Industrials: Toshiba Corp, Nikola Corp, Zhongtan Nengtou Tech, Cahya Mata Sarawak and more

• There is a Toshiba Corp (6502 JP) EGM next week for shareholders to vote on the company’s Separation Plan, with a shareholder proposal to re-engage take-private buyers.
• Four+ weeks ago, the Board unanimously supported the first, and unanimously opposed the second, and shareholders and major proxy advisors came out against the first.
• Now Independent Director Raymond Zage, originally from one of the dissenting shareholders, has written a letter stating he has voted FOR the shareholder proposal the board rejected. OOPS! 🤭

• The announcement from Raymond Zage that he would vote for 3D’s proposal at next week’s EGM is a curious development.
• It suggests that pressure on Toshiba’s directors could be ramping up significantly. 
• Whether that is a good thing or not is a serious question though.

• Liquidity shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements. 
• Liquidity shorts have built-in catalysts, have moderate to higher betas,  and can have strong down moves if a crisis develops.  They can go bankrupt, pushing the stock price near zero.
• Today we are flagging Rivian, Nikola, ChargePoint, Domo & Enviva.

• China’s environmental watchdog has named and shamed four firms for faking carbon emission reports, in the latest sign that data fraud continues to threaten the nation’s green ambitions.
• The Ministry of Ecology and Environment (MEE) said the data verification agencies manipulated reports and falsified testing dates, emissions data and carbon footprint results
• Such agencies are crucial to the measurement, reporting, and verification system used to keep a lid on carbon emissions and allocate quotas to high-emission sectors such as power and chemicals

• Imputing for earnings risk; D/G to HOLD
• A smallish MYR15.75m outlay, but …
• In the RED and in Net Liability
• No synergy nor value accretion for now

CMS’ proposed acquisition of Scomi Oilfield Ltd plus 12 other companies and assets within the Oilfield Group of Companies for a total MYR15.75m cash (its 75% share) comes with earnings risk as the acquiree coys have been loss-making. Plans to turn-around were not disclosed. Also, we see no synergy & value accretion for now. We switch valuation methodology to PER (from RNAV), using 7x (-1SD) on FY22E net profit (earnings unchanged for now); the -1SD reflecting earnings risk concern. Our new TP is MYR1.27 (previously MYR1.84 on 0.7x RNAV). D/G from tactical BUY.