In today’s briefing:
- Iwatani – Hydrogen Getting Interesting Again and This Is the Best Play
- Pacific Basin Shipping (2343 HK): Strongest Ever Year
- ACS/Hochtief/CIMIC: Rationalization of Holding Structure
- Hyosung TNC: 10x Increase in Dividends Per Share
- Pick of the Week: Polycab India
- Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine – Buy into the Sell-Off
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
- Zhenro Plans Asset Sale of up to $644mn
- United Tractors (UNTR IJ) – Despite slow in January, February operationals should be higher
Iwatani – Hydrogen Getting Interesting Again and This Is the Best Play
- Japan continues to move forward with preparing for the shift to a hydrogen economy with new developments in both rail and hydrogen production.
- The efforts to produce hydrogen through artificial photosynthesis are particularly interesting given the potential to reduce hydrogen costs drastically.
- While Toyota is of course involved in the efforts, the key beneficiary for the hydrogen economy remains Iwatani.
Pacific Basin Shipping (2343 HK): Strongest Ever Year
- Impressive result with underlying net profit reached US$698m in FY21, up sharply from loss of US$19.4m a year ago. Net gearing dropped to 7% with record-high ROE of 58%.
- With 48-64% of Handysize and Supramax days covered at TCE slightly below FY21 level, it has well secured FY22 profitability, with upside from higher rate in rest of this year.
- We expect ROE to be over 30% for FY22, making its 1.3x P/B not expensive, especially with an improved balance sheet. Dividend yield of 14% for FY22 is another attraction.
ACS/Hochtief/CIMIC: Rationalization of Holding Structure
- Hochtief offers A$22/share in cash, a 33% premium to the closing share price on the prior day, and the offer is final. The offer is a relatively low amount.
- The deal should complete. The premium is generous, as the 15.4x P/22e E paid is high given that Hochtief and ACS are trading at 9.9x and 11.3x, respectively.
- ACS trades at 27% discount to NAV. Holding structure rationalization and c. €5 billion received should be a catalyst for discount tightening. Long 1 ACS SM/short 0.4162 HOT GR.
Hyosung TNC: 10x Increase in Dividends Per Share
- Hyosung TNC announced 50,000 won in DPS in 2021, up 10x from 2020. This is likely to reverse the recent declining share price trend in the past several months.
- Hyosung TNC’s current dividend yield is 10.5%, representing one of the highest dividend yields in Korea. Dividend payout in 2021 was 28%.
- We believe Hyosung TNC is well positioned to outperform KOSPI in 2022.
Pick of the Week: Polycab India
- Polycab India is a leading manufacturer of cables & wires with a diverse product range catering to industrial and household segments
- In 2009 the company diversified into EPC business to strategically cater to the Cables & Wires requirement of large infrastructure EPC projects
- We recommend a Buy the stock for a target price of Rs 2,640 implying an upside of 11% from CMP
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine – Buy into the Sell-Off
- Hitachi is evacuating more than 7,000 GlobalLogic employees from Ukraine to other countries, but IT workers are mobile and these may have more work due to cyber attacks.
- Hitachi Construction Machinery and other Hitachi Group divisions do some business in Ukraine, but we expect the impact of the crisis to be manageable and temporary.
- Hitachi Ltd shares are down 25% since November and the P/E ratio is near the bottom of its historical range.
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
US equity markets dropped again on Wednesday with the S&P and Nasdaq down 1.8% and 2.6% with sectoral losses led by Consumer Discretionary and IT down over 2.5-3.5%. The US 10Y Treasury yields are down 10bp this morning to 1.89% on the back of Russia’s “military operation” in Ukraine (scroll below for details) this morning . European markets were relatively steady yesterday – DAX was down 0.4%, CAC was down 0.1% and FTSE was up 0.1%. Brazil’s Bovespa closed 0.8% lower. In the Middle East, UAE’s ADX was flat and Saudi TASI was down 0.3%. Asian markets have dropped sharply – Shanghai, HSI, STI and Nikkei are down 0.9%, 2.8% 2.7% and 2.3% respectively. US IG CDS spreads widened 1.2bp and HY spreads were 5.7bp wider. EU Main CDS spreads were 0.7bp tighter and Crossover CDS spreads were 1.6bp wider. Asia ex-Japan CDS spreads were 2.8bp tighter.
Zhenro Plans Asset Sale of up to $644mn
Zhenro Properties plans to sell assets worth up to RMB 4bn ($632.7mn) in H2 2021 and extend maturity of other onshore and offshore debt, including debt bank loans and asset-backed securities (Term of the Day, explained below) , as per three sources. The developer is already asking holders of its $200mn 14.724% Perp callable on March 5 to waive claims against the company if it does not redeem the bond. It is also seeking to extend the maturity of five bonds due 2022 that have a total amount outstanding of $1.05bn to be exchanged for new 8% bonds due March 6, 2023. Zhenro is said to be in talks with state-owned firms to sell the assets.
United Tractors (UNTR IJ) – Despite slow in January, February operationals should be higher
Despite slow in January, February operationals should be higher
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
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