In today’s briefing:
- Quiddity Leaderboard STAR 50 Jun 24: 3 Changes Likely But Some Question Marks Over Certain Names
- Cathay Pacific – Rising Inflationary Pressure Expedites Earnings Normalisation
- Cathay Pacific (293 HK, BUY, TP HK$9.90): FY23 Better than Expected, and Surprise Dividends
- BQE: Profitable & Growing Micro-Cap in the Water Treatment Industry
- Qantm Weighs Rouse’s And Adamantem’s Proposals
- Duskin (4665): Q3 FY03/24 Update
Quiddity Leaderboard STAR 50 Jun 24: 3 Changes Likely But Some Question Marks Over Certain Names
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
- I currently expect three changes for the STAR 50 index in June 2024 but there are some questions marks over the names leading the race to become ADDs.
Cathay Pacific – Rising Inflationary Pressure Expedites Earnings Normalisation
- 2023 results came in broadly in line with expectations but included a concerning step up in ex-fuel unit cost inflation.
- We cut our 2024 EBITDAR by 10% to HK$22.2bn, which drives net income down 21% to HK$6.6bn, leaving us well below consensus.
- We revisit Cathay’s margin generation problems from the last cycle, illustrating structural problems which require structural solutions.
Cathay Pacific (293 HK, BUY, TP HK$9.90): FY23 Better than Expected, and Surprise Dividends
- FY23 net profit of HKD9.1b, easily beating the consensus forecast of HKD8.5b, and announced a surprise dividend, the first since 2019, signally pandemic effects are over
- Perfect execution from the team, leveraging on a strong market
- Cathay Pacific is a value BUY, our target price of HK$9.90 (+10% UPSIDE) implies 10x FY2024 PE. We will update more after tuning in the 2 pm analyst briefing
BQE: Profitable & Growing Micro-Cap in the Water Treatment Industry
- BQE’s recurring revenue is growing as a percentage of total revenue, making its business more predictable and stable.
- The Company has major tailwinds from increasing environmental regulations on water discharge as well as increasing mining capex.
- BQE’s EBITDA margins have been steadily improving over the past five years due to its asset-light model, reaching 22% in 2023E.
Qantm Weighs Rouse’s And Adamantem’s Proposals
- On the 27th Feb, Qantm Intellectual Property (QIP AU) announced a NBIO from UK-based Rouse International; but opted not to disclose price, DD, or even if this was a cash/scrip Offer.
- Then on the 12th March, Qantm announced a NBIO from Adamantem Capital, by way of a Scheme, of $1.817/share in cash or with a scrip election of up to 50%
- Qantm secured a trading halt yesterday morning, presumably to flesh out the best Offer for shareholders. Will IPH Ltd (IPH AU) throw its hat into the ring, again?
Duskin (4665): Q3 FY03/24 Update
- Duskin Co Ltd (4665 JP) operates a Dust Control business where it rents mops and mats to residential and commercial customers through franchisees.
- In FY03/23, Duskin posted revenue of JPY170.5bn, operating profit of JPY8.6bn, recurring profit of JPY11.4bn, and net income attributable to owners of the parent of JPY7.2bn.
- Duskin Co., Ltd. announced the cancellation of a portion of its treasury stock.
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