In today’s briefing:
- KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- Golden Energy: IFA Says Fair & Reasonable. It Is Neither
- Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable
- [ZTO Express (ZTO US, BUY, TP US$38) TP Change]: Margin Improves While Capex Intensity Nears Peak
- Howmet Aerospace Inc.: Commercial Aerospace Resurgence Is Saving The Day – Key Drivers
- Illinois Tool Works Inc.: The Margin Improvements Seem To Be Encouraging – Key Drivers
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
- There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
- Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.
Golden Energy: IFA Says Fair & Reasonable. It Is Neither
- Responding to SIAS and the SGX, the Widjaja Family revised terms such that Golden Energy (GER SP) shareholders opting for an all-cash payout would receive S$0.973/share, up from S$0.846/share.
- The Offer remains low-balled. The Offer should include a similar in-specie of the Stanmore Coal (SMR AU) stake together with a cash-out option. This is the most transparent approach.
- The Circular is out and the IFA reckons the Offer is fair & reasonable – despite a fair value of S$0.574/share for Stanmore versus the Exit Offer of A$0.181/share.
Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable
- The IFA has concluded that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is fair and reasonable. The EGM will be held on 9 June.
- The IFA has justified its conclusion based on a convoluted methodology that has serious flaws. A fairer SOTP valuation is 37% higher than the IFA’s SOTP valuation range.
- Notably, Dian Swastatika Sentosa (DSSA IJ) will abstain from voting on both resolutions. While the prospect of a bump is diminishing, the offeror is yet to declare the offer final.
[ZTO Express (ZTO US, BUY, TP US$38) TP Change]: Margin Improves While Capex Intensity Nears Peak
- ZTO reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income (3.1%), 30%, and 30% vs. our est. ZTO raised volume est. to 20-24% YoY;
- Margin beat as parcel cost was (8%) vs. our est., but we suggest also due to (1) parcel mix improvements, (2) output-based pay, and (3) lower % of KA customers;
- Maintain BUY and raise TP to US$ 38 due improving gross profit per parcel and an end in-sight for CAPEX spending. Our TP implies 24x P/2023E.
Howmet Aerospace Inc.: Commercial Aerospace Resurgence Is Saving The Day – Key Drivers
- Howmet Aerospace had a strong first quarter with revenues of $1.6 billion, up 6% sequentially and 21% over the previous year.
- Commercial aerospace sales increased 29% year on year, led by Engine Products, Engineered Structures, and Fastening Systems.
- Defence Aerospace increased 11% year on year, led by the F-35 program and increases in legacy spares.
Illinois Tool Works Inc.: The Margin Improvements Seem To Be Encouraging – Key Drivers
- Illinois Tool Works had a strong start to the year, with results beyond Wall Street expectations.
- Because of this, they anticipate a favorable change in the cost margin effect starting in Q2.
- Given these strong results, Illinois anticipates performing better than its competitors throughout the remainder of 2023.
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