In today’s briefing:
- Boustead Projects: Boustead Singapore Bumps. Still Underwhelming
- Ihara Science (5999 JP) – Here Comes The Bumpitrage
- Kubota (6326) | Signs of Stability
- LIG Nex1: 10x Increase in Operating Profit from 2019 to 2022 Not Adequately Reflected in Share Price
- Millennium Services Group Ltd – Solid Growth Ahead with Contract Wins
Boustead Projects: Boustead Singapore Bumps. Still Underwhelming
- On the 6 Feb, Boustead Projects (BOCJ SP), a high-spec facilities designer and builder, announced an unconditional Offer from Boustead Singapore Limited (BOCS SP) at S$0.90/share.
- The Offer price was low-balled. Taking into account net cash of S$154mn, this was being done cheaply. It needed to be bumped and shares traded up to S$0.99 in expectation.
- BOCS has now bumped to S$0.95/share and declared terms final. Not a great outcome for minorities.
Ihara Science (5999 JP) – Here Comes The Bumpitrage
- In my first piece, Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement I noted that the price was too low. I expected activist efforts.
- The price did not trade below the Tender Offer Price after it opened for trading. That was a sign this wasn’t going to go easy.
- This morning I am made aware of a letter from one of the “active if not activist” shareholders saying the price is too low. Hint: It is.
Kubota (6326) | Signs of Stability
- We turn bullish on Kubota. Macro indicators point to stabilization
- Management guidance for 2023 surprised the market, but we think it is realistic
- We think that quarterly results will be a catalyst to convince investors that profitability is improving
LIG Nex1: 10x Increase in Operating Profit from 2019 to 2022 Not Adequately Reflected in Share Price
- LIG Nex1 produces a wide range of advanced precision electronic systems, including missile, radars, electronic warfare, avionics, tactical communication systems, fire control systems, and naval combat systems.
- LIG Nex1’s operating profit has jumped by nearly 10x from 2019 to 2022. However, its share price has not adequately reflected this growth.
- The company reached its highest ever order backlog of 12.2 trillion won at the end of 2022. The company is benefiting from increased demand for precision guided weapons worldwide.
Millennium Services Group Ltd – Solid Growth Ahead with Contract Wins
- Millennium Services Group Ltd (ASX:MIL) has delivered a H1 FY23 result well below prior forecast, with a two-month timing lag between wage increases and pass-through impacting the gross margin over H1 FY23 (down ~190bps to 14%).
- With these costs now passed through under contract, gross margins improved in Q2 FY23 and are forecast to average around 15% for FY23, implying H2 FY23 margins of ~16%.
- This combined with ~$25m-$30m of new contract business wins over the past six months puts the business in good stead for solid growth in H2 FY23 and into FY24.
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