Industrials: Keppel Corp, Nidec Corp, Hitachi Transport System, SK Shieldus, John Menzies PLC, Yinson Holdings and more

• 20 months ago, Temasek walked away from a deal to buy control of Keppel Corp (KEP SP) as the O&M business saw large writedowns and covid stoppage losses.
• The story? A possible Keppel O&M and Sembcorp Marine (SMM SP) merger. SMM was recapped and spun out of Sembcorp Industries (SCI SP) then recapped again. 
• Now it’s crunch time. Keppel & SMM hope to update investors on a merger plan by end of April. This insight looks at what to look out for.

• Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn. 
• This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view. 
• Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.

• The Nikkei Leak Article of the Hitachi Transport takeover price is out. That suggests board meetings and deal announcement are imminent
• The price suggested in the article comes out to be just under ¥8,000. 
• Past deals between KKR and Hitachi for Hitachi subs (and the language of the article on deal structure) suggest the minority Tender Offer Price could be different.

• After the market close today, SK Shieldus revised its IPO filing, especially for the valuation comps. However, it maintained the same IPO price range of 31,000 won to 38,800 won.
• Bankers included two new comps (Taiwan Secom and Cyberone). Bankers excluded ADT Inc, Alarm.com, and Qualys as comps.
• Our valuation of SK Shieldus suggests market cap of 4.1 trillion won or target price of 44,892 won (28.6% higher than the mid-point of the IPO price range). 

• The contracts, presence in airports and relationships make John Menzies a difficult business to replicate. NAS has a direct stake of 19% and undertakings and letters of intent for 33.3%.
• The 608p final offer represents a 107% premium to the 3-month VWAP and 6.1x EV/Fwd EBITDA, and is 10% above my fair-value estimate (551p/share, DCF based WACC 9.0%, 4.5x EBITDA exit multiple).
• The offer is highly likely to close. Gross spread is 1.48% with an estimated annual return of 4.78% (assuming settlement by 15 August). Reiterate long MNZS LN.

• Nidec is the best stock in Japan to play the rising adoption of EVs
• The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale
• We think the company can hit its mid-term targets and see over 30% upside for the stock

• Maintain BUY and MYR5.58 TP
• FPSO Anna Nery project on track
• 3 strong bids, realistically targets 2
• Rights issue and value-unlocking proposals

Its Anna Nery FPSO project in China is 90% completed; on track to meet its delivery deadline. Meanwhile, its PDB and Enauta projects are still at preliminary stages, thus not affected by the latest Covid-19 lockdown. Yinson remains well-entrenched to capitalise on this FPSO upcycle. With 6 prospects in the horizon, it targets 2 wins over the next 12 months. It is also exploring options to unlock FPSO assets by undertaking an IPO route, or bringing in a strategic investor. Our TP is SOP-based.