In today’s briefing:
- Japan’s Governance Changes I – The PBR 1.0 Target
- Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
- Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation
- Tokyo Electron (8035 JP): Recovery Likely to Be Slow
- Lian Beng: Family Takeout At <50% of NAV
- Significant EV Opportunity with a Profitable and Growing Base Business
Japan’s Governance Changes I – The PBR 1.0 Target
- The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
- After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
- There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.
Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
- Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
- The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely.
- The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.
Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation
- Dongfang Electric (1072 HK)‘s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.
- It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
- While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.
Tokyo Electron (8035 JP): Recovery Likely to Be Slow
- Samsung is finally cutting semiconductor production while Micron makes further cuts to both production and capital spending.
- Demand for Japanese semiconductor production equipment has stopped growing and the Japanese government plans to restrict exports in the months ahead.
- An optimist would say that the bad news is now all in the price, but this is not good for Tokyo Electron (TEL) and its shares are not cheap.
Lian Beng: Family Takeout At <50% of NAV
- Singaporean construction firm Lian Beng (LBG SP) has announced a voluntary unconditional cash Offer from the controlling Ong family, via investment holding company OSC Capital.
- The Offer Price of S$0.62/share (not declared final) is a mediocre 8.8% premium to last close and a 59.7% discount to the 30 November 2022 NAV of S$1.538/share.
- The announcement fails to mention the NAV/share. The IFA considered the 2021 Mandatory Offer of S$0.50/share not fair and not reasonable. Expect a similar conclusion
Significant EV Opportunity with a Profitable and Growing Base Business
- Greenland is a leading Tier 1 supplier of transmissions, integrated electric drivetrains, and all-electric construction equipment.
- The company supplies more than 100 multinational and Chinese lift truck original equipment manufacturers (OEMs) through its research and development (R&D), testing, and manufacturing facilities.
- The company also manufactures and sells battery-electric powered heavy construction equipment in the US market, the HEVI division, which we see as being at the early stages of a significant growth opportunity.
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