Daily Brief Energy/Materials: Korea Zinc, SGX Rubber Future TSR20, Mattr , Ercros , Vale Indonesia Tbk, Element Solutions , Rio Tinto Ltd, Axalta Coating Systems, TMC the metals co and more

• Another play is spread trading Korea Zinc single-stock futures: go long on the front-month and short on the farther-out contract to profit from price convergence.
• The key is when longer-dated futures’ volume will rise and if the basis difference with front-month futures will create arbitrage opportunities. November’s volume seems more for hedging than arbitrage.
• MBK is likely to launch a second tender offer, potentially extending the spread trading timeline and giving us more chances to hit sweet spots.

• Korea Zinc raised the share buyback and tender offer price from 830,000 won to 890,000 won. Korea Zinc’s share price closed up by only 0.6% today to 794,000 won. 
• As a result, the amount of capital involved in this share buyback and tender offer would increase from 2.7 trillion won to 3.2 trillion won.
• Despite higher share buyback/tender offer of Korea Zinc by Choi family, we believe that this fight for the control of Korea Zinc is increasingly in favor of MBK/Jang family.

• Delay in EUDR to lead to renegotiation of premium
• Talks of removal of Ivorian cup lump ban

• In my latest portfolio update, I discussed the potential of investing in cyclical businesses and how shifts in a company’s business model or balance sheet can often go unnoticed by the market, creating compelling investment opportunities.
• Today, I present Mattr Corp, a company that not only revamped its business model and balance sheet without receiving due recognition but also strategically repositioned itself within new end markets. This transformation aligns perfectly with all three of my key criteria for identifying attractive investments in cyclical stocks.
• Mattr Corp., a Canadian industrial conglomerate, is undergoing a strategic transformation into an advanced engineering company by leveraging its extensive expertise and decades of experience in materials science for industrial applications.

• The Spanish government has approved Esseco’s bid for Ercros, after previously approving Bondalti’s offer in June, signaling a significant step in the ongoing takeover battle for the chemical company.
• The next step lies with the CNMV, Spain’s stock market regulator, which must first approve Bondalti’s bid before considering Esseco’s. However, both bids have opposition from shareholders holding 27%.
• Ercros is trading in line with comparables, but there’s potential for bidders to improve their offers, which is likely. Gross spread to Esseco’s offer is 2%. Reiterate long.

• Pure nickel play PT Vale Indonesia, a leading global producer, could transform significantly over the next few years with plans to take stakes in projects more than doubling current output
• However, we see risks of a lull into 2025 as production is near capacity, the nickel price could potentially remain pressured from major global oversupply and operating costs could rise   
• Given the weak consensus 2025E ROE of 5%, a 1.6x P/B is not particularly inexpensive, although for longer-term investors considering the expansion potential this could be an entry point  

• Element Solutions Inc’s second quarter of 2024 showcased a commendable performance with notable strides in organic growth and margin expansion, reflecting efficient strategic execution despite broader market softness in consumer electronics and industrial segments.
• The company reported a revenue increase of over 20% in their Circuitry Solutions, primarily fuelled by robust demand in high-performance computing, artificial intelligence, electric vehicles, and certain mobile markets.
• This growth was somewhat moderated by weaker demand in power electronics and electronics assembly materials within some electric vehicle sectors.

• Rio Tinto recommended a price of $5.85 on the US stock and $8.60 on the CDIs, totaling about AU$10 billion or US$6.7 billion, with a 90% premium to the undisturbed price
• The deal is all cash and is expected to close in mid-2025, pending various approvals including shareholder and board approval
• Rio Tinto’s acquisition of Arcadium is seen as a countercyclical move, paying for optionality and long-term potential rather than immediate returns, reflecting a shift in their M&A strategy.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Axalta Coating Systems recently disclosed its financial performance for the second quarter of 2024, showcasing record-breaking results in the face of challenging market conditions.
• The company reported a 4% rise in net sales, reaching $1.35 billion, with a significant boost in volumes across all end markets.
• Additionally, adjusted EBITDA increased notably by $64 million year-over-year to $291 million, reflecting a 400 basis-point improvement in margins to 21.5%.

• ISA staying the course.
• The July meetings of the ISA featured the first reading of the consolidated text of the deep-sea mining code, which paves the way for formal comment to be submitted by member states to be incorporated into the second reading scheduled for the November 2024 meetings.
• The election of Leticia Carvalho as the new Secretary-General of the ISA should not pose an obstacle to further progress on the mining code, as she reiterated her intention to work toward adoption of the final version of the code at the ISA’s 30th meeting, scheduled for early 2025, in line with TMC’s intended timetable of submitting its exploitation application to the ISA by the end of this year.