Daily Brief Industrials: BayCurrent Consulting , Sai Gon Cargo Service , Applus Services SA and more

In today’s briefing:

Japan – Increasing Shorts on Some Interesting** Stocks
Sai Gon Cargo Service (SCS VN): 11.5x FY24e PE, ~7% Dividend Yield, >70% Net Margin Business
I Squared & TDR/Applus: Counteroffer at €11.0

Japan – Increasing Shorts on Some Interesting** Stocks

There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.

Sai Gon Cargo Service (SCS VN) is a cargo handling business, majority owned by the Airports Corporation Of Viet Nam (ACV VN) and Gemadept Corp (GMD VN) .
Net cash (16% of market cap), trading at 11.5x FY24e PE, with ~7% dividend yield (assuming 80% payout ratio), >75% EBITDA margins/>70% net margins, and 5 Yr Avg-ROEs >40%.
We see long-term structural growth drivers with the construction of the Long Thanh Airport, and in the short term, we see an impending cargo volume recovery.

Apollo had last week improved its offer price to €10.65/share of Applus Services SA (APPS SM) and acquired 21.85% of the share capital. Amber Equity signaled it continued in the race.
Amber Equity has raised to €11/share, 3.3% above Apollo’s last offer, for an implied equity value of c. €1,420 million, implied EV of €2,412 million, 6.8x EV/NTM Fwd EBITDA.
After the CNMV authorises the bid from Amber Equity, a 30-day acceptance period will open. Two most likely scenarios are either winner’s curse or the funds agree a 50-50 split.

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