Daily Brief Energy/Materials: Semen Indonesia (Gresik), Nippon Steel Corporation, ABM Investama, Cameco Corp and more

• Semen Indonesia came through the worst of 2022 with flat sales, despite lower volumes, with profits rising by +18.9%, driven by cost savings, reduced debt, and use of DMO coal.
• 4Q2022 may see a slowdown given. the onset of the rainy season but the company is well-positioned to ride a recovery in 2023 with additional capacity from Semen Baturaja.
• Semen Indonesia (SMGR IJ) is well set up for a recovery in earnings for the next two years, with great synergies to come from Semen Baturaja. Valuations are well-below historic.

• With the shrinking domestic market, the steel brokerage business is no longer a profitable business for trading companies, so Nippon Steel needs to strengthen its own sales capabilities.
• While this TOB will have negative impact on Nippon Steel’s balance sheet and profit margins in the short term, the steel market may be moving more significantly than we think.
• While it would be better for Nippon Steel to make NISSOL 100% subsidiary, I suspect that NISSOL is still being kept as a card to be sold for cash generation.

The Asia HY Trade Book for January 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Plans are being made to reroute Inkai’s production to avoid Russian infrastructure and port reliance.
• The firm’s joint acquisition of equipment supplier, Westinghouse, might add valuable cost synergies and improve Cameco’s economies of scope.
• Uranium prices remain supportive, and an operational pivot could realign Cameco stock’s valuation.