In today’s briefing:
- Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- Kansai Electric Power (9503 JP): The Current Playbook
- GQG Remains Bullish on Adani Despite US Indictment
- CRRC (1766): Still Far from the Highs
Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
- The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
- That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.
Kansai Electric Power (9503 JP): The Current Playbook
- Since the US$3.5 billion primary/secondary offering announcement, Kansai Electric Power (9503 JP)’s shares have been down 20.6% from the undisturbed price of JPY2,397 per share (13 November).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, KEPCO’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 26 November. The average large Japanese placement tends to generate positive returns.
GQG Remains Bullish on Adani Despite US Indictment
- GQG acknowledges the seriousness of the charges, but maintains its confidence in the Adani Group companies.
- GQG sees a distinction between the allegations against the individuals and the operational strength of the businesses.
- The firm believes that the fundamentals of the companies remain strong. GQG will continue to monitor the situation closely.
CRRC (1766): Still Far from the Highs
- CRRC Corp Ltd H (1766 HK) recent innovation on carbon-fibre subway trains for commercial operation has displayed their capability to decarbonize transport.
- Free cash flow improved from RMB -11 billion last year to now -1.4 billion and 28% of its market caps are in cash.
- CRRC used to trade at as high as 40x PER and 67x price to cash flow and currently is trading at 10x PER and 4x price to cash flow.
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