Industrials

• Today, the day before the previously extended M3 Inc (2413 JP) Partial Tender Offer for Benefit One Inc (2412 JP) was due to expire, M3 extended it another 20 days.
• Dai Ichi Life Insurance (8750 JP) several days ago extended their expected start date by weeks – from mid-January to early February. 
• The wording in the new document from M3 is curious. It bears examination. As does the strategy positioning and choice of each of the participants. 

• Ahead of the 17 January close, M3 Inc (2413 JP) has extended the close of its offer to 15 February due to a request from Benefit One Inc (2412 JP).
• The merger arb situation has four parties with different priorities – the Board, Pasona Group (2168 JP), Dai Ichi Life Insurance (8750 JP) (with a pre-conditional JPY2,123 offer) and M3.
• The Board and Pasona want the highest possible price. M3’s inability to table a revised offer suggests that Dai-ichi Life has set the bar too high. 

• With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
• The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.

• In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the March 2024 index rebal event.
• There are currently no changes expected for the DAX changes but Deutsche Lufthansa (LHA GR) and Fresenius Medical Care & (FME GR) are quite close to becoming ADDs.
• For the MDAX index, there could an intra-review change in January 2024 and then one more change in the March 2024 index rebal event.

• Hyundai Hyms reported excellent IPO bookbuilding results. IPO price has been determined at 7,300 won per share, which is 16% higher than the high end of the IPO price range.
• A total of 2,099 institutional investors participated in this IPO book building. The demand ratio was 681 to 1. Hyundai Hyms IPO will start trading on 26 January.
• Given the solid upside, we expect investors to push up the share price above the high end of our IPO sensitivity analysis (9,092 won) in the first day of trading. 

• The US Supreme Court has just blocked JetBlue’s planned acquisition of Spirit Airlines, ruling on the side of the US DOJ, which had sued to block the proposed deal.
• Reuters has reported that the European Commission should approve Korean Air/Asiana imminently following analysis of concessions provided. However, the US and Japan also need to approve the deal.
• In “Korean Air – Plan B should Asiana merger fail to gain approval” on 26 October 2023, we highlighted Korean Air is well positioned to continue as a standalone entity.

• Chinese tourists are back, and the Thai government has launched a series of initiatives to woo them back.
• Discounts to airlines offered by Airports of Thailand (AOT TB) will not hurt earnings much, although if extended for >12 months,  AOT earnings could lag their peers.
• Valuation is still expensive, although it is expected to normalize once earnings are back. Collapse the RV trade against Malaysia Airports Holdings (MAHB MK) and buy for the short term.

• The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. Orient Overseas International (316 HK) is a beneficiary.
• There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. 
• OOIL’s net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. 

• ​Early three-month and six-month fare levels largely remain above prior year for the full service carriers (FSCs) and low cost carriers (LCCs)
• EasyJet’s 2024 PBT can reach £600m, Ryanair FY25 net income can near-€2.5bn following €2.0bn in FY24, while Wizz Air can exceed €500m net income in FY25.
• Wizz has the strongest potential to demonstrate its ability to improve EBITDAR/ASK by managing capacity, which may provide insight into future prospects as operations normalize/developmental routes mature.

• Today, the day before the previously extended M3 Inc (2413 JP) Partial Tender Offer for Benefit One Inc (2412 JP) was due to expire, M3 extended it another 20 days.
• Dai Ichi Life Insurance (8750 JP) several days ago extended their expected start date by weeks – from mid-January to early February. 
• The wording in the new document from M3 is curious. It bears examination. As does the strategy positioning and choice of each of the participants. 

• Ahead of the 17 January close, M3 Inc (2413 JP) has extended the close of its offer to 15 February due to a request from Benefit One Inc (2412 JP).
• The merger arb situation has four parties with different priorities – the Board, Pasona Group (2168 JP), Dai Ichi Life Insurance (8750 JP) (with a pre-conditional JPY2,123 offer) and M3.
• The Board and Pasona want the highest possible price. M3’s inability to table a revised offer suggests that Dai-ichi Life has set the bar too high. 

