Daily Brief Energy/Materials: Greatview Aseptic Packaging, SK Innovation, Gold, Cemex SAB de CV ADR, Iron Ore, Medco Energi, Tethys Oil and more

• Greatview Aseptic Packaging (468 HK) disclosed that Mr Bi Hua Jeff (CEO) and Mr Hong Gang (co-founder) are contemplating a possible voluntary conditional offer. The terms and conditions were not disclosed.
• Due to the recent AGM protest votes, management needed to provide a credible alternative to shareholders to ensure that Shandong Xinjufeng Technology Packaging (301296 CH)’s offer failed.   
• Shandong Xinjufeng’s likely game plan is to wait for a binding counteroffer, focus on satisfying the preconditions, and requisition an EGM again to get Board representation.

• Exceeding the ceiling doesn’t cancel the merger; SK Innovation can still proceed. With their decision confirmed, focus should shift to appraisal rights flows rather than cancellation risk.
• We should focus on flow trading given the notable exercise size and potential for unprecedented market activity if institutions, including the NPS, exercise their rights due to the juicy premium.
• The large exercise size and SK Innovation’s KOSPI large-cap status may create unique flow trading opportunities, with potential repurchases after new shares list.

• To say Greatview Aseptic Packaging (468 HK)‘s management and Shandong Xinjufeng (301296 CH) (XJF) don’t get along is an understatement. GAPack has labelled XJF’s pre-conditional Offer hostile and unwelcome.
• Last night (6th August), co-founders Jeff Bi and Gang Hong tabled a non-binding Offer. No price was mentioned. Collectively they hold 14.72% of shares out compared to XJF’s 26.8%.
• A firm Offer (and price) would have been welcome, and this probably reflects on-going funding negotiations. But the announcement will give minorities pause if/when tendering into XJF’s Offer.

• Gold, silver, and copper futures fell by 3%, 6.7%, and 4.6% respectively on Monday amidst recession fears
• Gold and silver options showed bullish sentiment with significant call option buildup, while copper options saw mixed activity with high put interest in the front-month
• Implied volatility surged for gold, silver, and copper, with copper IV increasing by 7 percentage points to 27% post non-farm payroll report

• The transaction is valued at approximately 6.8x 2023 EBITDA, or $396/ton, which we consider a good price given that Cemex currently trades at 5.5x LTM EBITDA, or $208/ ton.
• We view Cemex’s divestments of its Dominican Republic assets as a positive credit event that aligns with its strategic priorities.
• With this divestment, the company should focus on growing its key markets through bolt-on acquisition while maintaining its commitment to a healthy balance sheet.

• Iron ore bounced from the 100 USD/ton level and has maintained a rangebound level between 95 and 130 USD/ton for the last three years.
• Inventories at the ports continued to increase, surpassing 150 million tons, representing about 38 days of inventory (normalized levels around 35 days). 
• After Capital Group’s recent selldown, Fortescue Metals (FMG AU) looks attractive (with a trailing dividend yield of 11% and 6.5x PE) and could be worth exploring. 

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.

• Greentown China
• Medco Energi
• Vedanta Resources

• 2Q24 production of 7,688 bbl/d had been previously reported.
• 2Q24 production was negatively impacted by flooding and production is expected to return to normal during 3Q24.
• In light of the flooding, FY24 production guidance has been trimmed from 7.8-8.6 mbbl/d to 7.8-8.2 mbbl/d.