Equity Long-Short Analyst

Pyari Menon

Thematic (Sector/Industry)

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (<a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a> &amp; <a href="https://www.smartkarma.com/entities/safran-sa" target="_blank" data-smartkarma-citation="entities:21540:1" rel="noopener">Safran SA (SAF FP)</a> joint venture),<a href="https://www.smartkarma.com/entities/aerojet-rocketdyne-holdings" target="_blank" data-smartkarma-citation="entities:19120:1" rel="noopener">Aerojet Rocketdyne (AJRD US)</a>, <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/raytheon-company" target="_blank" data-smartkarma-citation="entities:6453:1" rel="noopener">Raytheon Company (RTN US)</a>, &amp; <a href="https://www.smartkarma.com/entities/united-technologies-corp" target="_blank" data-smartkarma-citation="entities:12750:1" rel="noopener">United Technologies (UTX US)</a>. The current top players in space vehicles and equipment are <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/maxar-technologies-inc" target="_blank" data-smartkarma-citation="entities:28796:1" rel="noopener">Maxar Technologies Inc (MAXR US)</a>, <a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a>, <a href="https://www.smartkarma.com/entities/thales-sa" target="_blank" data-smartkarma-citation="entities:21483:1" rel="noopener">Thales SA (HO FP)</a>, <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a> &amp; <a href="https://www.smartkarma.com/entities/lockheed-martin-corp" target="_blank" data-smartkarma-citation="entities:20372:1" rel="noopener">Lockheed Martin (LMT US)</a>. 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).<a href="https://www.smartkarma.com/entities/avio-spa" target="_blank" data-smartkarma-citation="entities:34833:1" rel="noopener">Avio SPA (AVIO IM)</a>is a small-cap listed company in the top ten for propulsion

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (Airbus Group SE (AIR FP) &amp; Safran SA (SAF FP) joint venture),Aerojet Rocketdyne (AJRD US), Boeing Co (BA US), Raytheon Company (RTN US), &amp; United Technologies (UTX US). The current top players in space vehicles and equipment are Boeing Co (BA US), Maxar Technologies Inc (MAXR US), Airbus Group SE (AIR FP), Thales SA (HO FP), Alphabet Inc Cl C (GOOG US) &amp; Lockheed Martin (LMT US). 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).Avio SPA (AVIO IM)is a small-cap listed company in the top ten for propulsion

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

BWS provides independent stock specific research focused on companies with distinct value that are going through a special situation where there is a tangible catalyst not priced in. The catalyst can be anything from new product, restructuring, M&A, management change, change in business strategy, etc. BWS’s focus is to understand the change and evaluate the potential return for investors.

BWS utilizes a self formed proprietary approach in discovering stocks by putting great emphasis on deep research. BWS does generate short recommendations following a similar criteria.

Equity Bottom-Up

<ul type="disc"><li>
Garrett Motion (GTX) is reducing its debt obligations and could be signaling the business is on pace with the guidance provided on the second quarter earnings report. GTX has reached an agreement with Honeywell International (HON), the sole holder of GTX’s Series B Preferred.</li></ul> <ul type="disc"><li>The Series B Preferred was structured to pay HON $800 million in eight equal annual payments. However, there were put and call options depending on GTX achieving $600 million adjusted EBITDA in trailing twelve months for two consecutive quarters.</li></ul> <ul type="disc"><li>The prepayment GTX is making helps reduce the leverage of its balance sheet while improving the capital structure. We believe GTX is on pace to achieve the guidance the Company issued with its second quarter earnings call.</li></ul> <ul type="disc"><li>GTX has forecast generating between $300 million and $400 million of free cash flow in 2021. GTX ended the June quarter with $401 million of cash and should be able to retain significant level liquidity entering 2022.</li></ul>


Garrett Motion (GTX) is reducing its debt obligations and could be signaling the business is on pace with the guidance provided on the second quarter earnings report. GTX has reached an agreement with Honeywell International (HON), the sole holder of GTX’s Series B Preferred. The Series B Preferred was structured to pay HON $800 million in eight equal annual payments. However, there were put and call options depending on GTX achieving $600 million adjusted EBITDA in trailing twelve months for two consecutive quarters. The prepayment GTX is making helps reduce the leverage of its balance sheet while improving the capital structure. We believe GTX is on pace to achieve the guidance the Company issued with its second quarter earnings call. GTX has forecast generating between $300 million and $400 million of free cash flow in 2021. GTX ended the June quarter with $401 million of cash and should be able to retain significant level liquidity entering 2022.

