In today’s briefing:
- Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers
- Xiamen Port (3378 HK)’s Composite Doc Out; Shareholders To Vote On 16 Sept
- Fanuc (6954 JP) | Lights Out in China
- Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)
- Xiamen Port’s H Share Class Meeting on 16 September
- Canvest Env (1381 HK): Streaming Ahead Despite Tough Time
Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers
- Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
- If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
- This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.
Xiamen Port (3378 HK)’s Composite Doc Out; Shareholders To Vote On 16 Sept
- Back on 2 June, SOE terminal operator Xiamen International Port (3378 HK) announced a pre-conditional Offer of $2.25/share from Xiamen Port Holding, a Fujian SASAC-controlled entity.
- The pre-conditions – NDRC, MoC, SAFE, and CSRC – were fulfilled on the 16 August.
- The Composite Doc is now out. The H-class meeting will be held on the 16 September. There is no tendering condition. Payment should be the 6 October.
Fanuc (6954 JP) | Lights Out in China
- Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish
- Expectations for gradual recovery as China recovers from lockdowns, but power-saving measures are a new risk
- Weak end demand for mobile, PC, and consumer electronics are likely to foreshadow capex cuts in 2023
Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)
- Momentum has favored Japan Airlines’ share price vs ANA Holdings this year and we expect this outperformance to continue in the short term (next 3-6 months).
- So our pair trade involves going long Japan Airlines (9201 JP) and going short on Ana Holdings (9202 JP).
- Four major reasons why we like Japan Airlines vs ANA Holdings include: a) better valuations, b) higher EBITDA margins, c) stronger leverage ratios, and d) higher proportion of overseas business.
Xiamen Port’s H Share Class Meeting on 16 September
- Xiamen International Port H (3378 HK)‘s composite document is out with the H Shareholders’ class meeting scheduled for 16 September. The IFA considers the offer to be fair and reasonable.
- The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.
- This is a done deal. At last close and for a 6 October payment, the gross and annualised spread to the offer is 0.9% and 7.6%, respectively.
Canvest Env (1381 HK): Streaming Ahead Despite Tough Time
- The 25.6% increase in net profit for Canvest Environmental Protection Group (1381 HK) in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.
- Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.
- Canvest’s expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.
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