Industrials

• As part of a US$22.8bn transaction, BlackRock, Global Infrastructure Partners and Terminal Investment, have agreed to buy two contentious Panama ports from Li Ka-shing’s CK Hutchison (1 HK) (CKH).
• The transaction also includes an 80% stake in CKH’s ports subsidiaries, which operate 43 ports comprising 199 berths in 23 countries.
• CKH expects cash proceeds in excess of US$19bn. CKH’s current market cap was – at the time of deal – also  ~US$19bn. 

• In a big surprise, there is only one change for the Nikkei 225 (NKY INDEX) in March with BayCurrent Consulting (6532 JP) replacing Mitsubishi Logistics (9301 JP). 
• The non-inclusion of Kokusai Electric (6525 JP) is a big surprise given that the stock was ranked among the top 75 stocks by liquidity. There could be selling near-term.
• BayCurrent Consulting (6532 JP) has been added at a 0.5 PAF and that will increase to 1 in September. Fast Retailing (9983 JP) could be capped yet again in September.

• The March 2025 Nikkei 225 Average Review was announced last night. Something of a disaster for Team Quiddity. I had expected 2-3 ADDs and 2-3 DELETEs.
• We got only one change, and that was my second choice ADD and second choice DELETE. Top 75 name Kokusai Electric (6525 JP) was missing in action. BIG Disappointment. 🤔
• BayCurrent Consulting (6532 JP) is in at a PAF of 0.5, with an upweight end-Sep. Mitsubishi Logistics (9301 JP) is OUT. Fast Retailing (9983 JP) will see US$2.3bn of sells.

• Discussion with Darren Kwok from Barminko and Andrew Dawson from Sandvik about load and haul equipment in the mining industry
• Explanation of different types of load and haul equipment, including full battery, hybrid, and diesel electric
• Exploration of reasons why certain technologies, like diesel electric, have not been widely adopted in underground mining operations

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• On March 5 Chinese freight platform Full Truck Alliance posted another great set of results
• Strong Q424 top-line growth was matched by firm OpEx control, leading to higher margins
• We’ve upped our FY25 earnings numbers; we rate YMM a BUY with a US$17/ADS target

• In this edition: • Philips | recall of its Tack implants • Universal Music Group | independent labels file objections against Downtown Music deal • Arcadis | CFO will step down at the end of May

• The omni-channel specialist fishing tackle and equipment retailer updates on Trading for the Y/E January 2025.
• The Board expects to report revenue and adjusted EBITDA slightly ahead of market expectations.
• Its revenue is 11.9% ahead at £91.3m and 7.1% higher on a like for like basis. Its European online sales increased 7.1% to £4.6m. 

• Activist investors, confusing market price with intrinsic value, have shot themselves in the foot by offering terrible advice to Keisei Railway’s management. 
• When Keisei followed advice from the activist, selling just 1% of the shares of Oriental Land, Keisei’s share price collapsed, proving market price has nothing to do with intrinsic value. 
• Keisei’s revenue growth and return on investment are stronger than most of its peers, and the crash in its stock price caused by activists might create an opportunity for others.

• CK Hutchison Holdings (1 HK) (CKH) is trading “cheap” as Panama’s Supreme Court agrees to consider a request to nullify CKH’s canal concessions. 
• Preceding my comments on CKH, CK Infrastructure Holdings (1038 HK) (coming up cheap on my monitor), and Power Assets Holdings (6 HK) are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Sinfonia Technology is strategically positioned to benefit from Japan’s rising defence and semiconductor investments, leveraging its expertise in precision motion systems and power electronics.
• The company holds a leading market share in aerospace and semiconductor handling, underpinned by robust financial performance and a well-defined strategy for future growth.
• Amid increasing geopolitical tensions, Sinfonia’s integral role in space and defence applications enhances its long-term growth potential, making it a noteworthy player in Japan’s industrial expansion.

• In the past week, Hanwha Systems announced that it plans to expand third party allocation capital increase limit from 20% to 30% of issued shares in its articles of incorporation.
• This plan to significantly increase the amount of capital raise limit sets the stage for a major capital increase by Hanwha Systems in 2025, in our view. 
• Unlike in 2021 when we were bullish on Hanwha Systems post a large-scale capital raise, we are more cautious on the company’s potential new large scale capital raise this year. 

