In today’s briefing:
- Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities
- Tokyo Metro IPO – Will Price at the Top, but Isn’t Particularly Cheap
- Tokyo Metro IPO Valuation Analysis
- Boqi Environmental (2377 HK): Privatisation by Management?
- Charts & Context | From Here, What Can Get Better for Container Carriers? | Reduce Sector Exposure
- Fluence Corp Ltd – The pipeline is being converted
- Intloop (9556 Jp) – Turning a Corner with Improving Earnings Visibility
- Fluence Corp Ltd – Timing delays mask growth progress
Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities
- Since Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) were suspended around a month ago, pending a merger, a basket of peers are up 37%.
- The Shanghai Composite is up 21%. Volumes are up, commissions are up. Citic Securities (600030 CH), the largest broker by market cap, is up 42% in the past month.
- Zhejiang Expressway (576 HK) is also up ~45% in recent weeks due to its 40.3% look-through stake in Zheshang Securities (601878 CH). The question: how much more in the tank?
Tokyo Metro IPO – Will Price at the Top, but Isn’t Particularly Cheap
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.4bn in its Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
Tokyo Metro IPO Valuation Analysis
- Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
- Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
- Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.
Boqi Environmental (2377 HK): Privatisation by Management?
- China Boqi Environmental Hol (2377 HK) entered a trading halt based on the Hong Kong Code on Takeovers and Mergers. The shares have been up 39% since 30 September.
- It is likely that management, representing 59.59% of outstanding shares, is seeking to privatise Boqi through a Cayman scheme.
- Sinopec, a pre-IPO investor potentially holding a blocking stake, is likely seeking to exit. At the last close, Boqi trades in line with the median peers’ P/B multiple.
Charts & Context | From Here, What Can Get Better for Container Carriers? | Reduce Sector Exposure
- We believe price momentum for global container carriers is unlikely to improve from here
- As price momentum falters, carriers’ shares could continue to give back big gains
- We would look for near-term opportunities to reduce or eliminate exposure to sector
Fluence Corp Ltd – The pipeline is being converted
- RaaS Research Group has published a flash comment on environmental services company Fluence Corporation (ASX:FLC) following its announcement yesterday that it had secured a US$7.1m contract to provide a Sea Water Reverse Osmosis project for Stereau on Mayotte, a French archipelago in the Indian Ocean.
- This material project for the Municipal division (MWW) is complemented by a US$1.5m contract win in the Industrial Wastewater & Biogas division (IWB) for a food processor in the US.
- When combined with other recent successful tenders the new orders secured in the first 6 weeks of the current quarter total ~US$12m.
Intloop (9556 Jp) – Turning a Corner with Improving Earnings Visibility
- Strong finish to FY7/24 and positioned to grow – Q1-4FY7/24results were ahead of revised company guidance, demonstrating a positive combination of acquisitive growth, price hikes for new consultancy work, and improving utilization rates.
- The company has unveiled its ‘VISION 2030’ medium and long-term plan, focusing on margin expansion to accelerate earnings growth through sustained price increases and leveraging investments into technology, whilst maintaining expectations of stable double-digit growth in the mainstay consulting business.
- Overall, we believe INTLOOP’s earnings trajectory is set to improve, with management showing a strategic focus to raise profitability.
Fluence Corp Ltd – Timing delays mask growth progress
- RaaS Research Group has published an update report on water and wastewater treatment and solutions company Fluence Corporation (ASX:FLC) following its Q2 FY24 result and progress for H1 FY24 in which it reduced full year guidance for revenue of US$70-75m (previously US$90-100m) and EBITDA at breakeven (previously US$3.5-4.0m).The conversion of the pipeline remains key and management communicated its confidence on new contract wins, suggesting H2 FY24 and FY25 will be a “real proving ground” for the business.
- Likewise, after a weak cashflow performance in Q2 FY24, with an operating cash outflow of $6.3m, the company has guided to a positive performance in H2 FY24.
- We believe the balance sheet remains in a solid position to execute growth initiatives without the material debt burdens of the past.
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