Industrials

• Tryt Inc (9164 JP), a leading professional recruiting and temporary staffing service in Japan, seeks to raise US$450 million. Pricing is on 5 July, and book-building is 6-11 July.
• We previously discussed the IPO in TRYT IPO: The Bull Case and TRYT IPO: The Bear Case. 
• In this note, we discuss valuation. Our analysis suggests that Tryt is unattractively valued at the IPO reference price of JPY1,620 per share. We would pass on the IPO.

• S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
• SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Tryt Inc (9164 JP), a leading professional recruiting and temporary staffing service in Japan, seeks to raise US$450 million. Pricing is on 5 July, and book-building is 6-11 July.
• We previously discussed the IPO in TRYT IPO: The Bull Case and TRYT IPO: The Bear Case. 
• In this note, we discuss valuation. Our analysis suggests that Tryt is unattractively valued at the IPO reference price of JPY1,620 per share. We would pass on the IPO.

• S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
• SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• In my piece Yamauchi Family Office Buys More Toyo; Toyo Claims More Malfeasance, ISS Supports YFO I said I thought YFO would lose, but it would be close.
• I thought it hinged on the shape of the register. It turns out it did. And it turns out they won, and it was close. Analysis is presented.
• What next? The new board takes its seats and may entertain a new takeover offer. I could see a buyout price a fair bit higher than here. 

• The day after the Company announced 4Q FY23/3 results and FY24/3 initial guidance for consolidated revenue flat and OP -21.0%, the share price dropped -6.3% on heavy volume, maintaining a weak trend thereafter relative to a strong underlying market.
• SIR believes this is because the new MTP differed from investors‘ growth image.
• While the Company would be remiss not to highlight the high base from the post-COVID surge in special demand for permanent placement as a short-term risk for this term, investors may have been sensitive to the slowdown in growth over the coming two years.

• In this insight we look at the development of J&T’s China business over the past few years, including J&T’s purchase of Best Inc’s express operation in late 2021
• We also compare J&T’s Chinese operation to five listed Chinese express companies in terms of scale, market position, financial performance, and relationships with e-comm platforms
• Finally, we present a framework for the valuation of J&T’s China business, and offer a list of questions we would ask management as the company prepares for its IPO

• On 30 June, Apollo placed itself ahead of competitors with a €9.5/share cash offer for Applus Services SA (APPS SM), whose shares rose to €9.9, in the hope of a counter offer.
• The market is capable of forcing Apollo to sweeten its proposal to reach 75% acceptances. Many risk arbitrageurs have positions in Applus and may not settle for the current premium.
• This situation has been flagged for a while. If already long, it is worth holding for a possible better offer, which could come around €10/share, a 5.2% increase.

• In my piece Yamauchi Family Office Buys More Toyo; Toyo Claims More Malfeasance, ISS Supports YFO I said I thought YFO would lose, but it would be close.
• I thought it hinged on the shape of the register. It turns out it did. And it turns out they won, and it was close. Analysis is presented.
• What next? The new board takes its seats and may entertain a new takeover offer. I could see a buyout price a fair bit higher than here. 

• The day after the Company announced 4Q FY23/3 results and FY24/3 initial guidance for consolidated revenue flat and OP -21.0%, the share price dropped -6.3% on heavy volume, maintaining a weak trend thereafter relative to a strong underlying market.
• SIR believes this is because the new MTP differed from investors‘ growth image.
• While the Company would be remiss not to highlight the high base from the post-COVID surge in special demand for permanent placement as a short-term risk for this term, investors may have been sensitive to the slowdown in growth over the coming two years.