• OKP Holdings reported a 135.4% increase in gross profit for FY2024 to S$58.2 million, with a gross profit margin of 32.0%.
• The construction and maintenance segments generated revenues of S$114.0 million and S$61.7 million, respectively, in FY2024.
• OKP’s order book stands at S$600.7 million, supported by a strong balance sheet with S$124.3 million in cash.

• Titan International is a global manufacturer of off-the-road tires, wheels and undercarriages.
• The company serves the agricultural, earthmoving / construction, and consumer markets.
• Long-term secular tailwinds exist in the global agricultural, infrastructure and construction markets.

• Verbrec Limited (ASX:VBC) provides engineering, asset management, infrastructure services and training to the energy, mining, infrastructure and defence industries in Australia, New Zealand, PNG and the Pacific Islands.
• The company has released its H1 FY25 results delivering a profitable outcome for the third consecutive period, albeit below RaaS forecasts predominantly due to macro headwinds resulting in lower-than-forecast revenue on the back of project delays.
• Management cited that client feedback suggests “inflationary pressures, uncertainty prior to election results (both international and domestic) and shortage of qualified engineering resources caused deferrals of several notable prospective project opportunities that were expected to commence in H1 FY2025”.

• Zhejiang Sanhua Intellignt Controls Co., Ltd. (002050 CH) (ZSIC), a manufacturer of refrigeration and air-conditioning control components, aims to raise around US$1bn in its H-share listing.
• ZSIC is a market leader in a number of products, with commanding market share both domestically and globally.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Activist investors, confusing market price with intrinsic value, have shot themselves in the foot by offering terrible advice to Keisei Railway’s management. 
• When Keisei followed advice from the activist, selling just 1% of the shares of Oriental Land, Keisei’s share price collapsed, proving market price has nothing to do with intrinsic value. 
• Keisei’s revenue growth and return on investment are stronger than most of its peers, and the crash in its stock price caused by activists might create an opportunity for others.

• CK Hutchison Holdings (1 HK) (CKH) is trading “cheap” as Panama’s Supreme Court agrees to consider a request to nullify CKH’s canal concessions. 
• Preceding my comments on CKH, CK Infrastructure Holdings (1038 HK) (coming up cheap on my monitor), and Power Assets Holdings (6 HK) are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Sinfonia Technology is strategically positioned to benefit from Japan’s rising defence and semiconductor investments, leveraging its expertise in precision motion systems and power electronics.
• The company holds a leading market share in aerospace and semiconductor handling, underpinned by robust financial performance and a well-defined strategy for future growth.
• Amid increasing geopolitical tensions, Sinfonia’s integral role in space and defence applications enhances its long-term growth potential, making it a noteworthy player in Japan’s industrial expansion.

• In the past week, Hanwha Systems announced that it plans to expand third party allocation capital increase limit from 20% to 30% of issued shares in its articles of incorporation.
• This plan to significantly increase the amount of capital raise limit sets the stage for a major capital increase by Hanwha Systems in 2025, in our view. 
• Unlike in 2021 when we were bullish on Hanwha Systems post a large-scale capital raise, we are more cautious on the company’s potential new large scale capital raise this year. 

• OKP Holdings reported a 135.4% increase in gross profit for FY2024 to S$58.2 million, with a gross profit margin of 32.0%.
• The construction and maintenance segments generated revenues of S$114.0 million and S$61.7 million, respectively, in FY2024.
• OKP’s order book stands at S$600.7 million, supported by a strong balance sheet with S$124.3 million in cash.

• Titan International is a global manufacturer of off-the-road tires, wheels and undercarriages.
• The company serves the agricultural, earthmoving / construction, and consumer markets.
• Long-term secular tailwinds exist in the global agricultural, infrastructure and construction markets.

• Verbrec Limited (ASX:VBC) provides engineering, asset management, infrastructure services and training to the energy, mining, infrastructure and defence industries in Australia, New Zealand, PNG and the Pacific Islands.
• The company has released its H1 FY25 results delivering a profitable outcome for the third consecutive period, albeit below RaaS forecasts predominantly due to macro headwinds resulting in lower-than-forecast revenue on the back of project delays.
• Management cited that client feedback suggests “inflationary pressures, uncertainty prior to election results (both international and domestic) and shortage of qualified engineering resources caused deferrals of several notable prospective project opportunities that were expected to commence in H1 FY2025”.

