In today’s briefing:
- Nippon Yusen (9101) – Guidance Revision Up Still Conservative, Means More Capital Return Eventually
- Canvest Environmental (1381 HK): Grandblue’s Pre-Condition Privatisation at HK$4.90
- Robotics+Bobcat Merger: Merger Ratio Revision Possibility & Arb Spread Recalculations
- Ryanair – FY25 Weakness Suggests a “normalization” and Prompts Structural Industry Questions
- Trapping the Royal Rat-Catcher
- SYM: Symbolic Overvaluation, Sell
- CXW: Strong History of Contract Retention Preview 2Q24 Results
Nippon Yusen (9101) – Guidance Revision Up Still Conservative, Means More Capital Return Eventually
- Nippon Yusen Kk (9101 JP) today announced an upward revision of H1 and full-year guidance. It was a dramatic increase.
- The breakdown of the OP and RP numbers suggests a huge gain in containers in Q1 and into Q2. The breakdown of revenue and OP changes suggested substantial H2 conservatism.
- On a capital-adjusted basis, Nippon Yusen is now slightly cheap vs its domestic peers and has shown a willingness to spend its excess cash on buybacks. Expect more.
Canvest Environmental (1381 HK): Grandblue’s Pre-Condition Privatisation at HK$4.90
- Canvest Environmental Protection Group (1381 HK) disclosed a pre-conditional Cayman scheme privatisation from Grandblue Environment Co A (600323 CH) at HK$4.90 per share, an 11.6% premium to the last close price.
- The precondition relates to the completion of capital injection into the offeror, Grandblue shareholder, and regulatory approvals. The heavy presence of SOE entities makes this a formality.
- While not a knockout bid, the offer (which is final) is reasonable. Shareholders with blocking stakes will be supportive. Timing is the key risk as the offer is long-dated.
Robotics+Bobcat Merger: Merger Ratio Revision Possibility & Arb Spread Recalculations
- During Kim Byung-hwan’s hearing, he acknowledged market concerns about the Doosan merger, increasing skepticism about Doosan’s ability to maintain the original merger ratio.
- Calculating Bobcat’s net asset value using the net asset value method yields approximately ₩6.1T, derived from ₩5.95T in year-end equity plus ₩0.13T in adjustments.
- Reassess arb trading opportunities; with no short hedge for Robotics, consider an outright long position in Bobcat if its swap price is revised and the spread widens.
Ryanair – FY25 Weakness Suggests a “normalization” and Prompts Structural Industry Questions
- Ryanair issued a stark warning on summer pricing today with 1Q25 results and we cut our FY25 net income 31% accordingly.
- Our forecasts represent a re-set of unitary economics to pre-pandemic levels and it is difficult to plot improvement unless consolidation benefits or winter surgery help FY26.
- Ryanair’s cost advantage has widened markedly against peers, justifying a strategy of continued market share focus as competitors face greater challenges.
Trapping the Royal Rat-Catcher
- According to The Sunday Times, Philip Jansen is reportedly planning a takeover bid for Rentokil Initial (RTO LN), a FTSE 100 pest control company, with private equity backing.
- Jansen plans to boost Rentokil’s US performance and enhance its integration with Terminix, with the potential to market consolidation. Closest comparable Rollins trades at 33.7x EV/NTM EBIT vs. Rentokil’s 15.7x.
- As a global leader in pest control and hygiene services, Rentokil boasts a strong market position and brand recognition. Rentokil will report its H1 results on 25 July. Long.
SYM: Symbolic Overvaluation, Sell
- We are initiating coverage of Symbotic (SYM) with a Sell Rating and $10 target.
- The latest quarterly report from SYM suggests there could be little in the form of catalysts with the biggest news being related to a business owned by the CEO
- We believe investors are putting too much reliance on SYM generating revenue from Wal-Mart (WMT) even though WMT is also using SYM’s competition for warehouse automation.
CXW: Strong History of Contract Retention Preview 2Q24 Results
- We remain optimistic about CXW’s new business activities, operating improvements and cost containment efforts.
- Over time, we expect occupancies at CXW facilities to continue to increase, the pending ICE termination of services at CXW’s South Texas Family Residential Center notwithstanding, as ICE & multiple government entities seek capacity.
- CXW also continues to strengthen its balance sheet, with a 2Q24 debt offering concurrent with a tender offer for 2026 8.25% notes.