In today’s briefing:
- P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
- JETS US Equity: Takeoff Accomplished, Time to Return to Base
- China Airlines (2610 TT, NEUTRAL, TP:TWD 23.00): Superb 2023 Masks Upcoming Challenges
- Upgrading Real Estate, Transportation to Market Weight; Smid-Caps With Bullish RS Reversals
P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
- The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
- This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high.
- Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.
JETS US Equity: Takeoff Accomplished, Time to Return to Base
- The surprise US$1.9 billion acquisition of Hawaiian Holdings (HA US) by Alaska Air Group (ALK US) could potentially rerate the U.S. airline sector
- US Global Jets ETF (JETS US) is up 16% from our initiation on 13 November, a mere 5% to our target price of US$19
- We advocate to take profits and square this trade in the upcoming days
China Airlines (2610 TT, NEUTRAL, TP:TWD 23.00): Superb 2023 Masks Upcoming Challenges
- China Airlines (2610 TT) will deliver record profit in 2023 on strong passenger and rising cargo rates
- Beyond 2023, hard to forecast due to high exposure (~30%) to volatile cargo, and it lacks brand recognition and customer loyalty evidenced by its weaker yields to local rival
- Target price of TWD23 based on 1.71x FY2024 P/BV ratio – one SD above mean. Limited 6% UPSIDE, with 3,9% dividend yield. Prefer Eva Airways (2618 TT)
Upgrading Real Estate, Transportation to Market Weight; Smid-Caps With Bullish RS Reversals
- Ongoing developments have been almost exclusively of the risk-on variety ever since we discussed that risk/reward favored buyers in late-October (10/24/23 and 10/31/23 Compass reports).
- The latest risk-on developments include the Russell2000 (IWM) and DJI breaking above resistances of $180 and 35,650, to go along with bullish 9-month RS reversals for small-, mid-, and micro-caps.
- Breadth improvement and broadening participation was a big reason why we recommended buying the IWM when it was testing $162-$163 support (10/31/23 Compass). We remain bullish
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