Industrials

• On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
• Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
• We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

• After analyzing J&T’s Chinese and SE Asian operations in previous insights, in this note we turn to the company’s ‘Others’ segment, made up of New Markets and X-Border logistics
• Compared to China and SE Asia, J&T’s New Markets and X-Border logistics business lines are small (just 11% of 2022 Revenue) but could offer attractive growth in the medium-term
• We conclude this insight with a preliminary sum-of-parts valuation of J&T as a whole. Based on available information, our initial estimate of J&T’s EV is US$8.6 bn (pre-IPO)

• Stanley Black & Decker delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• Stanley Black & Decker generated free cash flow of $1.1 billion, up 36% year-over-year, and returned $1.2 billion to shareholders through dividends and share repurchases.
• We give Stanley Black & Decker a ‘Hold’ rating with a revised target price.

• Sunrun delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• Sunrun’s outlook includes guiding growth in solar energy capacity installed and an expected increase in storage attachment rates.
• This service is designed to optimize the value of solar energy following California’s latest solar policy, the net billing tariff.

• On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
• Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
• We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

• After analyzing J&T’s Chinese and SE Asian operations in previous insights, in this note we turn to the company’s ‘Others’ segment, made up of New Markets and X-Border logistics
• Compared to China and SE Asia, J&T’s New Markets and X-Border logistics business lines are small (just 11% of 2022 Revenue) but could offer attractive growth in the medium-term
• We conclude this insight with a preliminary sum-of-parts valuation of J&T as a whole. Based on available information, our initial estimate of J&T’s EV is US$8.6 bn (pre-IPO)

• Stanley Black & Decker delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• Stanley Black & Decker generated free cash flow of $1.1 billion, up 36% year-over-year, and returned $1.2 billion to shareholders through dividends and share repurchases.
• We give Stanley Black & Decker a ‘Hold’ rating with a revised target price.

• Sunrun delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• Sunrun’s outlook includes guiding growth in solar energy capacity installed and an expected increase in storage attachment rates.
• This service is designed to optimize the value of solar energy following California’s latest solar policy, the net billing tariff.

• US 10 year cleared the 4.90% resistance threshold as the market reprices Fed policy. This yield pop will have lasting effects.
• 3.85% is the key support with to supply rally energy.
• Short term target comes in at 4.20% and MT resistance at 4.70% (but not in a strait line). A staircase move is expected.

• Recruit Holdings (6098 JP) ’s share price has been down over the last few days following release of job openings data for May 2023 by the US Department of Labour.
• The no. of job openings in the US in May 2023 decreased to 9.8m vs 11.3m in May 2022. It has also declined compared to 10.1m reported in April 2023.
• Moreover, web traffic on Recruit’s job platforms Indeed and Glassdoor have also decreased in June 2023 compared to May.

• Plug Power delivered a mixed set of results for the previous quarter, with revenues above analyst expectations but below-par earnings.
• Plug Power reported $210.3 million in terms of its top-line 49% up year over year.
• Regarding the application business, Plug has a remarkably stable business model compared to the other companies in the industry.

• Republic Services managed to exceed analyst expectations in terms of revenue as well as earnings.
• They achieved revenue growth of 21%, including acquisitions and acquisition investments remain a priority for the management as they see significant opportunities in the recycling, solid waste, and environmental solutions sectors.
• Their commitment to delivering exceptional customer experiences is reflected in their high customer retention rate and positive trends in Net Promoter Score.

• US 10 year cleared the 4.90% resistance threshold as the market reprices Fed policy. This yield pop will have lasting effects.
• 3.85% is the key support with to supply rally energy.
• Short term target comes in at 4.20% and MT resistance at 4.70% (but not in a strait line). A staircase move is expected.

• Recruit Holdings (6098 JP) ’s share price has been down over the last few days following release of job openings data for May 2023 by the US Department of Labour.
• The no. of job openings in the US in May 2023 decreased to 9.8m vs 11.3m in May 2022. It has also declined compared to 10.1m reported in April 2023.
• Moreover, web traffic on Recruit’s job platforms Indeed and Glassdoor have also decreased in June 2023 compared to May.