• Zhejiang Sanhua Intellignt Controls Co., Ltd. (002050 CH) (ZSIC), a manufacturer of refrigeration and air-conditioning control components, aims to raise around US$1bn in its H-share listing.
• ZSIC is a market leader in a number of products, with commanding market share both domestically and globally.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• In the TOPIX Index, some “low liquidity” names carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
• These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will see index inflows from passive trackers of TOPIX.
• In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2025 and their flow implications.

• Shenzhen International (152 HK)‘s FY24 net profit will range at HK$2.8-3.1bn (53-63% growth YoY), boosted by a HK$2.3bn gain from South China Logistics Park Transformation.
• Extrapolating this gain to the whole land plot will generate a profit of HK$11.4bn, or 66% of the current market capitalisation. The stock is significantly undervalued at 0.49x P/B. 
• At an assumed 50% payout ratio, SZI’s yield is at 9%. Moreover, with stable profit expected for FY25 and FY26, the yield will be maintained for the next two years.

• Fluor Corporation’s recent earnings announcement reflects a mix of positive financial results and ongoing strategic restructuring.
• The company reported a revenue of $16.3 billion for the year, marking a 5.4% increase from 2023, alongside a net income of $2.1 billion, largely influenced by the deconsolidation of its investment in NuScale Power and subsequent administrative accounting adjustments.
• This shows Fluor’s capacity to stabilize its financial footing while adapting to dynamic market conditions.

• Franklin Electric delivered a mixed performance for the fourth quarter and full year of 2024 against a backdrop of challenging macroeconomic conditions.
• The company reported a modest year-over-year increase of 3% in consolidated sales for the fourth quarter, driven primarily by growth in the Distribution and newly renamed Energy Systems segments, while sales in the Water Systems segment were flat.
• Despite achieving higher volumes across segments, the company faced diverse challenges that impacted its overall performance.

• HT has maintained its FY24 guidance of OP of ¥2,900mil (-10.4% YoY) on sales of ¥44,000mil (-6.3% YoY).
• Management commits to pay out the higher of a DOE of 3.5% or a dividend pay-out ratio of 60% during the current medium-term plan (FY24~FY27).
• HT has not changed the view on the medium to long-term growth potential in the EV market, however, for the time being, it remains cautious.

• Institutions were net sellers of Singapore stocks, with a net outflow of S$265 million from Feb 21-27, 2025.
• DBS Group Holdings led share buybacks with 350,000 shares at S$46.73 each; total buybacks amounted to S$31,062,634.
• Wilmar International’s FY24 core net profit declined 26% to US$1.16 billion, with sales volume growth in most divisions.

• Valmont Industries, Inc. reported its fourth quarter and full-year 2024 financial results, citing a strong performance that aligned with expectations despite facing headwinds.
• The company noted significant achievements in operational and commercial areas, which aided in delivering solid outcomes.
• Key highlights included a focus on infrastructure and agricultural growth, as well as enhancements in operational flexibility and customer-driven innovation.

• Flowserve Corporation presented its fourth-quarter and year-end 2024 financial update, highlighting significant improvements and achievements throughout the year.
• The company reported robust growth with bookings reaching nearly $1.2 billion for the quarter, showing strong growth momentum in both original equipment and aftermarket segments.
• Their backlog closed near a record $2.8 billion, supported by strong cash flow generation of $197 million for the quarter, attributed to effective working capital management.

• In the TOPIX Index, some “low liquidity” names carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
• These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will see index inflows from passive trackers of TOPIX.
• In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2025 and their flow implications.

• Shenzhen International (152 HK)‘s FY24 net profit will range at HK$2.8-3.1bn (53-63% growth YoY), boosted by a HK$2.3bn gain from South China Logistics Park Transformation.
• Extrapolating this gain to the whole land plot will generate a profit of HK$11.4bn, or 66% of the current market capitalisation. The stock is significantly undervalued at 0.49x P/B. 
• At an assumed 50% payout ratio, SZI’s yield is at 9%. Moreover, with stable profit expected for FY25 and FY26, the yield will be maintained for the next two years.

• Fluor Corporation’s recent earnings announcement reflects a mix of positive financial results and ongoing strategic restructuring.
• The company reported a revenue of $16.3 billion for the year, marking a 5.4% increase from 2023, alongside a net income of $2.1 billion, largely influenced by the deconsolidation of its investment in NuScale Power and subsequent administrative accounting adjustments.
• This shows Fluor’s capacity to stabilize its financial footing while adapting to dynamic market conditions.

