In today’s briefing:
- Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- Ihi (7013) | Multiple Engines for Growth
- Energy China (3996 HK): Tempting Risk-Return Payoff
- Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
- Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)
Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- 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), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK),Origin Energy (ORG AU), Metro Pacific Investments Co (MPI PM).
- Lowest spreads Liontown Resources (LTR AU), Healius (HLS AU), Penguin International (PBS SP), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Blackmores Ltd (BKL AU), Arcland Service (3085 JP).
Ihi (7013) | Multiple Engines for Growth
- We look for the new MTP to present a growth outlook in the Aerospace division driven by a recovery in the civilian aircraft market
- IHI is a key beneficiary of structural growth themes of higher defense spending and energy transition
- We believe that the market has been overly concerned about a growth plateau. At 9x TEV / NTM EBIT, the stock is a bargain versus global peers
Energy China (3996 HK): Tempting Risk-Return Payoff
- China Energy Engineering (3996 HK) is a laggard in this round of “China style valuation” rally. With strong earnings and project backlog, there is good room to catch up.
- Its 1Q23 earnings growth is ahead of the infrastructure trio, and so as the new contracts signed. Moreover, it has a faster growth in overseas market.
- The 3-year EPS CAGR is projected at 16.3%, yet it just trades on 5x PER. Its ROE of 9.4% makes it attractively priced at only 0.4x P/B for FY23.
Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
- Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
- The company has provided to shareholders an executive summary from the Frost & Sullivan Feasibility Study for its titanium powder project in Abu Dhabi which concludes that the project is feasible across technical, financial and market parameters, and supports the Chairman’s prior guidance to shareholders.
- Amaero is progressing an 827-tonne a year titanium powder facility in the United Arab Emirates which it expects to greenlight before the end of this financial year.
Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)
- Maersk’s Q1 earnings were solid, despite plummeting container rates and volumes. Annualizing Q1 Net Income would give RoE of about 17%, which is a healthy level, in our view.
- Q1 EBITDA of US$4 bn is equivalent to 36% to 50% of full-year guidance, which remains unchanged. Maersk indicated Q1 will likely be its most profitable quarter in 2023.
- Maersk’s result reinforces our view that container rates are bottoming. A related takeaway is that a slowing goods inflation rate could lose a tailwind it’s enjoyed since last October.
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