In today’s briefing:
- Escorts Kubota (ESCORTS IN) | Alarming Allegations by Dealers
- I Squared/FirstGroup: Why Have the Negotiations Ended?
- Sinotrans (598 HK): Still a Very Decent Performance
- Balaji Speciality Chemicals Pre-IPO Tearsheet
Escorts Kubota (ESCORTS IN) | Alarming Allegations by Dealers
- Escorts Kubota (ESCORTS IN) ‘s domestic market share as of FY22 stood at 10.3 % vs 12% in FY20 against the aspiration of 15% for FY22.
- Our interactions with various dealers across key northern and eastern states suggest caution and structural inability to regain market share loss.
- Post equity infusion, Kubota Corp (6326 JP) is probably in for more surprises than what it might have initially hoped for.
I Squared/FirstGroup: Why Have the Negotiations Ended?
- On 16 August, I Squared confirmed it did not intend to make an offer for FirstGroup thus will now be precluded from bidding for six months.
- The 15 August offer implied almost no premium for the core business, significant value not reflected, and a difficult to grasp structure for most investors, in my view.
- A SOTP approach gives a fair value of 183.4p. The board seems right in its refusal. Other bidders may appear or I Squared may return to the negotiating table. Long.
Sinotrans (598 HK): Still a Very Decent Performance
- Recurring profit for Sinotrans (598 HK) increased 16.4% in 1H22 and improved to 16.6% in 2Q22. The declaration of an interim dividend also highlights management’s confidence.
- We expect a pick-up in 2H22 as negative impact of the lockdowns faded. Also, contribution from DHL-Sinotrans should return to growth as international express regain momentum.
- Strong financial position should allow for higher dividend payout, and currently it is already yielding 10.4%. Its 3.6x PER and 0.4x P/B are cheap, especially relative to ROE of 11.3%.
Balaji Speciality Chemicals Pre-IPO Tearsheet
- Balaji Speciality Chemicals (1742663D IN) is looking to raise about US$126m in its upcoming India IPO. The deal will be run by JM Financial and HDFC Bank.
- Balaji Speciality Chemicals (BSC) is the sole manufacturer in India of niche chemicals such as Ethylenediamine, Piperazine (Anhydrous), Diethylenetriamine, Amino Ethyl Ethanol Amines and Amino Ethyl Piperazine, according to CRISIL.
- The chemicals it manufactures are import substitutes and are used in end-use industries such as speciality chemicals. Its customer base grew from 45 in FY20 to 182 in FY22.
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