Daily Brief Industrials: Samsung Heavy Industries Pref, Secom Co Ltd, Recruit Holdings and more

In today’s briefing:

Potential Delisting of 5 Preferred Stocks in Korea at End of June

In this insight, we discuss the increasing likelihood of delisting of five preferred stocks in Korea at end of June.
These five preferred stocks are as follows: Samsung Heavy Industries Pref, SK Networks Pref, DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B.
Because the combined market cap of these five preferred shares is 37 billion won, it will have only a minor, positive impact on their common counterparts.

Secom’s share price has surged by 8% following shareholder proposals submitted by Dalton Investments, raising expectations for potential approval of a 10% share buyback and its impact on stock price.
Secom, operating in a mature industry with limited growth prospects, faces challenges in deploying capital and maintaining consistent earnings growth, leading to an accumulation of capital on its balance sheet.
While Dalton’s proposals may not gain sufficient support to pass at the upcoming AGM, the potential involvement of other activists warrant a bullish outlook.

Recruit’s share price been up +13% YTD and gained more than 22% over the last 30-days with the US Dept of Labour releasing job data for April 2023.
Job openings were 10.1m in April 2023 vs estimates of c. 9.4m which created positive sentiment over labour market’s resilience to economic turmoil. However, April numbers were 13.5% down YoY.
Recruit Holdings (6098 JP) is currently trading at a lofty FY+2 EV/EBIT multiple of 17.9x despite earnings expectations deteriorating, we are set to benefit nicely on the short side.

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