In today’s briefing:
- Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
- Kyocera (6971 JP): Another Leg Down
- Adani Enterprises Offering – A Discount and a Put Option But Liquidity Is a Bug Not A Feature
- Leonardo: European Value Defense Play
Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
- Hanwha Aerospace is still narrowly across the borderline. It is especially painful that the share price was corrected by more than 4% today.
- But suppose the cutoff MC is set at less than ₩2.7T, and Aerospace succeeds in recovering slightly. In that case, it will likely manage to come within the borderline.
- Given that the preemptive flow must not have been significant and the profit forecast has been upwards until recently, a price shooting may appear at the time of the announcement.
Kyocera (6971 JP): Another Leg Down
- Kyocera’s aggressive long-term investment plan makes sense: abandon an unnecessary zero-debt policy and borrow while interest rates are still low. The resulting debt/equity ratio should be manageable.
- But the near- to medium-term outlook is not encouraging. Semiconductor inventories are still too high and demand is down. Recovery is likely to be slow.
- The shares have dropped 21% since mid-September, but FY Mar-23 guidance looks too high and both consumer and corporate spending are weak. Wait for capitulation.
Adani Enterprises Offering – A Discount and a Put Option But Liquidity Is a Bug Not A Feature
- After the postal ballot approved the offering in December 2022, Adani Enterprises (ADE IN) is on track to conduct a Rs 200bn or US$2.4bn+ Equity Offering.
- One exchange release today gave the timing, and following few articles in recent days suggesting it, another release said the offering would be partly paid shares.
- The structure of the Offer and risks are detailed below but investors should remember, it was illiquidity which got the price here. Liquidity is a Bug not a Feature.
Leonardo: European Value Defense Play
- Leonardo’s revenues should benefit from several program ramp-ups driven by strong book-to-bill in prior years, and an impressive backlog that now stands at €37.4bn
- The underlying market for defense spending remains strong and is set to grow further
- The stock screens very cheap, trading on low multiples vs the sector, and our model shows a fair value well above the current share price.
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