• With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
• The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.

• In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the March 2024 index rebal event.
• There are currently no changes expected for the DAX changes but Deutsche Lufthansa (LHA GR) and Fresenius Medical Care & (FME GR) are quite close to becoming ADDs.
• For the MDAX index, there could an intra-review change in January 2024 and then one more change in the March 2024 index rebal event.

• Hyundai Hyms reported excellent IPO bookbuilding results. IPO price has been determined at 7,300 won per share, which is 16% higher than the high end of the IPO price range.
• A total of 2,099 institutional investors participated in this IPO book building. The demand ratio was 681 to 1. Hyundai Hyms IPO will start trading on 26 January.
• Given the solid upside, we expect investors to push up the share price above the high end of our IPO sensitivity analysis (9,092 won) in the first day of trading. 

• The US Supreme Court has just blocked JetBlue’s planned acquisition of Spirit Airlines, ruling on the side of the US DOJ, which had sued to block the proposed deal.
• Reuters has reported that the European Commission should approve Korean Air/Asiana imminently following analysis of concessions provided. However, the US and Japan also need to approve the deal.
• In “Korean Air – Plan B should Asiana merger fail to gain approval” on 26 October 2023, we highlighted Korean Air is well positioned to continue as a standalone entity.

• Chinese tourists are back, and the Thai government has launched a series of initiatives to woo them back.
• Discounts to airlines offered by Airports of Thailand (AOT TB) will not hurt earnings much, although if extended for >12 months,  AOT earnings could lag their peers.
• Valuation is still expensive, although it is expected to normalize once earnings are back. Collapse the RV trade against Malaysia Airports Holdings (MAHB MK) and buy for the short term.

• The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. Orient Overseas International (316 HK) is a beneficiary.
• There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. 
• OOIL’s net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. 

• ​Early three-month and six-month fare levels largely remain above prior year for the full service carriers (FSCs) and low cost carriers (LCCs)
• EasyJet’s 2024 PBT can reach £600m, Ryanair FY25 net income can near-€2.5bn following €2.0bn in FY24, while Wizz Air can exceed €500m net income in FY25.
• Wizz has the strongest potential to demonstrate its ability to improve EBITDAR/ASK by managing capacity, which may provide insight into future prospects as operations normalize/developmental routes mature.

• On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
• The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
• The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels.  I’d be looking to unwind the stub here. 

• TRYT (9164 JP) was listed on the TSE on 22nd July 2023. The IPO had been a 100% secondary offering. 
• TRYT offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• Coming up for six-month lockup is the sole pre-IPO investor who had sold some of its stake earlier in the IPO.

• Medi Assist Healthcare Services (0886371D IN) is looking to raise around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• In this note, we will look at the firm’s past performance, and share our thoughts on valuation.

Key points (machine generated)

• Ryanair Holdings is the largest and best capitalized airline in Europe with a low-cost business model.
• Despite being in an industry known for destroying capital, Ryanair has been able to achieve attractive returns on capital and successful growth.
• The author believes Ryanair is a profitable investment option, but recommends readers to conduct their own research before making any investment decisions.

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 the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
• The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
• The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels.  I’d be looking to unwind the stub here. 

• TRYT (9164 JP) was listed on the TSE on 22nd July 2023. The IPO had been a 100% secondary offering. 
• TRYT offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• Coming up for six-month lockup is the sole pre-IPO investor who had sold some of its stake earlier in the IPO.

• Medi Assist Healthcare Services (0886371D IN) is looking to raise around US$140m in its India IPO.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• In this note, we will look at the firm’s past performance, and share our thoughts on valuation.

Key points (machine generated)

• Ryanair Holdings is the largest and best capitalized airline in Europe with a low-cost business model.
• Despite being in an industry known for destroying capital, Ryanair has been able to achieve attractive returns on capital and successful growth.
• The author believes Ryanair is a profitable investment option, but recommends readers to conduct their own research before making any investment decisions.

