Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<p>We believe that iron ore prices will stay stronger for longer as <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale SA (VALE US)</a>, in its most recent regulatory filing, guided its production volumes down to 305-310 million tons for FY20 and 315-335 million tons for FY21. </p>
<p>Most of the sell-side and the market were assuming sales of 360 million tons for FY21. Market participants will have to bring supply estimates down by 25-45 million tons for FY21. </p>
<h3><strong>Vale Output Summary </strong></h3>
<table class="table table-striped">
<tbody>
<tr>
<td style="text-align: center; width: 128.444px;">2017</td>
<td style="text-align: center; width: 128.444px;">2018</td>
<td style="text-align: center; width: 128.444px;">2019</td>
<td style="text-align: center; width: 128.444px;">2020e</td>
<td style="text-align: center; width: 126.667px;">2021e</td>
</tr>
<tr>
<td style="text-align: center; width: 128.444px;">366</td>
<td style="text-align: center; width: 128.444px;">385</td>
<td style="text-align: center; width: 128.444px;">302</td>
<td style="text-align: center; width: 128.444px;">305-310</td>
<td style="text-align: center; width: 126.667px;">315-335</td>
</tr>
</tbody>
</table>
<p><em>source: company filings and presentations</em></p>
<p>We believe this guide down in sales for 2021 is substantial and will benefit iron ore prices in the short-term as Vale's shipments are almost 16-17% of the seaborne market. </p>
<p>Based on spot prices of 120-140$/ton, <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> trades at an 11-15% FCF yield.  The company pays out its cash generated as dividends.  </p>
<p>This catalyst and cheap FCF yield indicate a short term upside of at least 20-30%.</p>

We believe that iron ore prices will stay stronger for longer as Vale SA (VALE US), in its most recent regulatory filing, guided its production volumes down to 305-310 million tons for FY20 and 315-335 million tons for FY21. 
Most of the sell-side and the market were assuming sales of 360 million tons for FY21. Market participants will have to bring supply estimates down by 25-45 million tons for FY21. 
Vale Output Summary 



2017
2018
2019
2020e
2021e


366
385
302
305-310
315-335



source: company filings and presentations
We believe this guide down in sales for 2021 is substantial and will benefit iron ore prices in the short-term as Vale's shipments are almost 16-17% of the seaborne market. 
Based on spot prices of 120-140$/ton, Fortescue Metals (FMG AU) trades at an 11-15% FCF yield.  The company pays out its cash generated as dividends.  
This catalyst and cheap FCF yield indicate a short term upside of at least 20-30%.

Fortescue Metals: More Upside In the Near Term

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<div>
<p>With this report, I continue the monthly series on some of the main European holding companies that I deem interesting to long/short clients.</p>
</div>
<div>
<ul>
<li>The current premium of <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a> vs.  <a href="https://www.smartkarma.com/entities/bhp-billiton-plc" target="_blank" data-smartkarma-citation="entities:21840:1" rel="noopener">Bhp Billiton (BLT LN)</a>  is 23.5% (vs. 20.5% at the end of September), against a 10-year average of 14.2%.</li>
<li>
<a href="https://www.smartkarma.com/entities/corp-financiera-alba-sa" target="_blank" data-smartkarma-citation="entities:21245:1" rel="noopener">Corp Financiera Alba Sa (ALB SM)</a> is trading at a 43.8% discount to NAV (down from 49% at the end of October).</li>
<li>The discount to NAV of <a href="https://www.smartkarma.com/entities/groupe-bruxelles-lambert-sa" target="_blank" data-smartkarma-citation="entities:21332:1" rel="noopener">Groupe Bruxelles Lambert Sa (GBLB BB)</a> is 30.8%.</li>
<li>The discount in <a href="https://www.smartkarma.com/entities/heineken-holding-nv" target="_blank" data-smartkarma-citation="entities:21118:1" rel="noopener">Heineken Holding NV (HEIO NA)</a> relative to <a href="https://www.smartkarma.com/entities/heineken-nv" target="_blank" data-smartkarma-citation="entities:21117:1" rel="noopener">Heineken NV (HEIA NA)</a> is 12.3% (12.9% as of 30 October) vs. an average of 10.5% for the last 15 years, and 7.9% for the last five years.</li>
<li>
<a href="https://www.smartkarma.com/entities/industrivarden-ab" target="_blank" data-smartkarma-citation="entities:22395:1" rel="noopener">Industrivarden AB (INDUA SS)</a> C shares are trading at a 6.7% discount to NAV vs. 5.9% at the end of November.</li>
<li>The discount to NAV of <a href="https://www.smartkarma.com/entities/investor-ab" target="_blank" data-smartkarma-citation="entities:22397:1" rel="noopener">Investor AB (INVEB SS)</a> B shares has tightened to 15% (vs. 19% of 30 October) in line with the vaccine driven market rally.</li>
<li>
<a href="https://www.smartkarma.com/entities/kinnevik-ab" target="_blank" data-smartkarma-citation="entities:22407:1" rel="noopener">Investment Ab Kinnevik (KINVB SS)</a> B shares are trading at a <strong>11.4% premium to NAV</strong> (vs a discount of 8.3% as of 30 September).</li>
<li>
<a href="https://www.smartkarma.com/entities/royal-dutch-shell-plc-98de2c77-62f2-46da-88eb-af269fb53d42" target="_blank" data-smartkarma-citation="entities:28510:1" rel="noopener">Royal Dutch Shell PLC (RDS/B US)</a> “B” shares trade in New York at a discount of approximately 4.1% with respect to the <a href="https://www.smartkarma.com/entities/royal-dutch-shell-plc-adr" target="_blank" data-smartkarma-citation="entities:792:1" rel="noopener">Royal Dutch Shell Plc (Adr) (RDS/A US)</a> “A” shares.</li>
<li>
<a href="https://www.smartkarma.com/entities/unilever-plc" target="_blank" data-smartkarma-citation="entities:22197:1" rel="noopener">Unilever PLC (ULVR LN)</a> said on 30 November that the company had completed the unification of its U.K. and Dutch listed entities.</li>
</ul>
</div>


