Category

Industrials

Apr 12
0

Daily Brief Industrials: Japan Post Holdings, Lian Beng, Dongfang Electric, Tokyo Electron, Greenland Technologies Holdi and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Japan’s Governance Changes I – The PBR 1.0 Target
  • Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
  • Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation
  • Tokyo Electron (8035 JP): Recovery Likely to Be Slow
  • Lian Beng: Family Takeout At <50% of NAV
  • Significant EV Opportunity with a Profitable and Growing Base Business

Japan’s Governance Changes I – The PBR 1.0 Target

By Travis Lundy

  • The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
  • After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures.  In January, new rule proposals dropped.
  • There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62

By Arun George

  • Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
  • The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely. 
  • The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.   

Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation

By Osbert Tang, CFA

  • Dongfang Electric (1072 HK)‘s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  
  • It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
  • While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.

Tokyo Electron (8035 JP): Recovery Likely to Be Slow

By Scott Foster

  • Samsung is finally cutting semiconductor production while Micron makes further cuts to both production and capital spending. 
  • Demand for Japanese semiconductor production equipment has stopped growing and the Japanese government plans to restrict exports in the months ahead. 
  • An optimist would say that the bad news is now all in the price, but this is not good for Tokyo Electron (TEL) and its shares are not cheap.

Lian Beng: Family Takeout At <50% of NAV

By David Blennerhassett

  • Singaporean construction firm Lian Beng (LBG SP) has announced a voluntary unconditional cash Offer from the controlling Ong family, via investment holding company OSC Capital.
  • The Offer Price of S$0.62/share (not declared final) is a mediocre 8.8% premium to last close and a 59.7% discount to the 30 November 2022 NAV of S$1.538/share.
  • The announcement fails to mention the NAV/share. The IFA considered the 2021 Mandatory Offer of S$0.50/share not fair and not reasonable. Expect a similar conclusion 

Significant EV Opportunity with a Profitable and Growing Base Business

By Water Tower Research

  • Greenland is a leading Tier 1 supplier of transmissions, integrated electric drivetrains, and all-electric construction equipment. 
  • The company supplies more than 100 multinational and Chinese lift truck original equipment manufacturers (OEMs) through its research and development (R&D), testing, and manufacturing facilities.
  • The company also manufactures and sells battery-electric powered heavy construction equipment in the US market, the HEVI division, which we see as being at the early stages of a significant growth opportunity.

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Apr 12
0

Daily Brief Industrials: Japan Post Holdings, Lian Beng, Dongfang Electric, Tokyo Electron, Greenland Technologies Holdi and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Japan’s Governance Changes I – The PBR 1.0 Target
  • Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
  • Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation
  • Tokyo Electron (8035 JP): Recovery Likely to Be Slow
  • Lian Beng: Family Takeout At <50% of NAV
  • Significant EV Opportunity with a Profitable and Growing Base Business

Japan’s Governance Changes I – The PBR 1.0 Target

By Travis Lundy

  • The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
  • After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures.  In January, new rule proposals dropped.
  • There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62

By Arun George

  • Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
  • The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely. 
  • The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.   

Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation

By Osbert Tang, CFA

  • Dongfang Electric (1072 HK)‘s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  
  • It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
  • While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.

Tokyo Electron (8035 JP): Recovery Likely to Be Slow

By Scott Foster

  • Samsung is finally cutting semiconductor production while Micron makes further cuts to both production and capital spending. 
  • Demand for Japanese semiconductor production equipment has stopped growing and the Japanese government plans to restrict exports in the months ahead. 
  • An optimist would say that the bad news is now all in the price, but this is not good for Tokyo Electron (TEL) and its shares are not cheap.

Lian Beng: Family Takeout At <50% of NAV

By David Blennerhassett

  • Singaporean construction firm Lian Beng (LBG SP) has announced a voluntary unconditional cash Offer from the controlling Ong family, via investment holding company OSC Capital.
  • The Offer Price of S$0.62/share (not declared final) is a mediocre 8.8% premium to last close and a 59.7% discount to the 30 November 2022 NAV of S$1.538/share.
  • The announcement fails to mention the NAV/share. The IFA considered the 2021 Mandatory Offer of S$0.50/share not fair and not reasonable. Expect a similar conclusion 

Significant EV Opportunity with a Profitable and Growing Base Business

By Water Tower Research

  • Greenland is a leading Tier 1 supplier of transmissions, integrated electric drivetrains, and all-electric construction equipment. 
  • The company supplies more than 100 multinational and Chinese lift truck original equipment manufacturers (OEMs) through its research and development (R&D), testing, and manufacturing facilities.
  • The company also manufactures and sells battery-electric powered heavy construction equipment in the US market, the HEVI division, which we see as being at the early stages of a significant growth opportunity.

