Daily BriefsEnergy & Materials Sector

Daily Brief Energy/Materials: Shougang Fushan Resources, Poongsan Corp and more

In today’s briefing:

  • Fushan Energy: Back to Interesting Levels
  • Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

Fushan Energy: Back to Interesting Levels

By Sameer Taneja

  • Shougang Fushan Resources (639 HK) is back to interesting levels after a correction in HK/China and now trades at 4.5x PE/1.3x EV-EBITDA FY22e and a dividend yield of 17%. 
  • With >50% of the market capitalization in cash (accounting for the dividend liability), there is an excellent margin of safety in the name.
  • A further correction of coking coal prices by 20% from these levels to 1700-1800 RMB/ton would still have the stock trading at a >10% dividend yield. 

Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

By Douglas Kim

  • On 7 September, Poongsan Corp announced a physical division spin-off of its defense business unit. This is likely to have a negative impact on the existing shareholders of Poongsan Corp.
  • Its proposal to spin off the defense business comes at a bad time when investors are very cautious about companies trying to spin off valuable businesses into a separate entity.
  • Poongsan’s spin-off is excluded from the need to include stock purchase rights.

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