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

Honeywell International / Equity Capital Markets

<ul><li>Honeywell International delivered another outstanding quarter, with an organic sales growth of 15% and is nearing our target price.</li><li>The company’s top-line performance was led by double-digit growth in the Safety and Productivity Solutions, Honeywell Building Technologies and Advanced Materials, and Performance Materials and Technologies segments.</li><li>We believe Honeywell International is well-positioned for a decent 2021 ahead and maintain our 'Hold' rating on the stock with a revised target price.</li></ul>

Honeywell International delivered another outstanding quarter, with an organic sales growth of 15% and is nearing our target price.The company’s top-line performance was led by double-digit growth in the Safety and Productivity Solutions, Honeywell Building Technologies and Advanced Materials, and Performance Materials and Technologies segments.We believe Honeywell International is well-positioned for a decent 2021 ahead and maintain our 'Hold' rating on the stock with a revised target price.

Honeywell International Inc. - Investment Thesis

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.

Macroeconomics

<ul>
<li>This year's narrative from US treasuries suggests a short-lived inflation/overheating scare in Q1, which coincided with Winter Storm Uri and the Texas power crisis, along with an initial phase of tapering talk from regional Fed presidents which subsequently faded; since the March peak, 10yr yields are down -45bps or a whopping -26%, representing the view that inflationary pressures have been entirely transitory</li>
<li>The picture from 5yr TIPS breakevens and the 5yr5yr has been more closely attuned to commodities:  In the past 6 months, 5yr TIPS breakevens and 5yr5yr have been 74% and 70% correlated with copper prices vs. the 10yr yield's 46%, though correlations with oil have been low; breakevens peaked with copper in May and bottomed in June-July</li>
<li>While 10yr yields continued to grind lower in July, our text mining is picking up a new surge in reports of supply constraints, which have been strongly correlated with breakevens and reflect corporate commentary in the current earnings season</li>
<li>The inflation narrative from treasuries appears to be asynchronous with the Q2 earnings season narrative from cyclical corporates, who are uniformly reporting worsening raw materials inflation expected in Q3 and lingering supply constraints</li>
<li>Nonetheless, our text mining acknowledges that talk of tightening financial conditions last spiked in March and has not resurfaced since, and expectations of a massive US infrastructure package have faded</li>
</ul><div class="content-highlight">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. </div>


This year's narrative from US treasuries suggests a short-lived inflation/overheating scare in Q1, which coincided with Winter Storm Uri and the Texas power crisis, along with an initial phase of tapering talk from regional Fed presidents which subsequently faded; since the March peak, 10yr yields are down -45bps or a whopping -26%, representing the view that inflationary pressures have been entirely transitory
The picture from 5yr TIPS breakevens and the 5yr5yr has been more closely attuned to commodities:  In the past 6 months, 5yr TIPS breakevens and 5yr5yr have been 74% and 70% correlated with copper prices vs. the 10yr yield's 46%, though correlations with oil have been low; breakevens peaked with copper in May and bottomed in June-July
While 10yr yields continued to grind lower in July, our text mining is picking up a new surge in reports of supply constraints, which have been strongly correlated with breakevens and reflect corporate commentary in the current earnings season
The inflation narrative from treasuries appears to be asynchronous with the Q2 earnings season narrative from cyclical corporates, who are uniformly reporting worsening raw materials inflation expected in Q3 and lingering supply constraints
Nonetheless, our text mining acknowledges that talk of tightening financial conditions last spiked in March and has not resurfaced since, and expectations of a massive US infrastructure package have faded
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:  Asynchronous Inflation Narratives

