Industrials

By Research as a Service (RaaS)

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
In Horizon Construction Development IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The key elements of the bear case rest on core business margin decline, unexplained headcount reduction, cash burn, long receivable days and stretched balance sheet.

Amaero International Ltd – No Surprises in Q3 Result, Focus on the UAE Greenlight

Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
The company has reported a Q3 operating cash loss of $3.33m which was in line with our expectations.
The cash balance at the end of Q3 was $9.8m with an additional $2.05m in non-recurring cash payments has been received since the end of the quarter.

Horizon Construction Dev Pre-IPO – Refiled PHIP Updates – Affected by COVID-19 & Fueled by More Debt

By Ethan Aw

Horizon Construction Development (1887128D HK) is looking to raise US$250m in its upcoming Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In our previous note, we looked at the company’s past performance. In this note, we take a look at the company’s refiled PHIP updates.

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Apr 27

Daily Brief Industrials: AVIC (Chengdu) UAS Co Ltd, JD Industrials, Horizon Construction Development, Amaero International Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
JD Industrials Pre-IPO – The Negatives – Hasn’t Provided a Whole Lot of Details
Horizon Construction Development IPO: The Bear Case
Amaero International Ltd – No Surprises in Q3 Result, Focus on the UAE Greenlight
Horizon Construction Dev Pre-IPO – Refiled PHIP Updates – Affected by COVID-19 & Fueled by More Debt

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

By Brian Freitas

The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX).

JD Industrials Pre-IPO – The Negatives – Hasn’t Provided a Whole Lot of Details

By Sumeet Singh

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
JD Industrials (JDI) is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
In this note, we talk about the not-so-positive aspects of the deal.

Horizon Construction Development IPO: The Bear Case

By Research as a Service (RaaS)

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
In Horizon Construction Development IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The key elements of the bear case rest on core business margin decline, unexplained headcount reduction, cash burn, long receivable days and stretched balance sheet.

Amaero International Ltd – No Surprises in Q3 Result, Focus on the UAE Greenlight

Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
The company has reported a Q3 operating cash loss of $3.33m which was in line with our expectations.
The cash balance at the end of Q3 was $9.8m with an additional $2.05m in non-recurring cash payments has been received since the end of the quarter.

Horizon Construction Dev Pre-IPO – Refiled PHIP Updates – Affected by COVID-19 & Fueled by More Debt

By Ethan Aw

Horizon Construction Development (1887128D HK) is looking to raise US$250m in its upcoming Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In our previous note, we looked at the company’s past performance. In this note, we take a look at the company’s refiled PHIP updates.

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Apr 26

Daily Brief Industrials: Sembcorp Marine, Horizon Construction Development, CIMC Enric Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion
Horizon Construction Development IPO: The Bull Case
CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for Singapore’s ST index (“STI”) between now and the September 2023 index review.
With roughly 4 more months left for the base date, Sembcorp Marine (SMM SP) seems to be an ADD but it is close to the border.
Since the ranking system used for this index in based on prices as at a single point in time, the rankings could change significantly and our expectations could change too.

Horizon Construction Development IPO: The Bull Case

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost & Sullivan.
The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.

CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient

By Osbert Tang, CFA

We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well.
New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%.
Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.

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Apr 26

Daily Brief Industrials: Sembcorp Marine, Horizon Construction Development, CIMC Enric Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion
Horizon Construction Development IPO: The Bull Case
CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for Singapore’s ST index (“STI”) between now and the September 2023 index review.
With roughly 4 more months left for the base date, Sembcorp Marine (SMM SP) seems to be an ADD but it is close to the border.
Since the ranking system used for this index in based on prices as at a single point in time, the rankings could change significantly and our expectations could change too.

Horizon Construction Development IPO: The Bull Case

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost & Sullivan.
The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.

CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient

By Osbert Tang, CFA

We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well.
New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%.
Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.

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Apr 25

Daily Brief Industrials: Keisei Electric Railway Co, Kcc Corp, Nidec Corp, Evergreen Marine Corp, RELX PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Keisei (9009): Connecting Narita and Tokyo
KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023
Nidec (6594) | Remain Cautious Despite Bullish Guidance
TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News
RELX PLC: What Gives The Company Its Competitive Edge? – Key Drivers

Keisei (9009): Connecting Narita and Tokyo

By Henry Soediarko

Japan’s tourism scene is back in action albeit still missing a contribution from China.
On-The-Ground research in Japan has confirmed the above point and the crowded Narita airport.
Keisei Electric Railway Co (9009 JP)operates Skyliner which connects Narita Airport to downtown Tokyo.

KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

On 24 April, KCC Corp announced that it plans to IPO its subsidiary Momentive Performance Materials Inc. in the US stock market as early as 2023.
In 2021, KCC raised its stake in MOM Holding from 50% + 1 share to 60%. Momentive EBITDA increased from $300 million in 2018 to $450 million in 2022.
Our valuation of KCC Corp suggests an NAV of 3.1 trillion won (post 50% discount) or NAV per share of 347,633 won per share, representing 49% higher than current price.

Nidec (6594) | Remain Cautious Despite Bullish Guidance

By Mark Chadwick

NIdec’s full year FY3/23 operating profit declined 41% to Y100b, far short of analyst estimates
However, FY3/24 corporate guidance for Y220b in operating profit is very bullish and assumes a V-shaped recovery in margins
Given the macro outlook and lack of clarity on the restructuring charges, we prefer to remain cautious.

TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News

Our measures of momentum and profitability suggest industry bottomed in Q1 2023
In addition, shares of container shipping stocks have stopped reacting to (plentiful) bad news
Outcome of ongoing rate negotiations and Q1 earnings calls will drive near-term performance

RELX PLC: What Gives The Company Its Competitive Edge? – Key Drivers

RELX generated a decent financial performance in its last result and its underlying revenue increased by 9%.
RELX anticipates that underlying revenue growth will continue to exceed historical patterns, with adjusted operating profit growth exceeding underlying sales growth.
All four business segments expanded well, with underlying adjusted operating profit growth exceeding sales growth.

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Apr 25

Daily Brief Industrials: Keisei Electric Railway Co, Kcc Corp, Nidec Corp, Evergreen Marine Corp, RELX PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Keisei (9009): Connecting Narita and Tokyo
KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023
Nidec (6594) | Remain Cautious Despite Bullish Guidance
TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News
RELX PLC: What Gives The Company Its Competitive Edge? – Key Drivers

Keisei (9009): Connecting Narita and Tokyo

By Henry Soediarko

Japan’s tourism scene is back in action albeit still missing a contribution from China.
On-The-Ground research in Japan has confirmed the above point and the crowded Narita airport.
Keisei Electric Railway Co (9009 JP)operates Skyliner which connects Narita Airport to downtown Tokyo.

KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

On 24 April, KCC Corp announced that it plans to IPO its subsidiary Momentive Performance Materials Inc. in the US stock market as early as 2023.
In 2021, KCC raised its stake in MOM Holding from 50% + 1 share to 60%. Momentive EBITDA increased from $300 million in 2018 to $450 million in 2022.
Our valuation of KCC Corp suggests an NAV of 3.1 trillion won (post 50% discount) or NAV per share of 347,633 won per share, representing 49% higher than current price.

Nidec (6594) | Remain Cautious Despite Bullish Guidance

By Mark Chadwick

NIdec’s full year FY3/23 operating profit declined 41% to Y100b, far short of analyst estimates
However, FY3/24 corporate guidance for Y220b in operating profit is very bullish and assumes a V-shaped recovery in margins
Given the macro outlook and lack of clarity on the restructuring charges, we prefer to remain cautious.

TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News

Our measures of momentum and profitability suggest industry bottomed in Q1 2023
In addition, shares of container shipping stocks have stopped reacting to (plentiful) bad news
Outcome of ongoing rate negotiations and Q1 earnings calls will drive near-term performance

RELX PLC: What Gives The Company Its Competitive Edge? – Key Drivers

RELX generated a decent financial performance in its last result and its underlying revenue increased by 9%.
RELX anticipates that underlying revenue growth will continue to exceed historical patterns, with adjusted operating profit growth exceeding underlying sales growth.
All four business segments expanded well, with underlying adjusted operating profit growth exceeding sales growth.

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Apr 24

Daily Brief Industrials: Jiangnan, Intuitive Machines , ZTO Express and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair
Lunar Pioneers
TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

By David Blennerhassett

On the 21st Feb, Chu Hui, Jiangnan (1366 HK)‘s chairman and major shareholder, offered HK$0.40/share by of a Scheme, a 12.68% premium to last close.
However, shares gained 63% in the morning session of the 16 Feb, before being suspended, therefore the premium was an impressive 83.49% over the last full trading day’s closing price.
A shareholder with a blocking stake gave his irrevocable on the 22 March. The IFA reckons terms are fair and reasonable. This is done. The Court Meeting is May 15th.

