In today’s briefing:
- NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers
- Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
- SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales
- Beijing Enterprises Urban Resources (3718 HK): Potential Offer
- Fanuc (6954 JP) | Orders Slide as Automation Slows
- Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Hyundai Glovis: Increasing Pressure by the Carlyle Group & Minority Shareholders to Improve Value
- Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?
- LIFE Asset Management Goes Activist on SK Inc
NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers
- The NZ Air Rights Trade is nearly done. Last day of trading is today.
- The Rights were super cheap. They ran as NZ AIR ran a bit.
- Now it is the time to trade NZ AIR Shares vs Peers.
Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
- Hitachi has been in the process of selling Hitachi Transport System (9086 JP). An article in the Nikkei Thursday last suggested a deal was imminent (both companies report 28 April).
- Bloomberg carried an article this morning with more numbers and implied arithmetic. Then they revised the language in the article.
- There is STILL room for different interpretations of likely deal price if one tries to parse all the info provided and match it with history. But we may be there.
SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales
- Suppose we grouped S1 and Taiwan Secom with the Physical/Integrated Security weighting and then applied the Cybersecurity weighing to Ahnlab and CyberOne. We would have 11.40x, substantially lower than 14.85x.
- SK Shieldus’ sales were ₩1.55T, an increase of ₩0.22T (16.8%) from the previous year. But 65% of last year’s sales increase was derived from the internal deals with SK Group.
- How the company and the bankers will respond to those mentioned above two controversial aspects will be the most crucial point in determining the success or failure of this IPO.
Beijing Enterprises Urban Resources (3718 HK): Potential Offer
- Beijing Enterprises Water Group (371 HK) (BEW) and Beijing Enterprises Urban Resources (3718 HK) (BEUR) were both suspended this morning, the latter pursuant to the Takeovers Code.
- BEW holds ~29% in BEUR, a stake largely unchanged since BEUR’s listing in January 2020.
- A possible privatisation of BEUR follows on the heels of the ongoing take-private transaction for Guodian Technology & Environment Group (1296 HK), another waste treatment and environmental play.
Fanuc (6954 JP) | Orders Slide as Automation Slows
- Machine tool orders are losing momentum given the geopolitical risks and shortage of materials
- Margins are also order pressure given soaring materials and transportation costs
- FY3/23 OP guidance misses consensus, but it is not conservative. We expect the share price to head lower
Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- FY Mar-22 sales and profits exceeded guidance, as expected. New orders declined slightly in 4Q but remained above sales.
- Unfortunately, Disco has decided to stop disclosing orders and the order backlog. A cynic would say this signals the peak of the cycle.
- 1Q guidance looks conservative. That should be no surprise and no catalyst for the stock price. Shipments of blade dicers are forecast to decline by 10%. Beware.
Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Despite a dead cat bounce in Robomachine coming through as we suggested Fanuc’s 4Q OP missed consensus estimates by 14%.
- Guidance was strong however with revenue guidance of ¥825.5bn materially above consensus’ ¥797.7bn.
- This continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning.
Hyundai Glovis: Increasing Pressure by the Carlyle Group & Minority Shareholders to Improve Value
- With the Carlyle Group taking a 10% stake in Hyundai Glovis, we believe there could be increasing pressures including through higher dividends and buybacks to return capital to shareholders.
- Hyundai Glovis is likely to get re-rated going forward, driven by profitable expansion into LNG and hydrogen transport, online used car sales platform, and more favorable shareholder return policies.
- Hyundai Glovis’ recent contract with Tesla to ship cars out of China is another positive sign on the growing importance of Hyundai Glovis in the Asian vehicles shipping market.
Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?
- Beijing Enterprises Urban Resources (3718 HK)/BEUR and Beijing Enterprises Water Group (371 HK)/BEWG entered trading halts relating to the Code on Takeovers and Mergers and “a proposed notifiable transaction”, respectively.
- BEWG, the largest BEUR shareholder, has steadily increased its stake from 26.25% at BEUR’s IPO on 15 January 2020 to 29.45% as of 31 March 2022.
- Our best guess is that the trading halts relate to a potential mandatory general offer associated with BEWG acquiring 30%+ of the voting rights.
LIFE Asset Management Goes Activist on SK Inc
- On 26 April, it was reported that Life Asset Management sent a shareholder letter to SK Inc to cancel 1.8 million shares worth about 470 billion won.
- Our SoTP valuation of SK Inc suggests an implied valuation of 307,321 won per share, suggesting 17.3% upside from current levels.
- There has been an increased interest in SK Inc as its affiliates are getting ready for IPOs in 2022/2023 including Londian Wason Holdings, SK E&S, SK Pharmteco, and SK Siltron.
Before it’s here, it’s on Smartkarma