• In this insight we look at the development of J&T’s China business over the past few years, including J&T’s purchase of Best Inc’s express operation in late 2021
• We also compare J&T’s Chinese operation to five listed Chinese express companies in terms of scale, market position, financial performance, and relationships with e-comm platforms
• Finally, we present a framework for the valuation of J&T’s China business, and offer a list of questions we would ask management as the company prepares for its IPO

• On 30 June, Apollo placed itself ahead of competitors with a €9.5/share cash offer for Applus Services SA (APPS SM), whose shares rose to €9.9, in the hope of a counter offer.
• The market is capable of forcing Apollo to sweeten its proposal to reach 75% acceptances. Many risk arbitrageurs have positions in Applus and may not settle for the current premium.
• This situation has been flagged for a while. If already long, it is worth holding for a possible better offer, which could come around €10/share, a 5.2% increase.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Tryt Inc (9164 JP) will announce its price range in the coming week, while Kelun Biotech tries to break the US$100m+ deal silence in HK. 
• On the placement front, even Singapore joined in the placement action this week, with only HK deal remaining absent over the past month.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Tryt Inc (9164 JP) will announce its price range in the coming week, while Kelun Biotech tries to break the US$100m+ deal silence in HK. 
• On the placement front, even Singapore joined in the placement action this week, with only HK deal remaining absent over the past month.

• Tryt Inc (9164 JP) is looking to raise about US$460m 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.
• We have looked at the company’s past performance and track record against peers in our earlier notes. In this note, we will discuss our thoughts on valuation.

• On 28 June, after market close Fomento De Construcciones Y Co (FCC SM) announced the repurchase and redemption of 7% of its shares at €12.5/share (38% premium, €5.4 billion implied market cap).
• According to my calculations, Carlos Slim will hold, directly and indirectly, c. 88.2% of the share capital post repurchase. That, to me, heralds a delisting offer further down the road.
• The offer represents 7.1x EV/Fwd EBITDA, 8.9x Fwd P/E (on IBES forecasts). Median TP is €14.7. Gross spread is 5.3% (plus the €0.5 dividend). It seems a safe long.

• Nexteel is getting ready to complete its IPO in Korea in August. Nexteel is a steel pipe manufacturing company. The IPO price range is from 11,500 won to 12,500 won. 
• The IPO offering size is from 80.5 billion won to 87.5 billion won. The expected market cap is from 299 billion won to 325 billion won.
• Nexteel’s sales increased at a CAGR of 76.4% from 2020 to 2022. The company’s operating profit surged from 1.5 billion won in 2020 to 181.3 billion won in 2022. 

• STARK Corporation (STARK TB) (Stark) defaulted on its interest payments on 2-June, leading to a default event.
• Stark’s default has exposed the structural weakness in the Thai bond market which is worth discussion.
• We do not believe there is a reasonable basis for calculating the bond recovery value at this juncture.

• Tryt Inc (9164 JP) is looking to raise about US$460m 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.
• We have looked at the company’s past performance and track record against peers in our earlier notes. In this note, we will discuss our thoughts on valuation.

• On 28 June, after market close Fomento De Construcciones Y Co (FCC SM) announced the repurchase and redemption of 7% of its shares at €12.5/share (38% premium, €5.4 billion implied market cap).
• According to my calculations, Carlos Slim will hold, directly and indirectly, c. 88.2% of the share capital post repurchase. That, to me, heralds a delisting offer further down the road.
• The offer represents 7.1x EV/Fwd EBITDA, 8.9x Fwd P/E (on IBES forecasts). Median TP is €14.7. Gross spread is 5.3% (plus the €0.5 dividend). It seems a safe long.

• Nexteel is getting ready to complete its IPO in Korea in August. Nexteel is a steel pipe manufacturing company. The IPO price range is from 11,500 won to 12,500 won. 
• The IPO offering size is from 80.5 billion won to 87.5 billion won. The expected market cap is from 299 billion won to 325 billion won.
• Nexteel’s sales increased at a CAGR of 76.4% from 2020 to 2022. The company’s operating profit surged from 1.5 billion won in 2020 to 181.3 billion won in 2022. 

• STARK Corporation (STARK TB) (Stark) defaulted on its interest payments on 2-June, leading to a default event.
• Stark’s default has exposed the structural weakness in the Thai bond market which is worth discussion.
• We do not believe there is a reasonable basis for calculating the bond recovery value at this juncture.