With this report, I continue the monthly series on some of the main European holding companies that I deem interesting to long/short clients.



The current premium of BHP Group (BHP AU) vs.  Bhp Billiton (BLT LN)  is 23.5% (vs. 20.5% at the end of September), against a 10-year average of 14.2%.

Corp Financiera Alba Sa (ALB SM) is trading at a 43.8% discount to NAV (down from 49% at the end of October).
The discount to NAV of Groupe Bruxelles Lambert Sa (GBLB BB) is 30.8%.
The discount in Heineken Holding NV (HEIO NA) relative to Heineken NV (HEIA NA) is 12.3% (12.9% as of 30 October) vs. an average of 10.5% for the last 15 years, and 7.9% for the last five years.

Industrivarden AB (INDUA SS) C shares are trading at a 6.7% discount to NAV vs. 5.9% at the end of November.
The discount to NAV of Investor AB (INVEB SS) B shares has tightened to 15% (vs. 19% of 30 October) in line with the vaccine driven market rally.

Investment Ab Kinnevik (KINVB SS) B shares are trading at a 11.4% premium to NAV (vs a discount of 8.3% as of 30 September).

Royal Dutch Shell PLC (RDS/B US) “B” shares trade in New York at a discount of approximately 4.1% with respect to the Royal Dutch Shell Plc (Adr) (RDS/A US) “A” shares.

Unilever PLC (ULVR LN) said on 30 November that the company had completed the unification of its U.K. and Dutch listed entities.



Selected European Holdcos and DLCs: November Report

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Dalrymple Bay Infrastructure / Equity Capital Markets

<p>Dalrymple Bay Infrastructure (DBI from hereon) aims to raise around US$500m in its Australian listing. It is owned by <a href="https://www.smartkarma.com/entities/brookfield-asset-manage-cl-a-0483cfb5-71a5-4931-af80-901e5f30aace" target="_blank" data-smartkarma-citation="entities:23741:1" rel="noopener">Brookfield Asset Management (BAM US)</a>. </p><p>It holds a 99-lease for Dalrymple Bay Terminal (DBT), a coal export terminal. DBT was commissioned in 1983 and is located close to Bowen Basin, the world’s largest met coal export region, in Queensland.  </p><p>The terminal is a common-user facility providing services to a large number of mining customers. Approximately 80% of the coal shipped through DBT in 2019 was metallurgical (met) coal. It is the largest met coal terminal, handling 15% of global met coal in 2019 and 30% of Queensland coal exports. </p><p>While the current revenue for DBI is regulated and hence, fairly stable, it has been trying to change that so that it can set its own tariffs directly with clients. However, even if it manages to do that the upside might be limited.</p><p>As per my calculations, if it doesn’t manage to succeed in doing so, its revenue could drop by an amount far exceeding the projected upside. This doesn’t make DBI appear particularly attractive.</p>

Dalrymple Bay Infrastructure (DBI from hereon) aims to raise around US$500m in its Australian listing. It is owned by Brookfield Asset Management (BAM US). It holds a 99-lease for Dalrymple Bay Terminal (DBT), a coal export terminal. DBT was commissioned in 1983 and is located close to Bowen Basin, the world’s largest met coal export region, in Queensland.  The terminal is a common-user facility providing services to a large number of mining customers. Approximately 80% of the coal shipped through DBT in 2019 was metallurgical (met) coal. It is the largest met coal terminal, handling 15% of global met coal in 2019 and 30% of Queensland coal exports. While the current revenue for DBI is regulated and hence, fairly stable, it has been trying to change that so that it can set its own tariffs directly with clients. However, even if it manages to do that the upside might be limited.As per my calculations, if it doesn’t manage to succeed in doing so, its revenue could drop by an amount far exceeding the projected upside. This doesn’t make DBI appear particularly attractive.