• Plug Power delivered a mixed set of results for the previous quarter, with revenues above analyst expectations but below-par earnings.
• Plug Power reported $210.3 million in terms of its top-line 49% up year over year.
• Regarding the application business, Plug has a remarkably stable business model compared to the other companies in the industry.

• Republic Services managed to exceed analyst expectations in terms of revenue as well as earnings.
• They achieved revenue growth of 21%, including acquisitions and acquisition investments remain a priority for the management as they see significant opportunities in the recycling, solid waste, and environmental solutions sectors.
• Their commitment to delivering exceptional customer experiences is reflected in their high customer retention rate and positive trends in Net Promoter Score.

• The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
• These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
• Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

• TRYT Group is engaged in job placement and temporary staffing, specialising in the medical and welfare and construction fields. The company has set the pricing for its Tokyo IPO.
• Existing shareholders of the company will offer 40m shares at an indicative price range of ¥1,100-1,300 per share, raising around US$305-360m from the IPO.
• We think Tryt Inc (9164 JP) ’s IPO is overvalued at the above price range compared to Japanese recruitment peers and would recommend staying on the sidelines.

• The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
• These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
• Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

• TRYT Group is engaged in job placement and temporary staffing, specialising in the medical and welfare and construction fields. The company has set the pricing for its Tokyo IPO.
• Existing shareholders of the company will offer 40m shares at an indicative price range of ¥1,100-1,300 per share, raising around US$305-360m from the IPO.
• We think Tryt Inc (9164 JP) ’s IPO is overvalued at the above price range compared to Japanese recruitment peers and would recommend staying on the sidelines.

• Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.

• Tryt Inc (9164 JP) has disclosed a revised IPO price range of JPY1,100-1,300 per share, which is -32% to -20% below the IPO reference price of JPY1,620 per share.
• We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case and TRYT IPO: Valuation Insights. 
• Our analysis suggests that Tryt remains unattractively valued at the revised IPO price range. Also, market sentiment on the sector has weakened. We would pass on the IPO.

• United Rentals continues to perform well as the risk of a recession grows.
• The share price is not expensive as profitability and utilization rates remain strong.
• United Renters remains a sold long-term opportunity, but near-term risks should not be ignored, but United Rental remains a selling long- term opportunity.

• Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.

• Tryt Inc (9164 JP) has disclosed a revised IPO price range of JPY1,100-1,300 per share, which is -32% to -20% below the IPO reference price of JPY1,620 per share.
• We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case and TRYT IPO: Valuation Insights. 
• Our analysis suggests that Tryt remains unattractively valued at the revised IPO price range. Also, market sentiment on the sector has weakened. We would pass on the IPO.

• United Rentals continues to perform well as the risk of a recession grows.
• The share price is not expensive as profitability and utilization rates remain strong.
• United Renters remains a sold long-term opportunity, but near-term risks should not be ignored, but United Rental remains a selling long- term opportunity.

• The Nikkei has an article today with details of an interview with new Toyo Construction (1890 JP) Chairman Yoshida and President Obayashi. There will be a 2-3 month governance review.
• It will review decision-making process, “profit management” (利益管理), and business investment decisions (事業への投資判断).  Chairman Yoshida had a quote on neutrality on a YFO proposal. My wording there was carefully chosen.
• The President also said they expect ongoing synergies with Infroneer, and will maintain MTMP/Mitsui OSK Partnership management plans. Their words were chosen carefully too. 

• Back On 29 September 2019, Hainan Meilan International Airport (357 HK) entered into a subscription agreement with Hopu-affiliate Aero Infrastructure, for 200mn new H shares at HK$4.69/share.
• That issuance failed as CSRC approval was not secured by the Long Stop. Hopu reckoned HMIA reneged on its duties to secure approval and lodged a notice of arbitration.
• HKIAC recently agreed and opines HMIA did not use its best endeavours to complete the subscription. Hopu is seeking up to HK$6.962bn in compensation. Quite the overhang.

• TRYT Group is engaged in job placement and temporary staffing in the medical and welfare fields. The company has filed for an IPO and plans to raise around $450m.
• The company’s top line has continued to expand; however, margins have continued to narrow down over the last 3-4 years.
• We remain concerned over the company’s growth prospects and would only recommend subscribing if the IPO is priced attractively.

