United States

• Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
• NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
• But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

• Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
• A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
• Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.

• Driven by stronger PC/networking DRAM sales, Micron reports 5% stronger 4Q23 sales, 10-13ppts q/q margin improvement and 34% y/y decline in MOI to 5.2 months;
• Micron guides 1Q24 sales growth 8-16% q/q and 38-49% y/y and gross margin of 12%, beating Bloomberg consensus estimates by 6ppts;
• Rooms to raise: 1. 1Q24 sales of 18% q/q likely; 2. Turning profits sooner than expected; 3. +Free cash flow in 2024; 4. HBM3E for GH200/H200 to improve mix, margin. 

• Pfizer seems to be the worst-performing large pharma stock of 2023 after it lowered 2024 forecast. The Company continues to grapple with plummeting demand for its COVID products
• The acquisition of Seagen can’t turn things around. Except a few products that are still able to maintain growth, sales of vast majority products that we’re familiar with are declining. 
• The growth engine of Pfizer in post-pandemic era is still uncertain. Even though Pfizer’s share price has fallen sharply, this may still not be the time for bottom fishing.

• This note revises our estimates for Steelcase following its 3QFY24 earnings call.
• In short, for 4QFY24, we up our margin assumption, moderate our revenue assumption slightly, and shave our adjusted EPS estimate by $0.01.
• Steelcase reported strong margins and steady orders in the 3QFY24 on Tuesday evening.

• After Tuesday’s close, Steelcase reported 3QFY24 adjusted EPS of $0.30, ahead of our $0.25 estimate and consensus of $0.23.
• Revenue came in lighter than expected at $778 million versus our $804 million estimate and consensus of $796 million.
• Steelcase delivered another quarter of gross margin improvement at 32.4%, up 370 bps versus 3QFY23, and 46 bps above our estimate. 

• MillerKnoll reports 2QFY24 earnings after market close on Wednesday, December 20, and will host its management conference call at 5:00 pm ET.
• WTR is modeling EPS of $0.55, the midpoint of guidance, on revenue of $987 million. Consensus is $0.54, with an estimate range of $0.52-0.56.
• Order trends. We are modeling orders in the Americas at +13.9% versus a poor year-ago quarter of -17.3%.

• Chairman 69 years old Dr. Liu will retire and 70 years old CEO Dr. Wei will step up. What story do we believe? Will TSMC to regain its strong outperperformance?
• Positive impacts: we expect Arizona fab equipment move-in and ramp up might be further delayed if no subsidies are granted; two teams competing to one voice/team/direction.
• Three risks: 1. Dr. Wei at his age of 70 without a strong management backup; 2. Dr. Wei might make a wrong decision deeply; 3. absolute power corrupts.

• Soybean futures maintained above USc 1,300/bushel indicating continued strong support at the level.
• Large export sales announcements continued over the last week, through November, net Soybean sales from the US were higher than their 5Y average. December pace remains strong too.
• CONAB cut production forecast for Soybean in Brazil due to unfavorable weather over November. Weather has improved recently with rains expected in key agricultural region.

• The market remains in “lockout rally” mode, where prices continue to move higher with little-to-no pullbacks, while ignoring overbought readings.
• We have discussed this on a weekly basis since 11/21/23. Still no reason to fight this bullish trend, and we continue to expect more upside into year-end and early 2024.
• We highlight buys in Steel: NUE, STLD, RS, WOR, TMST, ZEUS, LatAm Banks: ITUB, BSBR, BBD, BAP, BCH, Industrials: ITT, FSS, SPXC, ATS, KAI, CR, BRC, SXI, and HSC

• We recently caught up with management to congratulate James Colquhoun on his promotion to CEO.
• We also got a good update on the business as well as some early indications of trends and management focus for 2024.
• As indicated on the 3Q23 earnings call, new member growth is continuing at a healthy clip and management expects to close 2023 at around 800k members.

• Steelcase reports 3QFY24 results after market close today. We are expecting adjusted EPS of $0.25 on revenue of $804 million.
• Consensus is EPS of $0.23 on revenue of $796 million.
• Our estimate is at the high end of the revenue guidance and the midpoint of adjusted EPS guidance. 