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Apr 11
0

Daily Brief Industrials: Nippon Rietec, MTR Corp, China Communications Construction, Caverion Corp and more

By | Daily Briefs, Industrials

In today’s briefing:

  • TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
  • MTR (66 Hk): Now if You Missed the First Bounce
  • China Comm Const (1800 HK): We See More Stories Coming
  • Caverion Switches to Triton’s Offer

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

By Janaghan Jeyakumar, CFA

  • The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
  • According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. 
  • Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.

MTR (66 Hk): Now if You Missed the First Bounce

By Henry Soediarko

  • MTR Corp (66 HK) is the lagging stock in Hong Kong although it is a key beneficiary to more Chinese tourists that will arrive soon.
  • HK Government has launched a few initiatives to invite tourists to visit Hong Kong that will boost higher ridership for the company. 
  • It is now trading at the level prior to COVID with the potential of higher earnings that will come from the ridership increase. 

China Comm Const (1800 HK): We See More Stories Coming

By Osbert Tang, CFA

  • China Communications Construction (1800 HK) is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.
  • Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. 
  • Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders’. 

Caverion Switches to Triton’s Offer

By Jesus Rodriguez Aguilar

  • Triton’s consortium reduced the acceptance threshold to 2/3rds of all shares, and, as expected,  the board of Caverion changed its recommendation in favour of the Triton consortium’s proposal. 
  • Nearly a third of the shares supporting the offer are held by each party. Bain’s consortium hasn’t improved Triton’s offer and expects the latter will encounter antitrust hurdles.
  • Triton would make a cumulative IRR of about 20% if it sold the business for 7.5x EBITDA by year 7. Long and tender to Triton’s offer (spread is 2.63%/3.75% gross/annualised).

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Apr 11
0

Daily Brief Industrials: Nippon Rietec, MTR Corp, China Communications Construction, Caverion Corp and more

By | Daily Briefs, Industrials

In today’s briefing:

  • TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
  • MTR (66 Hk): Now if You Missed the First Bounce
  • China Comm Const (1800 HK): We See More Stories Coming
  • Caverion Switches to Triton’s Offer

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

By Janaghan Jeyakumar, CFA

  • The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
  • According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. 
  • Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.

MTR (66 Hk): Now if You Missed the First Bounce

By Henry Soediarko

  • MTR Corp (66 HK) is the lagging stock in Hong Kong although it is a key beneficiary to more Chinese tourists that will arrive soon.
  • HK Government has launched a few initiatives to invite tourists to visit Hong Kong that will boost higher ridership for the company. 
  • It is now trading at the level prior to COVID with the potential of higher earnings that will come from the ridership increase. 

China Comm Const (1800 HK): We See More Stories Coming

By Osbert Tang, CFA

  • China Communications Construction (1800 HK) is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.
  • Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. 
  • Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders’. 

Caverion Switches to Triton’s Offer

By Jesus Rodriguez Aguilar

  • Triton’s consortium reduced the acceptance threshold to 2/3rds of all shares, and, as expected,  the board of Caverion changed its recommendation in favour of the Triton consortium’s proposal. 
  • Nearly a third of the shares supporting the offer are held by each party. Bain’s consortium hasn’t improved Triton’s offer and expects the latter will encounter antitrust hurdles.
  • Triton would make a cumulative IRR of about 20% if it sold the business for 7.5x EBITDA by year 7. Long and tender to Triton’s offer (spread is 2.63%/3.75% gross/annualised).

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The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

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Apr 09
0

Daily Brief Industrials: Hong Kong Hang Seng Index, Toyo Construction and more

By | Daily Briefs, Industrials

In today’s briefing:

  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?

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

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

By David Blennerhassett

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Apr 09
0

Daily Brief Industrials: Hong Kong Hang Seng Index, Toyo Construction and more

By | Daily Briefs, Industrials

In today’s briefing:

  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?

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

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

By David Blennerhassett

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Apr 08
0

Daily Brief Industrials: Amaero International Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Amaero International (ASX:3DA) – “Plan B” Brings Risk but Potentially Greater Returns
  • Amaero International Ltd – “Plan B” Brings Risk but Potentially Greater Returns

Amaero International (ASX:3DA) – “Plan B” Brings Risk but Potentially Greater Returns

By Research as a Service (RaaS)

  • Amaero has substantially shifted its strategy to focus on titanium powder production with a new project planned for the UAE.
  • With the greenlight slated for the end of June 2023, we conservatively anticipate first production in H1 FY25, powder qualification in H1 FY27 and “at capacity” production in H1 FY2.
  • We have substantially restruck our earnings forecasts to reflect this new project.

