In today’s briefing:
- Toshiba – 3D Stake Reduction Reduces and Increases Risk
- Nikkei 225 March 2023 Rebal Tomorrow
- Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
- China Everbright Environment (257 HK): The Dust Should Have Settled
- [Huitongda (9878 HK, SELL, TP HK$18) Target Price Change]: Concerns Arise on OCF Outflow
Toshiba – 3D Stake Reduction Reduces and Increases Risk
- An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%.
- This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here.
- Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.
Nikkei 225 March 2023 Rebal Tomorrow
- The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
- The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
- One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.
Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
- Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M.
- There have been some noises about cost-cutting, which could be key to an early return to profitability.
- Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.
China Everbright Environment (257 HK): The Dust Should Have Settled
- Plunge in net profit, high gearing and slowdown in new projects are market concerns, but should have well reflected in its share price. Its 3.6x PER is just too cheap.
- FY23 will see profit recovery, backed by decent project pipeline and lack of one-offs like impairment and exchange losses. Consensus forecast of 15% profit growth is too conservative.
- Cash flow will improve over the next two years as collection of national subsidies accelerates, capex moderates and contribution from operating projects increases.
[Huitongda (9878 HK, SELL, TP HK$18) Target Price Change]: Concerns Arise on OCF Outflow
- Huitongda (HTD) reported its 2H22 revenue (9.2%)/(9.0%) lower than our estimate and consensus. The non-IFRS net income beat our estimate/consensus by 23.6%/12.4% respectively.
- HTD generated RMB652mn OCF outflow in 2H22, negatively impacted by both Covid and accounts receivables due to its SME focused model.
- We maintain the stock as SELL rating and raise TP by HK$4.5 to HK$18.0 to factor in the shrinking minority interests on market value basis.
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