Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We assess Aggreko's ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial", but Disclosure is "Weak".

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We assess Aggreko's ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial", but Disclosure is "Weak".

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Horizon Construction Development / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/horizon-construction-development" target="_blank" data-smartkarma-citation="entities:35117:1" rel="noopener">Horizon Construction Development (1887128D HK)</a>/HCD, a subsidiary of <a href="https://www.smartkarma.com/entities/far-east-horizon-ltd" target="_blank" data-smartkarma-citation="entities:420:1" rel="noopener">Far East Horizon (3360 HK)</a>, is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.</li>
<li>In <a href="https://www.smartkarma.com/insights/horizon-construction-development-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:100813" rel="noopener">Horizon Construction Development IPO: The Bull Case</a>, we highlighted the key elements of the bull case. In this note, we outline the bear case.</li>
<li>The key elements of the bear case rest on core business margin decline, unexplained headcount reduction, cash burn, long receivable days and stretched balance sheet.</li>
</ul>



Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
In Horizon Construction Development IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The key elements of the bear case rest on core business margin decline, unexplained headcount reduction, cash burn, long receivable days and stretched balance sheet.


Horizon Construction Development IPO: The Bear Case

<ul>
<li>
<a href="https://www.smartkarma.com/entities/horizon-construction-development" target="_blank" data-smartkarma-citation="entities:35117:1" rel="noopener">Horizon Construction Development (1887128D HK)</a>/HCD, a subsidiary of <a href="https://www.smartkarma.com/entities/far-east-horizon-ltd" target="_blank" data-smartkarma-citation="entities:420:1" rel="noopener">Far East Horizon (3360 HK)</a>, is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.</li>
<li>HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost &amp; Sullivan.</li>
<li>The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.</li>
</ul>



Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost &amp; Sullivan.
The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.


Horizon Construction Development IPO: The Bull Case

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

The resolution to approve the scheme for the recommended cash acquisition of <a href="https://www.smartkarma.com/entities/aggreko-plc" target="_blank" data-smartkarma-citation="entities:21804:1" rel="noopener">Aggreko PLC (AGK LN)</a> was passed at the Court Meeting and the special resolution to implement it was passed at the EGM. Still awaiting antitrust clearance and foreign investment clearance.
In the meantime, there has no been further news of interloper risk (Platinum Equity was mentioned by Bloomberg in early March) and no further news regarding shareholders opposing the deal. Thus spread (negative at the time of my last Insight <a href="https://www.smartkarma.com/insights/aggreko-pe-consortium-recommended-cash-acquisition" target="_blank" data-smartkarma-citation="insights:48857" rel="noopener">Aggreko - PE Consortium: Recommended Cash Acquisition</a>) has been steadily decreasing and is now positive.
This, I believe, is a great outcome for the shareholders of Aggreko, as the charts below show.
The offer price represents 20x Fwd P/E, above its 10 year average of 16.1x, and 14.1x EV/EBITA, again above 10 year average of 9.9x (source: Capital IQ consensus).
Gross spread is 2%, c. 8% annualised assuming a 3 month completion (although it is expected to become effective at the beginning of Q3). Recommendation is long Aggreko, TP 880p.

The resolution to approve the scheme for the recommended cash acquisition of Aggreko PLC (AGK LN) was passed at the Court Meeting and the special resolution to implement it was passed at the EGM. Still awaiting antitrust clearance and foreign investment clearance.
In the meantime, there has no been further news of interloper risk (Platinum Equity was mentioned by Bloomberg in early March) and no further news regarding shareholders opposing the deal. Thus spread (negative at the time of my last Insight Aggreko - PE Consortium: Recommended Cash Acquisition) has been steadily decreasing and is now positive.
This, I believe, is a great outcome for the shareholders of Aggreko, as the charts below show.
The offer price represents 20x Fwd P/E, above its 10 year average of 16.1x, and 14.1x EV/EBITA, again above 10 year average of 9.9x (source: Capital IQ consensus).
Gross spread is 2%, c. 8% annualised assuming a 3 month completion (although it is expected to become effective at the beginning of Q3). Recommendation is long Aggreko, TP 880p.

