In today’s briefing:
- Kinetic & Globalvia/Go-Ahead: Recommended Offer
- KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
- Air China (753 HK): Positioned to Ride on the Coming Upturn
- Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report
- Orient Electric – Market Share in Odisha and Bihar Doubles Under Direct-To-Dealer Approach
Kinetic & Globalvia/Go-Ahead: Recommended Offer
- Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
- At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors’ approach.
- I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).
KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
- The ETF operator’s room to play around in index weighting is relatively minimal. Rebalancing is completed in one trading day. So, the actual passive impact was more intense and substantial.
- The rebalancing result based on the average float-adjusted MC from May 2 to yesterday: Additions Iljin Hysolus, Halla Holdings, & DTR Automotive / Deletions Nexen Tire, Kumho HT, & Seoyon
- Their estimated passive impact is more significant than that of the previous rebalancing. It is substantial enough to consider a preemptive position build-up for them.
Air China (753 HK): Positioned to Ride on the Coming Upturn
- Sequential passenger traffic improvement makes us believe that the worst was over for Air China (753 HK). We expect it continues the YTD outperformance vs. Air China Ltd (753 HK).
- With the pandemic under control and government’s focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.
- Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit Cathay Pacific Airways (293 HK) which now anticipates lower losses YoY in 1H22.
Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report
- Discounts have generally widened across our liquid universe, in line with the recent market losses.
- Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.
- Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.
Orient Electric – Market Share in Odisha and Bihar Doubles Under Direct-To-Dealer Approach
- The management highlighted that demand has softened mainly on account of early onset of monsoon in South India and inflationary pressure on consumer spending.
- However, it expects the subdued trend to be transitory as Orient operates mainly in small-ticket items that are relatively less affected by an inflationary environment.
- The management had employed a Direct-to-Dealer approach vs the Master Distributor approach in Odisha and Bihar as it was unable to find strong master distributors in these states.
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