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Hancom Lifecare is the leading provider of personal safety equipment products in Korea including air respirators, general masks, protective clothing, and gas masks to domestic fire departments, military units, police, and retail consumers.<a href="https://www.smartkarma.com/entities/hancom-lifecare-inc" target="_blank" data-smartkarma-citation="entities:33518:1" rel="noopener">Hancom Lifecare (372910 KS)</a> is offering 8.3 million shares at IPO price of 10,700 won to 13,700 won per share. The IPO deal size is from $79 million to $101 million. According to the bankers' valuation, the company would be valued at 307 billion won to 393 billion won. The book building for the institutional investors starts on 29 July 2021. Mirae Asset Securities is the lead underwriter of this IPO.<table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 237.13px;"><div style="text-align: start;"><div><div>Deal Specifics of the Hancom Lifecare IPO:</div></div></div></td>
<td style="width: 377.23px;"> </td>
</tr>
<tr>
<td style="width: 237.13px;">Lead underwriters of the IPO: </td>
<td style="width: 377.23px;">Mirae Asset Securities</td>
</tr>
<tr>
<td style="width: 237.13px;">Expected IPO price per share: </td>
<td style="width: 377.23px;">10,700 won (low)/13,700 won (high)</td>
</tr>
<tr>
<td style="width: 237.13px;">Number of Shares for IPO:</td>
<td style="width: 377.23px;">8.3m shares (4.5m new shares and 3.8m old shares)</td>
</tr>
<tr>
<td style="width: 237.13px;">IPO base deal size: </td>
<td style="width: 377.23px;">US$79 mn (low);  US$101 mn (high)</td>
</tr>
<tr>
<td style="width: 237.13px;">Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 377.23px;">28.68m shares</td>
</tr>
<tr>
<td style="width: 237.13px;">Expected market cap after IPO:</td>
<td style="width: 377.23px;">307 billion won (low)/393 billion won (high)</td>
</tr>
<tr>
<td style="width: 237.13px;">Book open: </td>
<td style="text-align: left; width: 377.23px;">29-Jul-21</td>
</tr>
<tr>
<td style="width: 237.13px;">Book closed:</td>
<td style="text-align: left; width: 377.23px;">30-Jul-21</td>
</tr>
<tr>
<td style="width: 237.13px;">Listing date: </td>
<td style="text-align: left; width: 377.23px;">TBC</td>
</tr>
<tr>
<td style="width: 237.13px;">Source: Company data</td>
<td style="width: 377.23px;"> </td>
</tr>
</tbody>
</table>Major Shareholder - <a href="https://www.smartkarma.com/entities/hancom-inc" target="_blank" data-smartkarma-citation="entities:13366:1" rel="noopener">Hancom Inc (030520 KS)</a> is the major shareholder of Hancom Lifecare with a 40.15% stake in the company.See our insight <a href="https://www.smartkarma.com/insights/korea-small-cap-gem-2-hancom-inc" target="_blank" data-smartkarma-citation="insights:39627" rel="noopener">Korea Small Cap Gem #2: Hancom Inc</a> for more details on the controlling shareholder of Hancom Lifecare. Hancom's shares have performed handsomely since our insight on this company in May 2020.

Hancom Lifecare is the leading provider of personal safety equipment products in Korea including air respirators, general masks, protective clothing, and gas masks to domestic fire departments, military units, police, and retail consumers.Hancom Lifecare (372910 KS) is offering 8.3 million shares at IPO price of 10,700 won to 13,700 won per share. The IPO deal size is from $79 million to $101 million. According to the bankers' valuation, the company would be valued at 307 billion won to 393 billion won. The book building for the institutional investors starts on 29 July 2021. Mirae Asset Securities is the lead underwriter of this IPO.






Deal Specifics of the Hancom Lifecare IPO:
 


Lead underwriters of the IPO: 
Mirae Asset Securities


Expected IPO price per share: 
10,700 won (low)/13,700 won (high)


Number of Shares for IPO:
8.3m shares (4.5m new shares and 3.8m old shares)


IPO base deal size: 
US$79 mn (low);  US$101 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
28.68m shares


Expected market cap after IPO:
307 billion won (low)/393 billion won (high)


Book open: 
29-Jul-21


Book closed:
30-Jul-21


Listing date: 
TBC


Source: Company data
 


Major Shareholder - Hancom Inc (030520 KS) is the major shareholder of Hancom Lifecare with a 40.15% stake in the company.See our insight Korea Small Cap Gem #2: Hancom Inc for more details on the controlling shareholder of Hancom Lifecare. Hancom's shares have performed handsomely since our insight on this company in May 2020. 

United States

Honeywell International Inc. is a worldwide diversified technology and manufacturing company providing aerospace products and services, control, sensing and security technologies, turbochargers, automotive products, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals, and energy efficient products and solutions.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Honeywell International (HON US)

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

The space economy is seeing much more private sector participation. This sets up the sector for strong growth. In this report, we screen for...

Pyari Menon

GTX: Turbocharged Deleverage

GTX reached an agreement with HON to repay $213 million of its Series B Pfd to reduce its debt balance. The prepayment suggests GTX should manage...

BWS Financial Inc

Honeywell International Inc. - Investment Thesis

Honeywell International delivered another outstanding quarter, with an organic sales growth of 15% and is nearing our target price. The company’s...

Baptista Research

TMI Snapshot: Asynchronous Inflation Narratives

While the bond market continues to dismiss inflationary pressures, our text mining picked up a recent spike in mentions of supply constraints as...

Elan Gore

Hancom Lifecare IPO Preview

Hancom Lifecare is the leading provider of personal safety equipment products in Korea. Hancom Lifecare is offering 8.3 million shares at IPO price...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)