Aggreko: Shareholders' Meeting, Spread Turned Positive

As expected, just hours before the put up or shut up deadline, the boards of <a href="https://www.smartkarma.com/entities/aggreko-plc" target="_blank" data-smartkarma-citation="entities:21804:1" rel="noopener">Aggreko PLC (AGK LN)</a> and Albion Acquisitions Limited announced their agreement on the <a href="https://www.plc.aggreko.com/~/media/Files/A/Aggreko/possible-offer/rule-2-7-announcement.pdf" target="_blank" rel="noopener">Ts&amp;Cs of a recommended all cash acquisition</a>.
880p in cash (the potential offer price that had been disclosed, as well as TP on <a href="https://www.smartkarma.com/insights/aggreko-2bn-potential-bid-from-pe-consortium" target="_blank" data-smartkarma-citation="insights:48171" rel="noopener">Aggreko: £2bn Potential Bid from PE Consortium</a>).
<ul>
<li>
for an implied equity value of £2,322 mn, and an implied EV of £2,967.5.
</li>
<li>
Adjustable by any dividend or capital distribution.
</li>
<li>
The offer price represents c. 1.9x P/BV (vs a five-year average of 1.6x), and 5.3x EV/2021E EBITDA (vs. 9.6x for Ashtead or 7.4x for United Rentals, though clients are a bit different). It also implies a ROIC over 13% (which is below management expectations of 15%).
</li>
<li>
The consideration represents a (generous) premium.
</li>
</ul>
Aggreko expects a recovery (32% EBITDA increase FY22e) across its different markets (including the Tokyo Olympics take place this year). That's the reason why it has proposed a final dividend of 10p.
It is difficult to see interloper risk for an unloved business, moreover when Albion's offer seems generous (and has all the chances to close), in my view.
On 4 March Bloomberg reported that Platinum Equity had approached Aggreko. Any competing offer must be made more than 7 days before the scheme vote.
Aggreko is trading 2% above the offer (vs. 4.5% below the offer price at publication on my prior insight on Aggreko), thus I would wait for any share price weakness before setting up a position. The market is betting on a competing offer. It is also true that lately there have been several sweetened bids in the European space.
(the Insight is labelled bearish because at the moment the spread is negative).

As expected, just hours before the put up or shut up deadline, the boards of Aggreko PLC (AGK LN) and Albion Acquisitions Limited announced their agreement on the Ts&amp;Cs of a recommended all cash acquisition.
880p in cash (the potential offer price that had been disclosed, as well as TP on Aggreko: £2bn Potential Bid from PE Consortium).


for an implied equity value of £2,322 mn, and an implied EV of £2,967.5.


Adjustable by any dividend or capital distribution.


The offer price represents c. 1.9x P/BV (vs a five-year average of 1.6x), and 5.3x EV/2021E EBITDA (vs. 9.6x for Ashtead or 7.4x for United Rentals, though clients are a bit different). It also implies a ROIC over 13% (which is below management expectations of 15%).


The consideration represents a (generous) premium.


Aggreko expects a recovery (32% EBITDA increase FY22e) across its different markets (including the Tokyo Olympics take place this year). That's the reason why it has proposed a final dividend of 10p.
It is difficult to see interloper risk for an unloved business, moreover when Albion's offer seems generous (and has all the chances to close), in my view.
On 4 March Bloomberg reported that Platinum Equity had approached Aggreko. Any competing offer must be made more than 7 days before the scheme vote.
Aggreko is trading 2% above the offer (vs. 4.5% below the offer price at publication on my prior insight on Aggreko), thus I would wait for any share price weakness before setting up a position. The market is betting on a competing offer. It is also true that lately there have been several sweetened bids in the European space.
(the Insight is labelled bearish because at the moment the spread is negative).

Aggreko - PE Consortium: Recommended Cash Acquisition

United Kingdom

Aggreko plc provides specialist power and temperature control rental services in two main product areas, mobile electricity generators and temperature control equipment.  Aggreko also supplies oil-free diesel compressors used to eliminate oil based contaminants in the food, pharmaceutical and textile industries.  The Group operates through approximately 118 depots in 23 countries worldwide.

Aggreko PLC (AGK LN)

Aggreko - ESG Report - Lucror Analytics

We assess Aggreko's ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial", but Disclosure...

Lucror Analytics

Horizon Construction Development IPO: The Bear Case

The key elements of the bear case rest on core business margin decline, unexplained headcount reduction, cash burn, long receivable days and...

Arun George

Horizon Construction Development IPO: The Bull Case

The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating...

Arun George

Aggreko: Shareholders' Meeting, Spread Turned Positive

With no interloper risk and spread having turned positive (gross is 2%, c. 8% annualised assuming a 3 month completion for a sure deal), it's time...

Jesus Rodriguez Aguilar

Aggreko - PE Consortium: Recommended Cash Acquisition

Unloved Aggreko is trading 2% above a generous offer, thus I would wait for any share price weakness before setting up a position. The market is...

Jesus Rodriguez Aguilar