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.

• Spot container rates have surged, owing to conflict near Red Sea / Suez Canal
• On top of higher spot rates, imposition of new fees also boosting carrier revenue
• Evergreen’s average monthly US$ revenue increased from Q123 to Q423

• Spot container rates have surged, owing to conflict near Red Sea / Suez Canal
• On top of higher spot rates, imposition of new fees also boosting carrier revenue
• Evergreen’s average monthly US$ revenue increased from Q123 to Q423

• Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana’s cargo business.
• The EC had set a preliminary decision deadline of 14 February.
• US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.

• Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana’s cargo business.
• The EC had set a preliminary decision deadline of 14 February.
• US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.

• We are most ahead of consensus for IAG in 2024, and recognising Lufthansa’s highest-in-group double-digit capacity growth rate in 2024 may render its earnings most difficult to forecast/vulnerable to disappointment.
• For AF-KLM 2024 seems a crucial year to demonstrate it can grow earnings in more challenging conditions if it is to increase confidence it can reach near-€4bn EBIT by 2028.
• Delta reports 2023 results today, and its outlook commentary will be important to frame 1Q24 prospects on the Transatlantic, which should encourage that 2024 will prove resilient.

Key points (machine generated)

• Arcosa is a high-quality equity investment benefiting from secular trends and government spending, with underappreciated secondary businesses experiencing rapid growth.
• The IRA tax credits are expected to act as a significant catalyst for Arcosa, pushing its numbers higher than anticipated.
• Despite its strong balance sheet, excellent management, and successful capital allocation history, Arcosa has zero hedge fund ownership, making it an attractive opportunity.

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.

• Mexico’s Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.
• However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).
• This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.

• FedEx Corporation delivered disappointing results as the company could not meet Wall Street’s revenue and earnings expectations.
• Despite a 3% decline in total revenue, the enterprise achieved a 17% improvement in adjusted operating income and a 110 basis points expansion in adjusted margin compared to the previous year.
• The Ground segment exhibited outstanding performance with a 57% increase in adjusted operating income and a remarkable 370 basis points expansion in adjusted margin.

• FuelCell Energy, Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• In the recently disclosed fourth quarter and full-year results, the company celebrates substantial progress in major projects, the evolution of solid oxide power generation, and electrolysis hydrogen platforms.
• Collaborating with major corporations, such as ExxonMobil, Toyota, Pfizer, EDF Energy, and IBM, FuelCell has made substantial strides in carbon capture solutions, distributed hydrogen, microgrid development, and innovative collaborations using AI.

• HEICO Corporation delivered an all-around beat in the previous quarter, with operating income and net sales reaching unprecedented heights.
• The fourth quarter of fiscal ’23 witnessed a remarkable 29% surge in consolidated operating income and a 54% increase in net sales compared to the same period in fiscal ’22.
• The Flight Support Group achieved significant net sales of $601.7 million in the fourth quarter of fiscal year ’23, marking a 74% increase from the same period in fiscal year ’22.

• Cintas Corporation delivered a positive result and managed an all-around beat in the last quarter, reaching $2.38 billion compared to the previous year’s $2.1 billion.
• The gross margin for the quarter reached $1.14 billion, marking an 11.6% increase from the previous year.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Plug Power Inc.’s results were a major disappointment as the company failed to meet the revenue and earnings expectations both of Wall Street.
• Difficulties arose due to plant downtimes, notably at the Tennessee facility, causing temporary outages across the hydrogen network.
• Plug Power’s diversified business model is evident, with fourth-quarter revenue from new ventures expected to surpass traditional business revenue.

• Sunrun Inc. delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
• The storage attachment rate surged to over 33% of installations in Q3, a significant rise from 15% at the beginning of the year.
• Despite challenges in the Californian market due to policy changes, Sunrun launched its new add-on storage product for solar clients in California.

