In today’s briefing:
- Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy
- HCM – Hitachi Partial Stake Sale to Itochu
- 51job (JOB US): 27.6% Reduction In Terms
- JL Mag Rare Earth A/H Trading – Set for a Tepid Debut
- Arwana Citramulia (ARNA IJ) – Tiling the Nation in 2022
- 6 New $ Deals incl. CIMB, IRFC, CCB; Macro; Rating Changes; New Issues; Talking Heads; Top Gainer…
- DOHOME: Expect 4Q21 Earnings Grow Both YoY and QoQ
Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy
- An NHK report today post-close said Hitachi Ltd (6501 JP) would sell “about half” its stake in sub Hitachi Construction Machinery (6305 JP) to Itochu and Japan Industrial Partners.
- That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.
- The big question is What Next? and What Impact for shareholders? That’s a tough couple of questions.
HCM – Hitachi Partial Stake Sale to Itochu
- NHK reports that Hitachi will be selling roughly half of its 51% stake in HCM to Itochu and Japan Industrial Partners.
- HCM has outperformed Komatsu over the last year and it is possible that some investors were expecting a buyout.
- If so, and if there is a negative reaction to this news we would be looking to buy.
51job (JOB US): 27.6% Reduction In Terms
- Not an overreaction after all. After shares closed down 19.2% on the 8 November, 20% adrift of indicative terms, that appeared overdone.
- Now 51 Job Inc (JOBS US) has announced the Offeror has proposed reducing the merger consideration from US$79.05 in cash per common share to US$57.25.
- Shares closed up, but still at a 14.5% gross spread to terms. The new construct, and the reasons for doing so, are decidedly baffling.
JL Mag Rare Earth A/H Trading – Set for a Tepid Debut
- JL Mag Rare-earth Co. Ltd (JLM) raised around US$544m via its H-shares listing.
- JLM is a producer of high-performance REPMs. It ranked first in the world by high-performance REPM production volume in 2020 with a market share of approximately 14.5%.
- In this note, we look at the allocation results and trading dynamics.
Arwana Citramulia (ARNA IJ) – Tiling the Nation in 2022
- Indonesia’s best quality ceramic tile producer, Arwana Citramulia (ARNA IJ), continues to register strong growth and higher margins due to improving product mix and improvements in manufacturing efficiency.
- Arwana Citramulia (ARNA IJ) is introducing new higher-end porcelain tiles which will displace Chinese imports given lower pricing, better terms for wholesalers and significantly faster delivery times.
- The company remains a top choice amongst Indonesian industrials with high-quality governance and a strong growth track record along with attractive valuations.
6 New $ Deals incl. CIMB, IRFC, CCB; Macro; Rating Changes; New Issues; Talking Heads; Top Gainer…
US equity markets ended higher with the S&P and Nasdaq up 0.3% and 0.2% respectively. Most sectors were in the green led by Materials, up 1% and Consumer Discretionary up 0.6%. US 10Y Treasury yields were up 1bp to 1.75%. European markets were also higher with the DAX, CAC and FTSE up 0.4%, 0.8% and 0.8% respectively. Brazil’s Bovespa was up 1.8%. In the Middle East, UAE’s ADX was up 0.1% while Saudi TASI was up 1%. Asian markets have opened broadly lower – Shanghai, STI and Nikkei were down 0.2%, 0.1% and 0.9% while HSI was up 0.3% respectively. US IG CDS spreads were 0.4bp tighter and HY CDS spreads also tightened 1.5bp. EU Main CDS spreads were 0.6bp tighter and Crossover CDS spreads were 1.9bp tighter. Asia ex-Japan CDS spreads tightened 0.6bp.
DOHOME: Expect 4Q21 Earnings Grow Both YoY and QoQ
- A slowdown short-term performance but solid long-term growth outlook. We reiterate our BUY rating with a target price of Bt28.0 derived from 35xPE’22E,which is close to the biggest home-improvement player
- We expect DOHOME to report 4Q21 net profit at Bt420m (+95%YoY, +23%QoQ), YoY growth will be supported by (1) a solid SSSG at +39%YoY, and (2) gross profit margin expansion
- We expect 1H22 earnings to slightly soften YoY pressured by (1) a drop in margin for steel products,which will trim down overall gross profit margin to roughly 19% from 21.7%-22.7%
Before it’s here, it’s on Smartkarma