• The share price of MTR Corp (66 HK) has not moved and lagged behind other transport operators in Asia.
• High-Frequency numbers from the company has shown improvement and signs that the Chinese tourists are gradually returning.
• The reopening of the checking in facility in downtown Hong Kong is another sign that more tourists are expected to come. 

• YTD performance of 61% has been stellar and index beating but the concern remains whether there will be more left. 
• Keisei Electric Railway Co (9009 JP) April 23 ridership and revenue growth provide momentum despite the still non-existence arrival of Chinese tourists. 
• Chinese tourists’ arrival in 2H 23 may be slow but chances are that they will arrive in Japan and will boost both ridership and revenue.

• We remain bullish on Komatsu despite returning a positive 37% return over the past year. 
• Q1 results are likely to exceed expectations and guidance is likely to be cautious, due to forex, pricing and cost factors.
• Komatsu is still attractively valued compared to its peers and historical averages, and has 20% upside potential.

Initiating coverage

• A successful market disruptor – Japan Elevator Service (JES) has been executing its growth strategy, increasing market share in the domestic elevator maintenance market via organic and acquisitive growth.
• Operating in a market dominated by OEMs, it is making solid headway by 1) offering a cost-effective solution, 2) a differentiated service offering technical services and availability of parts on par with the OEMs, and 3) experiencing rapid growth through by establishing a nationwide network providing regionally rooted services.
• Pursuing growth opportunities – we highlight two drivers for the company; 1) secular growth as building owners convert to reputable independent providers for cost management, and 2) structural demand from aging elevators requiring modernization.

• J&T’s China growth will slow from a lack of (1) M&A targets, and (2) cash to sustain a price war. SEA’s growth will slow, and profit margin decline due to
•  (1) Shopee in-sourcing of high-profit parcels(2) PE-backed rivals using price wars to gain market share. Lower penetration of China supply-chain platforms will stunt J&T’s growth in New Markets, we expect.
• In our base case we value J&T at US$ 10 bn, which is (25%) vs. J&T’s valuation in its latest round of funding.

• The share price of MTR Corp (66 HK) has not moved and lagged behind other transport operators in Asia.
• High-Frequency numbers from the company has shown improvement and signs that the Chinese tourists are gradually returning.
• The reopening of the checking in facility in downtown Hong Kong is another sign that more tourists are expected to come. 

• YTD performance of 61% has been stellar and index beating but the concern remains whether there will be more left. 
• Keisei Electric Railway Co (9009 JP) April 23 ridership and revenue growth provide momentum despite the still non-existence arrival of Chinese tourists. 
• Chinese tourists’ arrival in 2H 23 may be slow but chances are that they will arrive in Japan and will boost both ridership and revenue.

• We remain bullish on Komatsu despite returning a positive 37% return over the past year. 
• Q1 results are likely to exceed expectations and guidance is likely to be cautious, due to forex, pricing and cost factors.
• Komatsu is still attractively valued compared to its peers and historical averages, and has 20% upside potential.

Initiating coverage

• A successful market disruptor – Japan Elevator Service (JES) has been executing its growth strategy, increasing market share in the domestic elevator maintenance market via organic and acquisitive growth.
• Operating in a market dominated by OEMs, it is making solid headway by 1) offering a cost-effective solution, 2) a differentiated service offering technical services and availability of parts on par with the OEMs, and 3) experiencing rapid growth through by establishing a nationwide network providing regionally rooted services.
• Pursuing growth opportunities – we highlight two drivers for the company; 1) secular growth as building owners convert to reputable independent providers for cost management, and 2) structural demand from aging elevators requiring modernization.

• J&T’s China growth will slow from a lack of (1) M&A targets, and (2) cash to sustain a price war. SEA’s growth will slow, and profit margin decline due to
•  (1) Shopee in-sourcing of high-profit parcels(2) PE-backed rivals using price wars to gain market share. Lower penetration of China supply-chain platforms will stunt J&T’s growth in New Markets, we expect.
• In our base case we value J&T at US$ 10 bn, which is (25%) vs. J&T’s valuation in its latest round of funding.