In today’s briefing:
- Nidec (6594) Goes Hostile On Takisawa Machine Tool (6121) – I’ve Got 🍿🍿
- Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m
- Keisei Electric: Valuation Distortion Set to Unravel with Fantasy Springs’ Opening in Spring 2024
- Shenzhen Intl (152 HK): Enhancing Its Values
- Nexteel IPO Valuation Analysis
- Inflexion/DWF: Compelling Value
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Nidec (6594) Goes Hostile On Takisawa Machine Tool (6121) – I’ve Got 🍿🍿
- Last year Nidec Corp (6594 JP) approached machine tool maker Takisawa Machine Tool (6121 JP) interested in an integration with their sub. Takisawa said “Talk to the hand.”
- Now Nidec – a blue chip (from Kyoto no less, which traditionally abhors hostile activity) – has gone hostile on Takisawa bidding 65-100% depending how you see undisturbed.
- Lots of moving parts on this one, but in the end, Retail probably decides this.
Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m
- InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 29%+ stake was released from lock-up today.
- He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia.
- In this note, we will talk about the lockup dynamics and possible placement.
Keisei Electric: Valuation Distortion Set to Unravel with Fantasy Springs’ Opening in Spring 2024
- Since the announcement of the proposed Tokyo Disney Sea expansion in 2015, Keisei Electric Railway Co (9009 JP)‘s price perfromance has significantly diverged from Oriental Land (4661 JP)‘s price performance.
- The valuation disparity may result from the Disney Sea expansion’s impact, possibly due to Keisei Electric’s value-oriented investor base.
- Fantasy Springs’ opening could resolve the valuation distortion, leading to potential rewards in a Long Keisei Electric and Short Oriental Land trade.
Shenzhen Intl (152 HK): Enhancing Its Values
- We expect Shenzhen International (152 HK) to sustain efforts in realising and releasing the value of its assets, and this will be positive in narrowing its discount to book.
- The plan to issue REIT by using Hangzhou and Guizhou logistics projects as underlying assets will add to earnings. We estimate they account for 14% of SZI’s total project area.
- Subscription to A-share issuance of Shenzhen Expressway Co (548 HK) will increase its book value by Rmb5bn. This will lower its P/B multiple to 0.46x, from 0.54x.
Nexteel IPO Valuation Analysis
- Our base case valuation of Nexteel is target price of 18,671 won per share, which represents 49% higher than the high end of the IPO price range of 12,500 won.
- We estimate Nexteel to generate sales of 883.6 billion won (up 32.2% YoY) and operating profit of 257.4 billion won (up 42% YoY) in 2023.
- Nexteel’s main products include pipes used to extract oil and gas from oil wells. It also makes steel pipes for transporting oil & steam, construction, shipbuilding, and machinery industries.
Inflexion/DWF: Compelling Value
- DWF Group (DWF LN) is discussing with Inflexion regarding a 100p/share offer (£342 million implied equity value, 53% premium, 8.2x Fwd P/E, but 18% discount to IPO price). PUSU is 7 August.
- Spread to the offer price is 16.2%. The market is pricing a 53% chance to complete the deal, which seems low. Poor cash generation and leverage are already known.
- The shares trade at 6.7x Fwd P/E, 7.6% dividend yield and 18.6% FCF yield (IBES estimates). Considering that management has said it would recommend the offer, my TP is 100p.