• In this insight, we examine J&T Global Express (1936374D CH)‘s operation in SE Asia, where it’s the region’s dominant player, with market share of 22.5% by volume 
• We profile SE Asian demand and supply and compare these to the development of China’s express industry, acknowledging the key role Alibaba (ADR) (BABA US) has played there
• We also present a framework for estimating the value of J&T’s SE Asian operation by identifying the most appropriate comps and EV valuation multiples

• Cintas managed to exceed analyst expectations in terms of revenue as well as earnings.
• The Uniform Rental and Facility Services segment experienced solid organic growth driven by increased volume and new customer acquisitions.
• The company’s First Aid and Safety Services segment revenue grew 16.4% organically, driven by strong demand for first aid products and services, as well as training and compliance solutions whereas its All Other segment revenue grew 14.7% organically, driven by growth in fire protection services and direct sale uniform businesses.

Norcros’s final results highlighted a solid FY23 performance, and although we have reduced our estimates to reflect a weaker macro outlook, we believe Norcros has an excellent base to evolve its strategy, which should allow it to unlock significant market share opportunities. We also believe that its key strengths are undervalued and that most, if not all, of the legacy issues, particularly the pension deficit, have been resolved. We have trimmed our valuation from 252p/sh to 246p, implying c 50% upside.

• The Nikkei has an article today with details of an interview with new Toyo Construction (1890 JP) Chairman Yoshida and President Obayashi. There will be a 2-3 month governance review.
• It will review decision-making process, “profit management” (利益管理), and business investment decisions (事業への投資判断).  Chairman Yoshida had a quote on neutrality on a YFO proposal. My wording there was carefully chosen.
• The President also said they expect ongoing synergies with Infroneer, and will maintain MTMP/Mitsui OSK Partnership management plans. Their words were chosen carefully too. 

• Back On 29 September 2019, Hainan Meilan International Airport (357 HK) entered into a subscription agreement with Hopu-affiliate Aero Infrastructure, for 200mn new H shares at HK$4.69/share.
• That issuance failed as CSRC approval was not secured by the Long Stop. Hopu reckoned HMIA reneged on its duties to secure approval and lodged a notice of arbitration.
• HKIAC recently agreed and opines HMIA did not use its best endeavours to complete the subscription. Hopu is seeking up to HK$6.962bn in compensation. Quite the overhang.

• TRYT Group is engaged in job placement and temporary staffing in the medical and welfare fields. The company has filed for an IPO and plans to raise around $450m.
• The company’s top line has continued to expand; however, margins have continued to narrow down over the last 3-4 years.
• We remain concerned over the company’s growth prospects and would only recommend subscribing if the IPO is priced attractively.

• In this insight, we examine J&T Global Express (1936374D CH)‘s operation in SE Asia, where it’s the region’s dominant player, with market share of 22.5% by volume 
• We profile SE Asian demand and supply and compare these to the development of China’s express industry, acknowledging the key role Alibaba (ADR) (BABA US) has played there
• We also present a framework for estimating the value of J&T’s SE Asian operation by identifying the most appropriate comps and EV valuation multiples

• Cintas managed to exceed analyst expectations in terms of revenue as well as earnings.
• The Uniform Rental and Facility Services segment experienced solid organic growth driven by increased volume and new customer acquisitions.
• The company’s First Aid and Safety Services segment revenue grew 16.4% organically, driven by strong demand for first aid products and services, as well as training and compliance solutions whereas its All Other segment revenue grew 14.7% organically, driven by growth in fire protection services and direct sale uniform businesses.

Norcros’s final results highlighted a solid FY23 performance, and although we have reduced our estimates to reflect a weaker macro outlook, we believe Norcros has an excellent base to evolve its strategy, which should allow it to unlock significant market share opportunities. We also believe that its key strengths are undervalued and that most, if not all, of the legacy issues, particularly the pension deficit, have been resolved. We have trimmed our valuation from 252p/sh to 246p, implying c 50% upside.