Daily Briefs

• A decade of stagnant revenue and declining profits, despite significant capital investments in overseas expansion.
• CDG was destroying shareholder value. Return on Equity (“ROE”) had fallen to 6.9% in 2023, almost half the 13.3% recorded in 2015. More critically, ROE remained below its 9% cost of equity.
• Lack of strategic clarity on how its growth strategy aligns with long-term shareholder value creation.

• Vitzrocell is a global leader in lithium primary batteries, particularly for specialized industrial and military applications, demonstrating a robust growth trajectory with a 3-year net income CAGR of 44.4%.
• The company is strategically positioned to benefit from growing demand in the smart grid, IoT, and defense sectors, driven by its technological expertise in high-temperature and long-lifespan batteries.
• A strong financial profile, characterized by high growth, solid margins, and impressive free cash flow generation, supports continued investment in R&D and strategic acquisitions to solidify market leadership.

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• Atkore Inc., a leading manufacturer in electrical infrastructure, is under fresh scrutiny after activist investor Irenic Capital Management disclosed a 2.5% stake and began pressuring the company to explore a sale.
• The news, first reported by Bloomberg, triggered a 2.2% rise in Atkore’s stock price and follows the company’s own announcement that it is evaluating strategic alternatives with the help of Citi.
• While no formal process has been confirmed, market speculation has intensified around a possible leveraged buyout or private equity-led acquisition.

• MS International is experiencing a period of exceptional growth, driven by its Defence and Security division, which now accounts for 70% of turnover. The company recently reported record pre-tax profits and revenues for the year ending April 2025.
• The company exhibits a robust financial profile characterized by strong revenue and net income growth, a high return on equity, and a solid balance sheet with record cash levels reported in the 2024 fiscal year. This financial strength supports a consistently growing dividend.
• Despite impressive profitability, the company’s growth track record is marred by extremely volatile and often negative operating and free cash flows, posing a significant risk to the sustainability of its performance and dividend policy.

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• Pasona Group is a major player in the Japanese human resources sector, offering a comprehensive suite of services including temporary staffing, contracting, recruitment, and outsourcing. The company is navigating a challenging domestic market characterized by a shrinking workforce and increasing demand for specialized talent.
• Recent financial performance has been impacted by the sale of a significant subsidiary, Benefit One, and the conclusion of large-scale BPO projects related to the COVID-19 pandemic. The company is now focused on its ‘PASONA GROUP VISION 2030’ to reform its revenue structure and invest in new growth areas.
• Key challenges for Pasona include intense competition within the fragmented Japanese staffing industry, the need to adapt to evolving labor regulations, and the macroeconomic pressures of an aging population and potential economic slowdowns.

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• Salzer Electronics is a well-established player in the Indian electrical components market, demonstrating a robust track record of revenue and net income growth. The company is capitalizing on favorable industry tailwinds, including infrastructure development and the push for energy efficiency.
• Strategic expansion into high-growth areas such as smart meters and electric vehicle (EV) chargers presents significant upside potential. These new ventures, coupled with a strong existing portfolio in switchgears and wires & cables, are expected to be key long-term growth drivers.
• A significant concern is the consistently negative operating and free cash flow over the past three years, primarily due to high working capital requirements to fund growth. Improving cash conversion and working capital management will be critical for sustainable value creation.

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• Turnaround Specialist in a Cyclical Up-swing: After a prolonged downturn that necessitated two major debt restructurings (2018 and 2024), Nam Cheong has emerged as a leaner entity focused on vessel chartering. The company is capitalizing on a robust recovery in the Offshore Support Vessel (OSV) market, driven by increased offshore oil & gas exploration and production activities.
• Strong Financial Rebound and Earnings Visibility: The company has demonstrated a significant financial turnaround, with revenue and net income surging in the past three years. Recent long-term charter contract wins worth up to RM1.22 billion provide strong earnings visibility for the next 2-3 years, with a target of having 60-70% of its fleet on long-term charters.
• High-Risk, High-Reward Profile: Despite the positive momentum and an attractive valuation on a forward P/E basis, the company operates in a highly cyclical industry and has a history of financial distress. Key risks include dependence on oil & gas capital expenditure, potential for renewed vessel oversupply, and a corporate governance structure with significant family influence.

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• Ever Glory United Holdings is a Singapore-based provider of mechanical and electrical (M&E) engineering services, poised to capitalize on the burgeoning Singaporean construction sector. The company has demonstrated robust top-line growth, driven by an increase in M&E projects.
• Strategic acquisitions, such as Fire-Guard Engineering and Guthrie Engineering, have expanded the company’s service offerings and capabilities, enabling it to tender for larger, higher-value projects. This inorganic growth strategy is a key pillar of its future expansion.
• While revenue growth is strong, the company faces challenges with gross margin pressure due to the completion of higher-margin projects and broader inflationary pressures. Management is focused on cost control and diversification to mitigate these impacts.

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• CK Hutchison is a global conglomerate with leading positions in ports, retail, infrastructure, and telecommunications, offering significant diversification benefits.
• The company is currently trading at a substantial discount to its intrinsic value, indicated by low price-to-book and price-to-earnings ratios, presenting a potentially attractive entry point for long-term investors.
• Significant uncertainty surrounds the company due to a major pending sale of its port assets, which faces considerable geopolitical and regulatory hurdles, making it a key catalyst and risk.

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• Consolidated sales for 1H FY02/26 rose 10.1% YoY to JPY36.1bn, exceeding the forecast of JPY35.6bn.
• Operating profit increased 1.7% YoY to JPY7.5bn, with OPM declining 1.7pp YoY to 20.6%.
• Recurring profit decreased 1.1% YoY to JPY7.6bn, and net income fell 3.5% YoY to JPY4.7bn.