Daily Brief Energy/Materials: Boss Resources, Yodogawa Steel Works, Air Products & Chemicals, Inc, KEFI Minerals PLC, Medco Energi, Pan African Resources and more

• Privatisations could lead to two/three S&P/ASX 200 (AS51 INDEX) constituents being delisted in October/November and that means ad hoc inclusions to maintain the number of constituents at 200.
• Then there could be one change for the S&P/ASX 20 Index and two changes for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in December.
• The impact on the potential adds/deletes for the S&P/ASX 200 (AS51 INDEX) is high at between 7.5-23 days of ADV to trade from passive trackers.

• Activist investor, Strategic Capital, has taken a significant 5% stake in the underperforming steel company
• Yodogawa stacks up in line with the sector on operating metrics but its under leveraged balance sheet has crimped Returns on Equity and valuations
• We expect that the activist will seek to improve the company’s ROE through an improvement in capital allocation. That is bullish

• Air Products and Chemicals’ pricing strength remains unabated, with its volume improving for an impressive ninth consecutive quarter, bolstered by strong on-site performance, and the integration of over 13 new assets.
• Strategically, Air Products & Chemicals underscores two fundamental growth pillars: the robust core industrial gas business and the pioneering low and zero-carbon hydrogen projects.
• The latest quarter results were also commendable, with a 3% volume increase and a 10% rise in merchant price.

Three recent developments have served to put KEFI’s Tulu Kapi into the spotlight. The first is Ethiopia’s recent central bank directive exempting certain strategic industries – including mining – from foreign exchange controls, satisfying the last major condition precedent for the issuance of final approval by the project finance lenders. The second is Allied Gold’s listing on the TSX, including its decision to raise US$250m (US$160m in equity), of which 80% is to be invested in developing the Kurmuk mine, also in Ethiopia, on the border with Sudan, west of Tulu Kapi. The third is the takeover of early-stage OreCorp by Silvercorp at a price equivalent to 24.5% of attributable NPV5% or US$46.14 per resource ounce.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• JSW Infrastructure
• Medco Energi

Pan African Resources’ (PAF’s) FY23 results, announced on 13 September, were closely in line with our forecasts. Barberton underground, Evander underground and the Barberton Tailings Retreatment Project (BTRP) all recorded higher throughputs at slightly lower grades than we had been expecting, but also lower unit cash costs in ZAR/t terms. Elikhulu performed in line with our expectations in terms of output, albeit at slightly higher unit costs, owing to continued electricity supply disruptions and unfavourable weather. Overall, earnings for H123 and FY23 were US$2.5m higher than our prior forecasts, translating into 8.5% outperformance and 4.3% outperformance, respectively. EPS was in the top half of the consensus forecast range.