, though, they have been trending sideways.
Die Components have been holding up best, followed by Factory Automation. The VONA e-commerce business has been more volatile, but still shows a lack of traction.
Operating profit dropped 31% in 1H, but management is guiding for a 23% increase in 2H. This looks optimistic, but most of the bad news should be in the price.

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Oct 27

Daily Brief Industrials: Keisei Electric Railway Co, Ecopro BM , J&T Global Express, Bharat Electronics, HNI Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Keisei Electric: Activists Arrive As Expected
Ecopro Innovation Is Selling Ecopro BM Shares
J&T Global Express IPO: Trading Debut
Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting
HNI Corporation – 3Q Preview: Looking for Steady Demand in WF Segment

Keisei Electric: Activists Arrive As Expected

By Oshadhi Kumarasiri

Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.

Ecopro Innovation Is Selling Ecopro BM Shares

On 26 October, it was announced that Ecopro Innovation is selling 160k shares of Ecopro BM shares (0.2% of outstanding shares), representing about 32 billion won.
Although the percentage of shares is small relative to its outstanding shares, this additional selling is likely to further negatively impact Ecopro BM’s shares in the near term.
Ecopro BM’s shares have seen a significant drop in price over the past few months, but its current P/E (87.3x in 2023) and EV/EBITDA (46.9x in 2023) multiples remain unattractive.

J&T Global Express IPO: Trading Debut

J&T priced its IPO at a fixed price of HK$12.00 per share to raise the gross proceeds of the offering of US$500 million. The shares will start trading tomorrow.
We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Valuation Insights.
The market sentiment on the sector continues to weaken. The de-rating of peers lowers our SoTP valuation to HK$10.01 per share, 16.5% below the IPO price.

Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the March 2024 rebalance.
According to my latest estimates, there could be up to three changes or NIFTY 50 and five changes for NIFTY Next 50. The NIFTY 50 changes could have high impact.

HNI Corporation – 3Q Preview: Looking for Steady Demand in WF Segment

By Water Tower Research

HNI reports 3Q23 on Tuesday, October 31 before the market opens, with its earnings conference call scheduled for 11:00 am ET.
We expect 3Q23 non-GAAP EPS of $0.64 on consolidated sales of $713 million. Consensus is $0.63 EPS on consolidated sales of $713 million.
In 3Q22, HNI delivered $0.71 in non-GAAP EPS on consolidated sales of $598.8 million.

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Oct 27

Daily Brief Industrials: Keisei Electric Railway Co, Ecopro BM , J&T Global Express, Bharat Electronics, HNI Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Keisei Electric: Activists Arrive As Expected
Ecopro Innovation Is Selling Ecopro BM Shares
J&T Global Express IPO: Trading Debut
Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting
HNI Corporation – 3Q Preview: Looking for Steady Demand in WF Segment

Keisei Electric: Activists Arrive As Expected

By Oshadhi Kumarasiri

Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.

Ecopro Innovation Is Selling Ecopro BM Shares

On 26 October, it was announced that Ecopro Innovation is selling 160k shares of Ecopro BM shares (0.2% of outstanding shares), representing about 32 billion won.
Although the percentage of shares is small relative to its outstanding shares, this additional selling is likely to further negatively impact Ecopro BM’s shares in the near term.
Ecopro BM’s shares have seen a significant drop in price over the past few months, but its current P/E (87.3x in 2023) and EV/EBITDA (46.9x in 2023) multiples remain unattractive.

J&T Global Express IPO: Trading Debut

J&T priced its IPO at a fixed price of HK$12.00 per share to raise the gross proceeds of the offering of US$500 million. The shares will start trading tomorrow.
We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Valuation Insights.
The market sentiment on the sector continues to weaken. The de-rating of peers lowers our SoTP valuation to HK$10.01 per share, 16.5% below the IPO price.

Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the March 2024 rebalance.
According to my latest estimates, there could be up to three changes or NIFTY 50 and five changes for NIFTY Next 50. The NIFTY 50 changes could have high impact.

HNI Corporation – 3Q Preview: Looking for Steady Demand in WF Segment

By Water Tower Research

HNI reports 3Q23 on Tuesday, October 31 before the market opens, with its earnings conference call scheduled for 11:00 am ET.
We expect 3Q23 non-GAAP EPS of $0.64 on consolidated sales of $713 million. Consensus is $0.63 EPS on consolidated sales of $713 million.
In 3Q22, HNI delivered $0.71 in non-GAAP EPS on consolidated sales of $598.8 million.

