In today’s briefing:
- Merger Arb Mondays (03 Apr) – Toshiba, Toyo, AAG, Origin, United Malt, Liontown, Mincor, Healius
- Hyundai Elevator: Chairwoman Hyun Jeong-Eun Loses A Major Lawsuit Against Schindler Group
- Dongfang Electric (1072 HK): Heading Towards Another Fruitful Year
- Meilan Airport (357 HK): Higher Visibility into Earnings Recovery Outlook
- Space Race Reality Check
Merger Arb Mondays (03 Apr) – Toshiba, Toyo, AAG, Origin, United Malt, Liontown, Mincor, Healius
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Tyro Payments (TYR AU), Aag Energy Holdings (2686 HK), Toyo.
- Lowest spreads Healius (HLS AU), Liontown Resources (LTR AU), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU), GK Goh Holdings (GKG SP), SHL Japan Ltd (4327 JP).
Hyundai Elevator: Chairwoman Hyun Jeong-Eun Loses A Major Lawsuit Against Schindler Group
- On 30 March, it was announced that Hyun Jeong-Eun (Chairwoman of the Hyundai Group) lost a final lawsuit against the Schindler Group.
- The Supreme Court upheld an appeal court ruling that Chairwoman Hyun needs to pay 170 billion won (US$131 million) and delayed interest payments to Hyundai Elevator.
- Although this major lawsuit loss for Chairwoman Hyun is a tremendous catalyst, the downturn in the construction sector and uncertainty in the reduction in Chairwoman’s stake remain key negatives.
Dongfang Electric (1072 HK): Heading Towards Another Fruitful Year
- Dongfang Electric (1072 HK)‘s 35.1% increase in FY22 recurring earnings demonstrated its healthy operations. Slowdown in 4Q22 (+14.4% YoY) is more a result of pandemic disruption.
- Record new orders of Rmb65.6bn were signed FY22 (+16.3% YoY), and 4Q22 even saw a 25% growth. End-FY22 backlog is estimated to be enough to cover 1.66x FY22 revenue.
- DEC targets a 35% growth in power generation equipment production volume in FY23. Power storage, including pumped storage, and hydrogen energy are important engines going forward.
Meilan Airport (357 HK): Higher Visibility into Earnings Recovery Outlook
- FY22 results announced last week were in line excluding non-recurring items. The results provided latest evidence of monetization potential of its passenger traffic and insights into its cost base.
- We trim 2023 net profit estimate by 10% to RMB520 million and maintain RMB1 billion net profit estimate for 2025. Expect 25%/150% return by 2023/25 respectively based on 20x P/E.
- Duty-Free concession agreement renewal in 2025 is a key positive catalyst, but we also caution potential follow-on share issuance this year could be an overhang on stock price.
Space Race Reality Check
- This week, space launch company Virgin Galactic’s funding woes escalated as emergency talks with potential investors fell through.
- As a result, the company announced a staggering 85% workforce reduction and paused operations until further funding is secured.
- Since going public in 2021 with a $3.7 billion valuation, Virgin Orbit’s value has plummeted by 99% as of its last close, highlighting the realities of space investing.
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