Dalrymple Bay Infrastructure - Highly Curious Timing

<div>
<p>With this report, I continue the monthly series on some of the main European holding companies that I deem interesting to long/short clients.</p>
</div>
<div>
<p>The discounts to NAV of Industrivärden and Kinnevik have considerably tightened. It is time to unwind them, and wait for the discounts to widen before setting up the trades again.</p>
</div>
<div>
<p>The most compelling situations in this report are GBL and Investor AB. The spread in Unilever is less than okay, but safe. It should close in a month as a result of the share unification.</p>
</div>


With this report, I continue the monthly series on some of the main European holding companies that I deem interesting to long/short clients.


The discounts to NAV of Industrivärden and Kinnevik have considerably tightened. It is time to unwind them, and wait for the discounts to widen before setting up the trades again.


The most compelling situations in this report are GBL and Investor AB. The spread in Unilever is less than okay, but safe. It should close in a month as a result of the share unification.


Selected European Holdcos and DLCs: October Report

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>We run sentiment analysis around Rio Tinto's Juukan Gorge heritage site crisis, text-mining for ESG-related sentiment since news of ethically-challenged practices at RIO broke out</li>
<li>In early June, Rio Tinto revealed it had blasted a 46,000-year-old sacred aboriginal site, sparking widespread controversy and resulting in a management shakeout and parliamentary enquiry</li>
<li>Perceived as an ESG disaster, Rio Tinto continues to underperform FMG and the MSCI Global Metals &amp; Mining Index, though its performance gap with BHP closed in September following executive resignations</li>
<li>Fortescue's performance appears to have been unaffected by the Juukan Gorge crisis, but our sentiment analysis and news attributions see gathering clouds as FMG is recently linked to significant negative stewardship headlines</li>
<li>Our daily RIO ESG sentiment time series has been 74% correlated with RIO performance since May 31 with a 7-day lead</li>
<li>Though entirely dependent on the quality and volume of news flow, NLP-based sentiment analysis can help identify and attribute decoupling between equity performance and newsflow tone, as well as challenge confirmation biases, taking into account the rapid pace of news decay</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


We run sentiment analysis around Rio Tinto's Juukan Gorge heritage site crisis, text-mining for ESG-related sentiment since news of ethically-challenged practices at RIO broke out
In early June, Rio Tinto revealed it had blasted a 46,000-year-old sacred aboriginal site, sparking widespread controversy and resulting in a management shakeout and parliamentary enquiry
Perceived as an ESG disaster, Rio Tinto continues to underperform FMG and the MSCI Global Metals &amp; Mining Index, though its performance gap with BHP closed in September following executive resignations
Fortescue's performance appears to have been unaffected by the Juukan Gorge crisis, but our sentiment analysis and news attributions see gathering clouds as FMG is recently linked to significant negative stewardship headlines
Our daily RIO ESG sentiment time series has been 74% correlated with RIO performance since May 31 with a 7-day lead
Though entirely dependent on the quality and volume of news flow, NLP-based sentiment analysis can help identify and attribute decoupling between equity performance and newsflow tone, as well as challenge confirmation biases, taking into account the rapid pace of news decay
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  After Juukan Gorge, Rio Tinto Sentiment Stabilizes.  Reckoning Time For FMG?

Australia

BHP Group Ltd operates as an international resources company. The Company offers mineral exploration and production, including coal, iron ore, gold, titanium, ferroalloys, nickel, and copper concentrate, as well as petroleum exploration, production, and refining. BHP Group serves customers worldwide.

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BHP Group Ltd (BHP AU)

Fortescue Metals: More Upside In the Near Term

Fortescue is a pure-play with a high correlation to the iron ore price. With iron ore in a 120-140$/ton range, the stock has an FCF yield of 11-15%...

Sameer Taneja

Selected European Holdcos and DLCs: November Report

Holding companies have reduced their discount to NAV during November. Kinnevik is trading at a premium to NAV. Interesting trades are GBL, and in...

Jesus Rodriguez Aguilar

Dalrymple Bay Infrastructure - Highly Curious Timing

Dalrymple Bay Infrastructure aims to raise around US$500m in its Australian IPO. DBI is owned by Brookfield Asset Management.

Sumeet Singh

Selected European Holdcos and DLCs: October Report

The most compelling situations in this report are GBL and Investor AB. The spread in Unilever is less than okay, but safe. It should close in a...

Jesus Rodriguez Aguilar

TMI Snapshot: After Juukan Gorge, Rio Tinto Sentiment Stabilizes. Reckoning Time For FMG?

We text mined for ESG-related coverage of Rio Tinto to find that sentiment (74% correlated with the equity) has stabilized since the Juukan Gorge...

Elan Gore

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