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Oct 26

Daily Brief Industrials: Singapore Airlines, J&T Global Express, Caverion Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake
J&T Global Express IPO Trading – Tepid Demand Despite the Team Effort
Triton/Caverion: Offer Declared Unconditional

SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake

Temasek raised around US$300m via its secondary selldown in Singapore Airlines (SIA SP) in Jun 2023. The lockup from that placement will expire soon.
Temasek still owns over 50% of SIA and hence, any selldown might not come before SIA reports its 1H23/24 results in mid-Nov 2023.
In this note, we talk about the placement lockup dynamics.

J&T Global Express IPO Trading – Tepid Demand Despite the Team Effort

J&T Global Express (1519 HK), a global logistics service provider, raised around US$500m in its Hong Kong IPO.
As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
We have looked at the company’s past performance and valuations in our previous notes. In this note, we talk about the trading dynamics.

Triton/Caverion: Offer Declared Unconditional

By Jesus Rodriguez Aguilar

On 24 October, Crayfish received all regulatory approvals (earlier than expected) and secured the fulfillment of the minimum acceptance condition of 66.67%. Crayfish has thus declared the offer unconditional.
Triton’s purchase offer will continue until 1 November, after which the purchase offer will be implemented. Spread is 0.46%/5.29% (gross/annualised, assuming settlement on 27 November). Long and tender.
In case Crayfish obtains >90% of the shares, it intends to initiate compulsory redemption proceedings and delist Caverion.

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Oct 26

Daily Brief Industrials: Singapore Airlines, J&T Global Express, Caverion Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake
J&T Global Express IPO Trading – Tepid Demand Despite the Team Effort
Triton/Caverion: Offer Declared Unconditional

SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake

Temasek raised around US$300m via its secondary selldown in Singapore Airlines (SIA SP) in Jun 2023. The lockup from that placement will expire soon.
Temasek still owns over 50% of SIA and hence, any selldown might not come before SIA reports its 1H23/24 results in mid-Nov 2023.
In this note, we talk about the placement lockup dynamics.

J&T Global Express IPO Trading – Tepid Demand Despite the Team Effort

J&T Global Express (1519 HK), a global logistics service provider, raised around US$500m in its Hong Kong IPO.
As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
We have looked at the company’s past performance and valuations in our previous notes. In this note, we talk about the trading dynamics.

Triton/Caverion: Offer Declared Unconditional

By Jesus Rodriguez Aguilar

On 24 October, Crayfish received all regulatory approvals (earlier than expected) and secured the fulfillment of the minimum acceptance condition of 66.67%. Crayfish has thus declared the offer unconditional.
Triton’s purchase offer will continue until 1 November, after which the purchase offer will be implemented. Spread is 0.46%/5.29% (gross/annualised, assuming settlement on 27 November). Long and tender.
In case Crayfish obtains >90% of the shares, it intends to initiate compulsory redemption proceedings and delist Caverion.

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Oct 25

Daily Brief Industrials: Gs Yuasa Corp, U Ming Marine Transport Corp, Hanwha Aerospace and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point
A Major Defense Cooperation Between Saudi Arabia and South Korea Likely

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade

By Brian Freitas

Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.

Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the December 2023 Rebalance.
While there are no changes expected for the T50 index there could be one change for the T100 index.
U Ming Marine Transport Corp (2606 TT) has moved closer to a potential T100 deletion which could also result in a TDIV deletion which has very significant flow implications.

A Major Defense Cooperation Between Saudi Arabia and South Korea Likely

In the past several days, there have been numerous local news about a substantial defense cooperation between Saudi Arabia and South Korea.
This could result in billions of dollars in new military/defense related systems new orders for numerous companies in Korea in the coming decade.
If there are major long-term arms deal between Saudi Arabia and South Korea, it could benefit the top defense companies in Korea including Hanwha Aerospace and Korea Aerospace Industries.

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Oct 25

Daily Brief Industrials: Gs Yuasa Corp, U Ming Marine Transport Corp, Hanwha Aerospace and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point
A Major Defense Cooperation Between Saudi Arabia and South Korea Likely

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade

By Brian Freitas

Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.

Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the December 2023 Rebalance.
While there are no changes expected for the T50 index there could be one change for the T100 index.
U Ming Marine Transport Corp (2606 TT) has moved closer to a potential T100 deletion which could also result in a TDIV deletion which has very significant flow implications.

A Major Defense Cooperation Between Saudi Arabia and South Korea Likely