Daily Brief Energy/Materials: CPMC Holdings, Kum Yang , LS Materials , Sasol , Trigon Metals and more

• ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off. 
• Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
• What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing. 

• The arbitrage is clear: it’s the difference between stock rights/subscription costs and short hedge price. Kumyang’s high market interest and volatility amplify this, suggesting unusual trading angles.
• Kumyang’s futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
• This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.

• In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company. 
• Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders. 
• Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible.

• We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
• These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
• The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in September include LS Materials, CIS, and Kyobo Securities.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Sasol’s ESG as “Adequate”, in line with its Environmental and Social scores. The company’s Governance is “Strong”. Controversies are “Material”, but Disclosure is “Strong”. 

The group aspires to be included in the DJSI.

• Trigon announced high-grade drill results from the new zone near Shaft#3 of the Kombat Mine.
• The results confirm strong copper results previously discovered in a 2023 surface drill program that lie outside the proven and probable reserves.
• Today’s release is important as it shows strong resource growth potential in the area around Shaft #3 which would open up more mining faces, reducing operational risk and allowing for future production growth.