In today’s briefing:
- Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
- Angel Robotics: IPO Valuation Analysis
- Shanghai REFIRE Group Pre-IPO Tearsheet
- Grab Holdings: Initiation Of Coverage – What Is Their Core Business Strategy? – Major Drivers
- SITC International (1308 HK): Bidding Farewell to the Trough
- Trex Company Inc.: 7 Biggest Growth Drivers For The Company In 2024 & Beyond! – Financial Forecasts
- HEICO Corporation: Is It Able To Capture Adequate Value From Acquisitions? – Major Drivers
- Magyar Vagon/Talgo: Spanish Government Steps In
- Capita Group – Capitalising on a more streamlined business
- Republic Services Inc.: Solid Trends In Service Volume Business As A Major Growth Catalyst! – Other Key Drivers
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Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
- Over two decades, Keisei Electric Railway Co (9009 JP) has been the subject of softer and harder activist efforts to have Keisei monetise its stake in affiliate Oriental Land (4661).
- The most recent efforts were by Palliser last fall, briefly discussed here two weeks ago when Keisei announced a buyback.
- Today, Keisei announced (Japanese only) an Accelerated Block Offering of 1% of Oriental Land shares. The accompanying announcement is worth reading. It’s pretty clear.
Angel Robotics: IPO Valuation Analysis
- Our base case valuation of Angel Robotics is target price of 20,277 won per share, which represents a 35% upside from the high end of the IPO price range.
- We estimate sales of 9 billion won in 2024 (up 75.2% YoY) and 14.9 billion won in 2025 (up 65.3% YoY). Our estimates are more conservative than the company’s estimates.
- We like the strong sales growth of Angel Robotics. Many investors are likely to view this positively in this IPO. LG Electronics and Samsung Electronics are customers of Angel Robotics.
Shanghai REFIRE Group Pre-IPO Tearsheet
- Shanghai REFIRE Group (SRG) is looking to raise around US$100m in its upcoming Hong Kong IPO. The bookrunner for the deal is CICC.
- SRG designs, develops, manufactures, and sells hydrogen fuel cell systems, hydrogen production systems, and related components, as well as provides fuel cell engineering and technical services.
- According to Frost & Sullivan (F&S), it ranked first in the hydrogen fuel cell system market in China, with a market share of 25.9%.
Grab Holdings: Initiation Of Coverage – What Is Their Core Business Strategy? – Major Drivers
- This is our first report on transportation and fintech platform provider, Grab Holdings Inc.
- The company had a pivotal year in 2023, delivering on key goals and achieving profitability in adjusted EBITDA since the third quarter and earning a positive net profit in the fourth quarter.
- The company experienced a series of enhancements, including a successful rebuild of their mobility business which had been vastly impacted by the pandemic.
SITC International (1308 HK): Bidding Farewell to the Trough
- The 72.5% decline in SITC International (1308 HK)‘s FY23 earnings is disappointing but should already reflected in the share price given the profit warning. Instead, this may be the trough.
- Spot freight rates for key intra-Asia routes have already recovered since 3Q23, with the YTD level higher than the 2H23 average. The 1H24 result may show a sequential rebound.
- Even assuming flat YoY earnings in FY24, it still sits on a 9% dividend yield. The projected ROE of over 24% and net cash position mean 1.6-1.7x P/B undemanding.
Trex Company Inc.: 7 Biggest Growth Drivers For The Company In 2024 & Beyond! – Financial Forecasts
- Trex Company, the outdoor living products manufacturer reported solid performance for both the quarter and full year 2023, surpassing their revenue guidance.
- The strong results were credited to its mid-single-digit channel sell-through growth and new product offerings, demonstrating the strength and resilience of the Trex brand.
- In the fourth quarter, the company introduced numerous products that expanded its portfolio in existing categories and extended into complementary adjacencies.
HEICO Corporation: Is It Able To Capture Adequate Value From Acquisitions? – Major Drivers
- In its recent results, Heico is showing a significant growth trajectory in its recent financial results.
- This growth can be attributed to a couple of key factors, but there are also a number of risks and potential downsides that investors should be aware of.
- In terms of positives, HEICO’s first quarter of fiscal 2024 showed dramatic improvement over the first quarter of fiscal 2023.
Magyar Vagon/Talgo: Spanish Government Steps In
- According to Expansion, the Hungarian Ganz-MaVag Euroe Zrt consortium is giving final touches to the offer for Talgo SA (TLGO SM) after obtaining verbal approval from the lenders.
- The Minister of Transport assured that the Spanish Government will do everything possible to prevent the consortium from taking over Talgo due to hidden interests of the Viktor Órban Government.
- However, the Government would need to justify its decision thoroughly to avoid potential legal challenges. For now, I would remain in the sidelines due to uncertainties about development and timing.
Capita Group – Capitalising on a more streamlined business
Capita faced numerous cash drags in FY23, notably £20m in costs associated with a cyber incident, a £30m pension deficit contribution and a £20m increase in technology capex, which depressed the adjusted free cash outflow before disposals to £116m (£42.4m outflow in FY22). Despite these challenges, the implementation of a rigorous cost efficiency programme and the strategic divestment of non-core assets have the potential to fuel a turnaround. Some £160m of annualised cost savings are expected to be realised by mid-2025 (part reinvested for growth), aimed at bolstering a significant improvement in operating margins. As margins improve, shifting to faster-growing market segments with a more competitive cost base could catalyse a reduction in the valuation discount.
Republic Services Inc.: Solid Trends In Service Volume Business As A Major Growth Catalyst! – Other Key Drivers
- Republic Services (RSG) had a strong finish to 2023 highlighting its successful strategy designed for business growth.
- The company’s revenue for the year grew by 11%, which includes a 5% increase from its acquisitions.
- RSG generated 13% adjusted EBITDA growth and margin expansion of 60 basis points, as well as reporting adjusted earnings per share of $5.61.