• Franklin Electric delivered a mixed performance for the fourth quarter and full year of 2024 against a backdrop of challenging macroeconomic conditions.
• The company reported a modest year-over-year increase of 3% in consolidated sales for the fourth quarter, driven primarily by growth in the Distribution and newly renamed Energy Systems segments, while sales in the Water Systems segment were flat.
• Despite achieving higher volumes across segments, the company faced diverse challenges that impacted its overall performance.

• HT has maintained its FY24 guidance of OP of ¥2,900mil (-10.4% YoY) on sales of ¥44,000mil (-6.3% YoY).
• Management commits to pay out the higher of a DOE of 3.5% or a dividend pay-out ratio of 60% during the current medium-term plan (FY24~FY27).
• HT has not changed the view on the medium to long-term growth potential in the EV market, however, for the time being, it remains cautious.

• Institutions were net sellers of Singapore stocks, with a net outflow of S$265 million from Feb 21-27, 2025.
• DBS Group Holdings led share buybacks with 350,000 shares at S$46.73 each; total buybacks amounted to S$31,062,634.
• Wilmar International’s FY24 core net profit declined 26% to US$1.16 billion, with sales volume growth in most divisions.

• Valmont Industries, Inc. reported its fourth quarter and full-year 2024 financial results, citing a strong performance that aligned with expectations despite facing headwinds.
• The company noted significant achievements in operational and commercial areas, which aided in delivering solid outcomes.
• Key highlights included a focus on infrastructure and agricultural growth, as well as enhancements in operational flexibility and customer-driven innovation.

• Flowserve Corporation presented its fourth-quarter and year-end 2024 financial update, highlighting significant improvements and achievements throughout the year.
• The company reported robust growth with bookings reaching nearly $1.2 billion for the quarter, showing strong growth momentum in both original equipment and aftermarket segments.
• Their backlog closed near a record $2.8 billion, supported by strong cash flow generation of $197 million for the quarter, attributed to effective working capital management.

• AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best. 
• Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
• This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Mixue Group (2097 HK) andJX Advanced Metals (5016 JP) IPOs. Japan Post Bank (7182 JP) placement. 
• Event-Driven developments: Seven & I Holdings (3382 JP), Aeon Delight (9787 JP), Tonami Holdings (9070 JP), Sg Fleet (SGF AU). 

• On Monday, Western Digital (WDC) spun off its NAND flash business, Sandisk (SNDK).

• On Friday, CompoSecure (CMPO) spun off its management company, Resolute Holdings (RHLD).

• During the week, we got earnings from Howard Hughes (HHH) and Sunrise Communications (SNRE).

• AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best. 
• Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
• This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Mixue Group (2097 HK) andJX Advanced Metals (5016 JP) IPOs. Japan Post Bank (7182 JP) placement. 
• Event-Driven developments: Seven & I Holdings (3382 JP), Aeon Delight (9787 JP), Tonami Holdings (9070 JP), Sg Fleet (SGF AU). 

• On Monday, Western Digital (WDC) spun off its NAND flash business, Sandisk (SNDK).

• On Friday, CompoSecure (CMPO) spun off its management company, Resolute Holdings (RHLD).

• During the week, we got earnings from Howard Hughes (HHH) and Sunrise Communications (SNRE).

• Bowing before bureaucratic, governmental, societal, and perhaps finally shareholder pressure, Aeon Co Ltd (8267 JP) Friday announced it is rolling up two big subsidiaries. 
• Aeon Mall will be merged with Aeon in a share exchange and Aeon Delight (9787 JP) will be taken over via slightly long-dated Tender Offer which starts Monday.
• This is probably the wrong price, but it isn’t egregiously wrong I expect. And it would be difficult to block. I expect it gets done easily.

• Aeon Delight (9787 JP) has recommended a tender offer from Aeon Co Ltd (8267 JP) at JPY5,400 per share, a 15.3% premium to the last close.
• Despite the skinny premium, the offer is reasonable compared to historical trading ranges and peer multiples. The offer represents an all-time high. 
• The offer aligns with the midpoint of the special committee IFA’s DCF valuation range and is marginally below the Board’s requested price. The required minority acceptance rate is attainable. 

