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
- 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
- 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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