Daily Brief Energy/Materials: C.I. TAKIRON Corporation, Youlchon Chemical, Polyplex Corporation, Copper, Crude Oil, Iron Ore, Eastman Chemical Co, Cemex SAB de CV ADR, Reliance Steel & Aluminum and more

• Itochu Corp (8001 JP) today announced another TOB to buy out minorities of a sub other than Descente Ltd (8114 JP). C.I. TAKIRON Corporation (4215 JP) at ¥870. A takeunder.
• The stock was up a lot today I assume on news I didn’t see. Slightly lower than the close. Low EV/EBITDA multiple. Lacking transparency.
• The Board is OK selling at below book, but if one takes out net cash, securities, net receivables, and inventory/materials of one quarter of sales, the rest is 0.54x book.

• C.I. TAKIRON Corporation (4215 JP) has recommended a tender offer from Itochu Corp (8001 JP) at JPY870, a 9.7% premium to the undisturbed price of JPY793 (2 August).
• The lower limit of the tender offer is set at a 10.97% ownership ratio. The tender offer runs from 6 August to 18 September, with payment from 26 September. 
• While attractive vs peer multiples, the offer is light due to a skinny takeover premium, an implied P/B below 1x, and 9% below the mid-point IFA DCF valuation. 

• We discuss the potential additions and deletions to KOSPI 200 in December 2024 amid big declines in share prices of many stocks in KOSPI in the past week.
• The eight potential additions are up on average 8.5% from end of 2023. The eight potential deletion candidates are down on average 39.1% YTD.
• The average market cap of the seven potential additions is 1.9 trillion won. The average market cap of the seven potential deletion candidates is 0.6 trillion won.

• Polyplex is the integrated packaging player with global manufacturing facilities catering global customers and wide industries with its wide product portfolios
• Polyplex saw a 70% jump in exports while there has been a significant jump in product prices and spreads
• Significant investment by an FMCG veteran into another packaging player at the bottom of the cycle further strengthens the thesis.

• China’s state grid is increasing spending by 13% this year, which could boost sentiment in the copper sector
• Chinese steel rebar standards are changing, leading to concerns about obsolete inventories and potential pressure on steel prices
• India’s rising demand for metals, particularly in steel production, could have a significant impact on the global market by 2030

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• The US oil and gas rig count declined by three to 586 for the week ending 02/Aug, following two consecutive weeks of increases. 
• The US oil rig count held steady at 482, after rising by 5 last week. Gas rigs decreased by three to 98, marking a second consecutive weekly decline.  
• In May, US crude oil production experienced its first monthly decline since January, while natural gas output dropped to its lowest level since February 2023. 

• Iron ore prices rose 1.8% last week, maintaining levels above $100/MT due to positive sentiment from potential Chinese stimulus measures.
• The volume put/call ratio for FEF options last week increased to 1.23, reflecting renewed put activity despite positive price action.
• Implied volatility (IV) remained largely flat last week. Despite continued interest in put options, IV skew declined suggesting puts became relatively cheaper.

• Eastman Chemical Company’s earnings call for the second quarter of 2024 presented a thorough discussion of the company’s ongoing projects and performance metrics, weighing both the positive advancements and the challenges faced.
• Among the highlighted points, the company’s methanolysis plant has achieved significant milestones in processing hard-to-recycle materials, producing on-spec food-grade Tritan with 75% rDMT, which demonstrates its capability to address substantial sustainability concerns through chemical recycling at scale.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• We maintain our Outperform recommendation on Cemex. The company benefits from favorable market trends in key markets, a strong commitment to further strengthening its credit profile, and credit-positive strategic priorities.
• Despite challenging conditions, Cemex’s top line for 2Q24 remained relatively flat yoy, missing analyst estimates, while adjusted EBITDA aligned with expectations, rising by 1.5% yoy.
• Cemex ended the quarter with $10.1 billion of total debt, down $357.0 million sequentially. Gross and net leverage declined by one tick sequentially to 3.0x and 2.8x, respectively. 

• Reliance, Inc. reported its financial results for the second quarter of 2024, demonstrating resilience in a challenging market environment characterized by fluctuating steel prices and economic uncertainties.
• The company’s strategic focus on diversification and customer service has allowed it to increase shipments and expand its market presence, albeit with mixed financial outcomes.
• On a positive note, Reliance, Inc. has seen strong results from its recent acquisitions, including Cooksey Steel, American Alloy, and Mid-West Materials, which collectively added nearly $500 million in annualized net sales.