• January air cargo activity moderated; timing of LNY holiday also made for tough comps
• January Int’l air cargo tons at US gateways grew far less than inbound (ocean) TEUs
• Data from Asian carriers & US gateways indicates low utilization, softening growth

• I tally 56 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
• Two new deals discussed this week: Mixi Inc (2121 JP)‘s Offer for PointsBet Holdings (PBH AU), and Tonami Holdings (9070 JP)‘s MBO. CICC (3908 HK)/China Galaxy (6881 HK) merger rumoured.
• Key updates/news took place on: SG Fleet (SGF AU), Silk Logistics (SLH AU), Jamco Corp (7408 JP), and Makino Milling Machine Co (6135 JP).

• Bowing before bureaucratic, governmental, societal, and perhaps finally shareholder pressure, Aeon Co Ltd (8267 JP) Friday announced it is rolling up two big subsidiaries. 
• Aeon Mall will be merged with Aeon in a share exchange and Aeon Delight (9787 JP) will be taken over via slightly long-dated Tender Offer which starts Monday.
• This is probably the wrong price, but it isn’t egregiously wrong I expect. And it would be difficult to block. I expect it gets done easily.

• Aeon Delight (9787 JP) has recommended a tender offer from Aeon Co Ltd (8267 JP) at JPY5,400 per share, a 15.3% premium to the last close.
• Despite the skinny premium, the offer is reasonable compared to historical trading ranges and peer multiples. The offer represents an all-time high. 
• The offer aligns with the midpoint of the special committee IFA’s DCF valuation range and is marginally below the Board’s requested price. The required minority acceptance rate is attainable. 

• January air cargo activity moderated; timing of LNY holiday also made for tough comps
• January Int’l air cargo tons at US gateways grew far less than inbound (ocean) TEUs
• Data from Asian carriers & US gateways indicates low utilization, softening growth

• I tally 56 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
• Two new deals discussed this week: Mixi Inc (2121 JP)‘s Offer for PointsBet Holdings (PBH AU), and Tonami Holdings (9070 JP)‘s MBO. CICC (3908 HK)/China Galaxy (6881 HK) merger rumoured.
• Key updates/news took place on: SG Fleet (SGF AU), Silk Logistics (SLH AU), Jamco Corp (7408 JP), and Makino Milling Machine Co (6135 JP).

• Price momentum for deep sea container carriers continued to plunge in January 2025
• January’s revenue decline vs the Summer peak also historically bad despite LNY boost
• We take down emerging consensus view that “all trade disruptions are good for carriers”

• Arwana Citramulia published a solid set of FY2024 results, with sales growth to +7.4% YoY, although FY2024 net profit was down slightly due to cost pressures and higher promotional spending.
• The company continues to see a favourable product mix shift towards higher-end tiles, especially its ARNA porcelain brand. New capacity coming on stream in 2025 will provide a further boost.
• The gas subsidy has yet to be confirmed for the ceramic industry, but expectations are that it will come through shortly. Arwana Citramulia valuations remain attractive, with higher growth ahead.

• In this insight, we provide the top 10 stocks picks and key catalysts in the Korean stock market for the two weeks starting 3 March.
• Our top 10 Korean stock picks from 14 to 28 January are down on average 1.8%, slightly outperforming KOSPI which is down 2.2% in the same period.
• The top 10 Korean stock picks (bi-weekly) include SL Corp, Korea Electric Terminal, BNK Financial, S1, LX International, Doubleugames, Samsung C&T, Amorepacific Corp (pref), SK Telecom, and POSCO International. 

• This insight provide a list of 43 stocks (2 KOSPI and 41 KOSDAQ) with end of mandatory lock-up periods for certain shares in March 2025.
• Some of the companies mentioned in this insight which highlights the end of major lockup periods in March could help to narrow down the list of candidates for potential shorting.
• Among these 43 stocks, the top five market cap stocks that could be sold after end of lock-up/total outstanding shares include Hanwha Engine, GI Innovation, Orum Therapeutics, and Angel Robotics.

• In this edition: • Ahold Delhaize | Jumbo has found an interim CEO • KPN | Ziggo to increase the download speed for all broadband subscribers • Unilever | former owners believed to be interested in buying back Ben & Jerry’s • InPost / PostNL | Vinted Go to roll out APMs in the Netherlands and Belgium • Van Lanschot Kempen | some post-earnings call remarks • Kendrion | sets itself a challenging FY25 EBITDA-margin goal of at least 15%