Lunar Pioneers

By subSPAC

In recent months, the once-thriving Space SPAC ecosystem has faced significant deflation, brought on by operational hurdles, delays, and challenges in raising funds.
Over the last three years, more than a dozen space-focused companies went public through SPACs, yet the majority now trade at a significant discount to their deal valuation.
Amidst this challenging landscape, lunar-focused space company Intuitive Machines is the latest to debut last month through a SPAC deal, which valued the company at close to $1 billion.

TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

March parcel volume growth (22.7%) improved against an easy comp (-3.1%) from 2022
Prices are declining, too (-3.2% Y/Y) — not yet precipitous, but worst since Q1 2022
Based on what we see, ZTO’s 2023 volume targets will still be difficult to meet

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Apr 24

Daily Brief Industrials: Jiangnan, Intuitive Machines , ZTO Express and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair
Lunar Pioneers
TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

By David Blennerhassett

On the 21st Feb, Chu Hui, Jiangnan (1366 HK)‘s chairman and major shareholder, offered HK$0.40/share by of a Scheme, a 12.68% premium to last close.
However, shares gained 63% in the morning session of the 16 Feb, before being suspended, therefore the premium was an impressive 83.49% over the last full trading day’s closing price.
A shareholder with a blocking stake gave his irrevocable on the 22 March. The IFA reckons terms are fair and reasonable. This is done. The Court Meeting is May 15th.

Lunar Pioneers

By subSPAC

In recent months, the once-thriving Space SPAC ecosystem has faced significant deflation, brought on by operational hurdles, delays, and challenges in raising funds.
Over the last three years, more than a dozen space-focused companies went public through SPACs, yet the majority now trade at a significant discount to their deal valuation.
Amidst this challenging landscape, lunar-focused space company Intuitive Machines is the latest to debut last month through a SPAC deal, which valued the company at close to $1 billion.

TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

March parcel volume growth (22.7%) improved against an easy comp (-3.1%) from 2022
Prices are declining, too (-3.2% Y/Y) — not yet precipitous, but worst since Q1 2022
Based on what we see, ZTO’s 2023 volume targets will still be difficult to meet

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Apr 23

Daily Brief Industrials: Hong Kong Hang Seng Index, Jiangnan, LG Energy Solution, Woodside Energy Group Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt
Jiangnan Group (1366 HK): Scheme Vote on 15 May
Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain
Woodside Energy Group Ltd: Upside From BHP Assets & Pluto KGP Interconnector

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Jiangnan Group (1366 HK): Scheme Vote on 15 May

The Jiangnan (1366 HK) scheme document is out with the court meeting scheduled for 15 May. The IFA considers the HK$0.40 per share offer to be fair and reasonable.
Key conditions include approval by at least 75% independent shareholders (<10% rejection). The shareholder with a blocking stake has provided an irrevocable on 22 March.
This is a done deal. At the last close and for the 31 May payment, the gross and annualised spread is 3.9% and 44.0%, respectively.

Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world.
The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
This is mainly due to greater challenges of getting access to lithium at more affordable prices.

Woodside Energy Group Ltd: Upside From BHP Assets & Pluto KGP Interconnector

Woodside Energy Group delivered a decent financial performance in 2022, driven by higher prices and adding former BHP assets to the portfolio and the Pluto KGP interconnector.
Besides that, Woodside Energy completed subsea tieback and enhancement initiatives across its Gulf of Mexico and West Australian LNG assets, keeping the plants occupied.
We give Woodside Energy Group Ltd. a ‘Buy’ rating with a revised target price.

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Apr 23

Daily Brief Industrials: Hong Kong Hang Seng Index, Jiangnan, LG Energy Solution, Woodside Energy Group Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt
Jiangnan Group (1366 HK): Scheme Vote on 15 May
Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain
Woodside Energy Group Ltd: Upside From BHP Assets & Pluto KGP Interconnector

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Jiangnan Group (1366 HK): Scheme Vote on 15 May

The Jiangnan (1366 HK) scheme document is out with the court meeting scheduled for 15 May. The IFA considers the HK$0.40 per share offer to be fair and reasonable.
Key conditions include approval by at least 75% independent shareholders (<10% rejection). The shareholder with a blocking stake has provided an irrevocable on 22 March.
This is a done deal. At the last close and for the 31 May payment, the gross and annualised spread is 3.9% and 44.0%, respectively.

Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world.
The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
This is mainly due to greater challenges of getting access to lithium at more affordable prices.

Woodside Energy Group Ltd: Upside From BHP Assets & Pluto KGP Interconnector