In this briefing:
- Chiyoda: Minor Updates About the Major Capital Infusion, Cost Overruns and Upcoming Orders
- WTI 59.50 Top and Turn Target
- Geo Energy (GERL SP): Recovery in Coal Price from 4Q18 Bottom; Continue to Wait for M&A Action
- New J. Hutton Exploration Report (Weeks Ending 08/03/19)
- HK Connect Discovery Weekly: PICC, Xinyi Solar (2019-03-08)
1. Chiyoda: Minor Updates About the Major Capital Infusion, Cost Overruns and Upcoming Orders
The key point of interest for investors regarding Chiyoda Corp (6366 JP) continues to be details surrounding its upcoming capital raise. The company has, since early November when it incurred these losses, offered scant details regarding the structure of the capital raise, except to note that the components would include additional loans and equity from industrial partners and most likely, main shareholder Mitsubishi Corp (8058 JP).
We visited the company to gather as much information as possible on the potential structure of the capital increase and to update the order outlook and reasons for further cost overruns.
2. WTI 59.50 Top and Turn Target
WTI’s bullish counter trend rally cycle from the touted low at 45 is maturing and we are hunting for a fresh high to turn from long to short WTI. A peak in oil would align with a softer economic cycle in the next quarter.
Price triangulation is touted as a tactical bullish breakout pattern that will induce a fresh high near targeted dual projection/retracement. This rise is viewed as a more exhaustive rally that will begin to run out of steam with risk of a fade near 58-59. This is a tradable upside move.
RSI dual tops have show high confidence in market peaks from early 2018 and a final push higher out of the triangle bull flag would get us back to the 70 top resistance to nail down a double top. It is this dual top and MACD resistance that worn of an intermediate peak for oil into strength.
Energy shares are underperform oil and a frequent cycle leader to an oil peak.
3. Geo Energy (GERL SP): Recovery in Coal Price from 4Q18 Bottom; Continue to Wait for M&A Action
Geo Energy Resources (GERL SP) reported weak 4Q18 results late last month. The reason for the 5M USD net loss in 4Q18 was mainly due to Chinese import restrictions for Indonesian coal in November and December last year. With the import quota removed as of January ICI4 coal prices have rebounded from +/-30 USD/ton late 2018 to 40 USD/ton this week.
Geo remains in deep value territory (3x EV/EBITDA) as the company still has over 200M USD+ in cash it raised from a 300M USD bond placing almost 18 months ago. While the CEO announced plans to organize a HK dual listing in 1H19 this cannot materialize unless management can execute on a significant acquisition opportunity it has been considering for the last twelve months. With Indonesian elections coming up next month the hope is that clarity on this potential transaction can be sorted by late 1H19.
While Europe is obsessed with Climate Change doomsday scenarios being shouted around by school-skipping teenagers, the reality is that three out of four of the most populated countries in the world (China, India and Indonesia) will remain heavy users of coal for decades to come. With cleaner coal technology being the key differentiator how much pollution is emitted.
My Fair Value estimate (Base case) remains 0.35 SGD or 89% upside. Please recall, Macquarie paid 0.29 SGD for a 5% stake in November 2018 and had warrants issued to it at 0.33 SGD.
4. New J. Hutton Exploration Report (Weeks Ending 08/03/19)
- Coverage now expanded to 730 mining companies
- Retain Peel Mining Ltd (PEX AU) as a Speculative Buy
- Current drilling infill only
- Est. A$4-4.5m cash with capital raising soon
- Very solid geological genetic model honing future extensional exploration efforts
- Expect maiden Resource computation to commence after next three hole assays released
- Aeon Metals Ltd (AML AU), Blackearth Minerals NL (BEM AU), Boss Resources (BOE AU), Centaurus Metals (CTM AU), Catalyst Metals (CYL AU), Amur Minerals (AMC LN), Patagonia Gold (PGD LN), Tyranna Resources (TYX AU), Gladiator Resources (GLA AU), King River Resources (KRR AU), Vango Mining (VAN AU), Hummingbird Resources (HUM LN), Caravel Minerals (CVV AU), Lefroy Exploration Ltd (LEX AU), Millennium Minerals (MOY AU), Northern Minerals (NTU AU), Blackham Resources (BLK AU), Avz Minerals (AVZ AU), Orocobre Ltd (ORE AU), Serabi Gold plc (SRB LN), Paringa Resources (PNL AU), Artemis Resources (ARV AU), Centrex Metals (CXM AU), Great Boulder Resources Ltd (GBR AU), Superior Lake Resources (SUP AU), Cora Gold Ltd (CORA LN), European Metals Holdings Ltd (EMH LN), Savannah Resources PLC (SAV LN) , IronRidge Resources Ltd (IRR LN)
5. HK Connect Discovery Weekly: PICC, Xinyi Solar (2019-03-08)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we will highlight PICC and Xinyi Solar.
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