• Welcome to this week’s Energy Cable.
• We finally got stopped out of our crude oil trade at the beginning of last week, only to see crude rally at the end of the week on the back of the FOMC meeting and again today due to the supply chain.
• We also entered a long in utilities as advertised last week and we are already enjoying a healthy plus, also as a consequence of the FOMC.

• After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.
• This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.
• As is our custom, our working excel models are available to our readers on request. 

• Marvell reported earnings recently, and I wanted to mention that at least before I continued onwards because that is a good context-setting event for the industry day.

• Revenue exceeded expectations, but the mix beneath the results was illustrative.

• Datacenter revenue grew 20% QoQ, cloud over 30% QoQ; while networking was strong, they guided for a 40% QoQ decline, consistent with networking OEM results.

• Blockchain gaming peaks industry interest with unprecedented content quality. With the combined market cap of almost 200 leading projects being less than DOGE, there is ample room for future growth.
• In 2023, 133 deals closed, securing $1.1B in funding, marking a 66% drop from 2022. Anticipating a reversal in the next ~6 months due to increased attention and capital.
• High Web3 project costs drive competition for <1M gaming-inclined wallets. A battle for player liquidity will favor projects with versatile user bases, efficiently funneling between games for market dominance.

• FedEx Corp (FDX US) (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  
• Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    
• Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx’s historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk 

• XPER is streamlining its operations by divesting its AutoSense and image sensing product lines to strategically refocus on the burgeoning entertainment sector
• XPER is selling AutoSense and the image sensor business to Tobii for $42.7 million plus a performance fee
• XPER estimates revenue loss from the divesture would be approximately $30 million with adjusted EBITDA moving up

• Ocean Power Technologies reported 2QFY24 revenue of $0.9 million, up 193% Y/Y from $0.3 million in 2QFY23, driven by sales of WAM-V autonomous vehicles, the contract with the Department of Energy (DOE), and an increase in strategic consulting services.
• The previous quarter had revenue of $0.2 million from leased boats.
• The company reported 2QFY24 gross profit of $0.5 million, compared with a profit of $39,000 in 2QFY23.

• The stage is set for a potential resurgence of NFTs in 2024. As crypto wealth increases, spending on NFTs for “flexing”, identity, and entertainment will rise.
• A few NFT Character Brands could explode into mainstream consciousness and grow exponentially. Others will remain as niche communities.
• Ethereum will lose market share in NFTs, and Solana could catch up.

• AMD’s resurgence against a dominant Intel saw the company grow annual revenues >4x between 2017 and 2022
• FY 2023 revenue is likely to be down roughly $1 billion or ~4% YoY.
• We expect a combination of renewed Data Center market share growth plus a grand entrance into the AI acceleration segment will restart the party all over again in 2024. 

• The hosts discuss the abundance of bowl lunch options in midtown Manhattan and how it has changed over time.
• They raise the question of how businesses in this crowded market can stand out and win customers.
• The co-founder of Sweetgreen, Nick Jamaic, is introduced as the guest to discuss their success in the salad bowl game and their recent announcement of not cooking anything in seed oils.

This podcast is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only.

• Rain Oncology (RAIN) is being bought out for $1.16 + CVR worth up to $0.17/share.
• This seems like a worse deal than the $1.25 + CVR Tang was offering, but ok, I will take it.
• Usually these CVR’s should be valued at a large discount to their upper value, so I see no reason to hang around in this one so closing this one for a 15% gain at $1.

• CEO John Belizaire joined WTR’s Tim Regan and Graham Mattison to talk about Soluna’s impressive business turnaround in 2023, including the projects that are online today and their growing adjusted EBITDA contributions.
• Belizaire also talked about new projects under development, incremental revenue sources, and the company’s recently announced AI pilot at Project Dorothy
• 2023 – the turnaround of Soluna. Belizaire talked about the transformation of the company in 2023, coming from the depths of the crypto winter and regulatory delays, to bringing the company’s flagship Project Dorothy online, securing partners at the project level, and then being selected for the 166-MW Project Kati.

• Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
• The Hollysys 6-K filling outlines the closing conditions – a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).  
• Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.

