Daily Brief Industrials: Recruit Holdings, DS Dansuk, AKR Corporindo, Hunan Yuneng New Energy Battery Material, INFRONEER Holdings , Elior, Duskin Co Ltd and more

• Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)). 
• It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. 
• Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

• DS Dansuk reported solid bookbuilding results. DS Dansuk IPO price has been determined at 100,000 won per share, which is 12.4% higher than high end of the IPO price range.
• A total of 1,843 institutional investors participated in this IPO book building. The demand ratio was 342 to 1. DS Dansuk IPO will start trading on 22 December.
• Given the strong IPO bookbuilding results, we believe shares of DS Dansuk are likely to trade above the high end of the IPO sensitivity analysis (137,877 won). 

• AKR Corporindo (AKRA IJ) recently hosted an analyst meeting where it provided some positive guidance for FY2024, with projections of double digit net profit growth with growth across all segments.
• The core trading and distribution business is expected to see positive growth in 2024 with  the real kicker to come from its JIIPE industrial Estate plus recurrent income from utilities.
• AKR Corporindo (AKRA IJ) is an increasingly holistic play on Indonesia’s growth through its fuel and chemical distribution, which is being hosted by smelters and the EV battery complex.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

• JWD Acquisition: Infroneer acquires Japan Wind Development for ¥200 billion, sparking a ¥75 billion market cap dip and concerns about potential overpayment.
• Valuation Analysis: Using DCF and comparable transaction values, estimates suggest JWD’s equity value may be far lower than the agreed-upon ¥200 billion.
• Need for Transparency: Infroneer’s claim of fair value requires scrutiny. Market suggests an estimated fair value of ¥125 billion, emphasizing the need for detailed information on the acquisition.

Elior’s turnround is gathering pace with a near doubling of target recurring annual EBITDA synergies (€56m vs €30m) by 2026 following its April 2023 integration with Derichebourg (DMS). Also, with deleveraging the priority, net debt/EBITDA is expected by management to fall from 5.4x in FY23 to 4x in the current year and below 3x in FY26. Current momentum in terms of pricing, cost control, cross-selling and voluntary contract exits as well as an easing of inflationary pressures look to justify this confidence, with FY24 guidance of c 2.5% adjusted EBITA margin (up from normalised 1.9%) and organic revenue growth of 4–5% (focus on profit, not volume). Consensus FY24e EV/EBITDA of 5.9x reflects the early stage of recovery and lower guidance for H223 rather than potential upside from a turnround.

• Positive dynamic changes being executed – Q1-2 FY3/2024 results were in line with upwardly revised company guidance and indicated that the company is making steadfast progress in its transformation initiatives via positive capital allocation.
• Investment into Smart Factory via RFID technology is being conducted as planned to drive future cost efficiencies, and the company raised its FY dividend forecast to ¥98 per share (initially forecast at ¥78) highlighting the company’s positive stance on returning cash to shareholders.
• The Food Group business continues to see robust growth at ‘Mister Donut’ restaurant chain, driven by increases in footfall, average spending, and store sales YoY.