• United Rentals, Inc. delivered an all-around beat in the most recent quarterly result, witnessing a substantial 23% year-over-year surge in total revenue, reaching an unprecedented $3.8 billion.
• The company’s Adjusted EBITDA soared by 22%, achieving a third-quarter high of $1.85 billion, resulting in a margin exceeding 49%.
• The strategic addition of personnel is highlighted as a key factor in successfully assimilating companies into United Rentals.

• We are most ahead of consensus for IAG in 2024, and recognising Lufthansa’s highest-in-group double-digit capacity growth rate in 2024 may render its earnings most difficult to forecast/vulnerable to disappointment.
• For AF-KLM 2024 seems a crucial year to demonstrate it can grow earnings in more challenging conditions if it is to increase confidence it can reach near-€4bn EBIT by 2028.
• Delta reports 2023 results today, and its outlook commentary will be important to frame 1Q24 prospects on the Transatlantic, which should encourage that 2024 will prove resilient.

Key points (machine generated)

• Arcosa is a high-quality equity investment benefiting from secular trends and government spending, with underappreciated secondary businesses experiencing rapid growth.
• The IRA tax credits are expected to act as a significant catalyst for Arcosa, pushing its numbers higher than anticipated.
• Despite its strong balance sheet, excellent management, and successful capital allocation history, Arcosa has zero hedge fund ownership, making it an attractive opportunity.

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.

• Mexico’s Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.
• However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).
• This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.

• FedEx Corporation delivered disappointing results as the company could not meet Wall Street’s revenue and earnings expectations.
• Despite a 3% decline in total revenue, the enterprise achieved a 17% improvement in adjusted operating income and a 110 basis points expansion in adjusted margin compared to the previous year.
• The Ground segment exhibited outstanding performance with a 57% increase in adjusted operating income and a remarkable 370 basis points expansion in adjusted margin.

• FuelCell Energy, Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• In the recently disclosed fourth quarter and full-year results, the company celebrates substantial progress in major projects, the evolution of solid oxide power generation, and electrolysis hydrogen platforms.
• Collaborating with major corporations, such as ExxonMobil, Toyota, Pfizer, EDF Energy, and IBM, FuelCell has made substantial strides in carbon capture solutions, distributed hydrogen, microgrid development, and innovative collaborations using AI.

• HEICO Corporation delivered an all-around beat in the previous quarter, with operating income and net sales reaching unprecedented heights.
• The fourth quarter of fiscal ’23 witnessed a remarkable 29% surge in consolidated operating income and a 54% increase in net sales compared to the same period in fiscal ’22.
• The Flight Support Group achieved significant net sales of $601.7 million in the fourth quarter of fiscal year ’23, marking a 74% increase from the same period in fiscal year ’22.

• Cintas Corporation delivered a positive result and managed an all-around beat in the last quarter, reaching $2.38 billion compared to the previous year’s $2.1 billion.
• The gross margin for the quarter reached $1.14 billion, marking an 11.6% increase from the previous year.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Plug Power Inc.’s results were a major disappointment as the company failed to meet the revenue and earnings expectations both of Wall Street.
• Difficulties arose due to plant downtimes, notably at the Tennessee facility, causing temporary outages across the hydrogen network.
• Plug Power’s diversified business model is evident, with fourth-quarter revenue from new ventures expected to surpass traditional business revenue.

• Sunrun Inc. delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
• The storage attachment rate surged to over 33% of installations in Q3, a significant rise from 15% at the beginning of the year.
• Despite challenges in the Californian market due to policy changes, Sunrun launched its new add-on storage product for solar clients in California.

• United Rentals, Inc. delivered an all-around beat in the most recent quarterly result, witnessing a substantial 23% year-over-year surge in total revenue, reaching an unprecedented $3.8 billion.
• The company’s Adjusted EBITDA soared by 22%, achieving a third-quarter high of $1.85 billion, resulting in a margin exceeding 49%.
• The strategic addition of personnel is highlighted as a key factor in successfully assimilating companies into United Rentals.