• Research shows that El Niño results in milder weather leading to higher precipitation and consequently ~3.5% higher yield leading to depressed bean prices.
• Bean prices have outperformed seasonal trends in November and December. It is surprising given surplus inventory outlook and El Niño effect on production.
• Notifications of large export sales have driven much of the bullishness in prices over the past week. Prices are up 1.7% from last Friday’s settlement prices.

• Adelson family interests have sold 10% of their LVS equity to acquire a pro basketball franchise. This triggered am 8.5% decline in the stock when it was actually  bullish.
• The market has not yet grasped the magnitude of  the Asian  gaming  recovery arc which points to 2024 reaching baseline 2019 arrivals and GRR pace by mid-2024.
• LVS has the scale and amenities to outperform peers but this  is  not  yet reflected in its trading  range dead pooled in  the $40s.

• Since 11/21/23 Compass we have discussed weekly that even a minor 2-5% pullback is far from a guarantee, considering “breakaway gaps” and what appeared to be an ongoing “lockout rally”
• All we got was a 1% peak to trough decline in the S&P 500, while the Nasdaq 100 (QQQ) pulled back 2.9% (though left the 11/14/23 gap unfilled).
• Now, SPX and QQQ are breaking out yet again after a multi-week consolidation period, including SPX breaking above 2-year resistance at 4600-4607. This is what a strong market looks like.

• So there we were today, scanning the latest corporate filings to the Securities and Exchange Commission , when we noticed that Johnson Controls ($JCI) had filed its latest earnings report .
• We started reading, and were immediately stopped short by this earnings adjustment, right there in the second bullet point: Fiscal Q4 GAAP EPS of $0.80; Q4 Adjusted EPS of $1.
• Hold up — what cybersecurity incident? When did that happen, and what has Johnson Controls said about it so far? 

• Hollysys Automation Technologies (HOLI US)‘s board persistent stonewalling was effectively terminated after the its court injunction was dismissed last month. An SGM will now take place sometime next month.  
• A firm merger agreement was expected this month, and Hollysys announced yesterday Ascendent Capital has emerged as the preferred suitor with a (revised) US$26.50/share Offer. 
• This looks to be (finally) all stitched up. Trading wide-ish to terms. Get involved. 

Immix presented encouraging new data at the American Society of Hematology (ASH) 2023 meeting for its Nexcella subsidiary’s lead CAR-T asset, NXC-201, in amyloid light chain amyloidosis (ALA) patients. The update corresponds to 10 ALA patients treated with NXC-201, for which the overall response rate (ORR) stands at 100% (10/10). NXC-201 also maintains its competitive safety profile among this group, including no cases of neurotoxicity and only low-grade cytokine release syndrome associated with short onset and duration. The results to date are supportive of NXC-201 potentially becoming the first outpatient CAR-T therapy, in our view, offering a potentially desirable treatment option for a fragile patient population. While the current data come from the NEXICART-1 trial based in Israel, with the Investigational New Drug (IND) application in ALA patients recently accepted by the FDA, we believe the enrolment of patients at US trial sites (NEXICART-2) will be a key milestone for the clinical progression of NXC-201. Management has communicated that it intends to submit a Biologics License Application to the FDA once 30–40 ALA patients have been treated.

• Hollysys Automation Technologies (HOLI US) has agreed to be acquired by Ascendent Capital, the largest shareholder, for US$26.50, a 16.7% premium to the last close.   
• The Board’s claims of realising the highest shareholder value are not credible. The Board fails to explain why Ascendent’s offer is superior to Recco’s, although both have the same value.
• Deal fatigue (the process first started in December 2020) and the 42% premium to the undisturbed price suggests meeting the simple majority threshold for a statutory merger is achievable.

• News came out today that Hollysys (HOLI) is being acquired by Ascendant for $26.5/share . So I sold my shares for $24.74 today.
• And closing this at $24.88. Only a 7% spread, and there could be some delays before this closes.
• Was a nice trade and a 43% gain since dedicating a full write-up to it in July this year.

• SES AI Corp. will be hosting its third annual Battery World event on December 12, 2023, at 9:00 am ET.
• SES develops and produces high-performance, Li- Metal rechargeable batteries for electric vehicles (EVs) and other applications.
• During Battery World, the company is expected to announce the world’s inaugural B-sample Joint Development Agreement with a prominent automotive OEM.