In today’s briefing:
- Outsourcing (2427) – Earnings Delay Causes Consternation
- Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?
- Stylam Industries (SYIL IN) 3QFY24: Concall Highlights, Margin Expansion
- Octillion Energy Holdings Pre-IPO – Over-Reliance on Top Customer and Lack of Competitive Edge
- Selecta – ESG Report – Lucror Analytics
- S&P 500 and Nasdaq 100 Testing 20-Day MAs; 10-Yr Treasury Yield Testing Critical 4.35% Resistance
- Sanyo Trading (3176) – Aiming for Growth and a Strong Start to FY9/24
Outsourcing (2427) – Earnings Delay Causes Consternation
- Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
- Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
- Outsourcing shares are down hard on this. -1.5% as I write. I examine.
Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?
- Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed.
- Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer.
- Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.
Stylam Industries (SYIL IN) 3QFY24: Concall Highlights, Margin Expansion
- Stylam Industries (SYIL IN) reported its best-ever EBITDA margin of 22.3% Vs 16.8% due to a raw material price decline. Revenues continued to remain soft, with growth of -8% YoY.
- The company completed its brownfield expansion to increase the plant capacity by 40% and is now embarking on a capacity expansion of 200 crores in FY25, effectively doubling its revenues.
- Stylam Industries (SYIL IN) trades at 22x/19x FY24e/25e, with a potential for doubling of revenues over the next 3-5 years.
Octillion Energy Holdings Pre-IPO – Over-Reliance on Top Customer and Lack of Competitive Edge
- Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
- Octillion’s main revenue driver has been its EV battery systems with battery cells over the track record period, with a healthy balance sheet to support its cash burn.
- However, its revenue growth fell off a cliff in 1H23 due to its heavy reliance on a single customer, which doesn’t appear sustainable, in our view.
Selecta – ESG Report – Lucror Analytics
- Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
- We view Selecta’s ESG as “Adequate”, in line with the Environmental and Governance scores, while the Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
- Selecta claims to be the leader in the European vending machine market. The company operates vending and coffee machines in workplaces, public areas (e.g. hospitals, universities, train stations, airports and petrol stations) and entertainment venues.
S&P 500 and Nasdaq 100 Testing 20-Day MAs; 10-Yr Treasury Yield Testing Critical 4.35% Resistance
- Large-Cap indexes (S&P 500, Nasdaq 100) remain bullish, finding support at their respective 20-day MAs since November 2023, and we remain bullish
- The question is whether that will continue to be the case. Concerns are rising Treasury yields and the U.S. dollar (DXY), which have broken above short-term resistance levels on Feb13
- Friday’s PPI report should provide more clarity as to how concerned we should be about rising inflation
Sanyo Trading (3176) – Aiming for Growth and a Strong Start to FY9/24
- Q1 FY9/24 results were at a record high for the company for a first quarter period, with the company benefitting from stronger-than-expected demand from the auto sector, together with a forex tailwind from a weak Japanese yen benefitting the Overseas Subsidiaries segment; this business saw a major uplift in profitability YoY with positive trading conditions in the Americas and Thailand for exported Japanese goods.
- Demand also remained firm in the company’s specialist areas of expertise such as bio-related and feed-related areas, and geothermal equipment.
- The company has maintained FY9/24 guidance, which indicates some expectations of auto demand normalizing from pronounced levels in Q1 FY9/24.
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