Amaero International Ltd – “Plan B” Brings Risk but Potentially Greater Returns

By Research as a Service (RaaS)

  • Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
  • Following a strategic review, Amaero has shifted its focus to titanium powder production and has created a new United Arab Emirates-based enterprise, Amaero Advanced Metals Ltd, to build an 827-tonne a year titanium powder operation within Abu Dhabi’s KEZAD industrial park.
  • The nuances of the focus have shifted since the company first announced plans to concentrate on the UAE and titanium powder operations but “Plan B” allows Amaero shareholders to retain 100% ownership of the project which has been scaled back to focus on the opportunity with the greatest economic return.

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Apr 08
0

Daily Brief Industrials: Amaero International Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Amaero International (ASX:3DA) – “Plan B” Brings Risk but Potentially Greater Returns
  • Amaero International Ltd – “Plan B” Brings Risk but Potentially Greater Returns

Amaero International (ASX:3DA) – “Plan B” Brings Risk but Potentially Greater Returns

By Research as a Service (RaaS)

  • Amaero has substantially shifted its strategy to focus on titanium powder production with a new project planned for the UAE.
  • With the greenlight slated for the end of June 2023, we conservatively anticipate first production in H1 FY25, powder qualification in H1 FY27 and “at capacity” production in H1 FY2.
  • We have substantially restruck our earnings forecasts to reflect this new project.

Amaero International Ltd – “Plan B” Brings Risk but Potentially Greater Returns

By Research as a Service (RaaS)

  • Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
  • Following a strategic review, Amaero has shifted its focus to titanium powder production and has created a new United Arab Emirates-based enterprise, Amaero Advanced Metals Ltd, to build an 827-tonne a year titanium powder operation within Abu Dhabi’s KEZAD industrial park.
  • The nuances of the focus have shifted since the company first announced plans to concentrate on the UAE and titanium powder operations but “Plan B” allows Amaero shareholders to retain 100% ownership of the project which has been scaled back to focus on the opportunity with the greatest economic return.

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Apr 07
0

Daily Brief Industrials: Golden Energy & Resources, Old Dominion Freight Line and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer
  • Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers

Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer

By Arun George

  • Golden Energy & Resources (GER SP)’s valuation is dependent on three key assets – Golden Energy Mines (GEMS IJ), Stanmore Coal (SMR AU) and Ravenswood. GEMS/SMR have observable values.
  • The valuation of GEAR’s 50% stake in Ravenswood gets little publicity largely as it is unlisted. However, the annual report provides data points to value this key gold asset. 
  • Based on peer EV/Resource and EV/Reserve multiples, Ravenswood 50% stake is worth S$200-465 million. Using the midpoint valuation, the SoTP valuation is S$1.40 (39% upside to the last close).

Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers

By Baptista Research

  • This is our first report on a major LTL shipping company, Old Dominion Freight Line.
  • As a result, the company delivered double-digit growth in earnings per diluted share in the fourth quarter.
  • Besides that, the productive labor expenses as a percentage of revenue decreased by 170 basis points within their direct operating costs, while their purchase transportation costs decreased by 200 basis points.

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Apr 07
0

Daily Brief Industrials: Golden Energy & Resources, Old Dominion Freight Line and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer
  • Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers

Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer

By Arun George

  • Golden Energy & Resources (GER SP)’s valuation is dependent on three key assets – Golden Energy Mines (GEMS IJ), Stanmore Coal (SMR AU) and Ravenswood. GEMS/SMR have observable values.
  • The valuation of GEAR’s 50% stake in Ravenswood gets little publicity largely as it is unlisted. However, the annual report provides data points to value this key gold asset. 
  • Based on peer EV/Resource and EV/Reserve multiples, Ravenswood 50% stake is worth S$200-465 million. Using the midpoint valuation, the SoTP valuation is S$1.40 (39% upside to the last close).

Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers

By Baptista Research

  • This is our first report on a major LTL shipping company, Old Dominion Freight Line.
  • As a result, the company delivered double-digit growth in earnings per diluted share in the fourth quarter.
  • Besides that, the productive labor expenses as a percentage of revenue decreased by 170 basis points within their direct operating costs, while their purchase transportation costs decreased by 200 basis points.

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