Utilities Sector

• Kontrol Technologies reported Q3 financial results yesterday after market close that were softer than expected.
• Revenue came in at $1.7M vs. our expected $2.0M.
• Subsequent to the quarter, KNR signed an LOI to acquire an Ontario-based business doing $525K in EBITDA.

• Cumulative Q3 FY12/24 saw YoY declines in revenue and profits, with Recurring business revenue down 2.7% YoY.
• The company revised earnings projections downward due to weak Spot business performance, maintaining net income forecast via asset sales.
• Recurring business gross profit grew 8.2% YoY, with significant growth in overseas Power Production and O&M business segments.

• SPRU announced 3Q24 results yesterday. Spruce Power is a leading owner-operator of residential solar power purchase agreements (PPAs) and solar lease agreements (SLAs).
• Spruce grows through the acquisition of mature portfolios. Its portfolio has expanded at a 29% CAGR since 2018 and Spruce now owns the cash flow from approximately 75,000 home solar assets and contracts.
• Spruce offers a “Power-as-a-Service” business model and believes its own in-house technology-driven solar servicing platform is the most comprehensive on the market and hard to replicate. 

• Renewable Japan (9522 JP) has recommended a Tokyu Fudosan Holdings (3289 JP)-sponsored MBO at JPY1,250 per share, a 132.3% premium to the last close.
• The high takeover premium reflects the 55% YTD decline in the share price. While the timing is opportunistic, the offer is attractive compared to peer multiples. 
• The irrevocables and low required minority acceptance rate ensure that this is a done deal. The tender runs from 15 November to 8 January 2025 (34 business days).

• The spin-off of the value-added business (VAS) of China Gas Holdings (384 HK) may add HK$0.22-0.83/share to the stock price, or 3.4-12.8%, based on our initial assessment.
• VAS generated an operating profit of HK$1.58bn in FY24, up by 5.7% YoY. It is significant to China Gas as this accounted for 23.5% of its total segment profit.
• The share price has not reacted much to the news because weak Chinese equity market and uncertainties on the upcoming 1H FY25 result. Once cleared, we see good upside.

• Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
• This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP). 
• This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
• Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.

• Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
• Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
• There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.

• Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
• JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
• Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).

• NTPC Green Energy Ltd (2214556D IN) is looking to raise INR 100bn (US$1.19bn) in its IPO. That will value the company at INR 910bn (US$10.8bn) at the top end. 
• The anchor allocations will be completed early next week, and the stock is expected to start trading on 27 November.
• The stock will not get Fast Entry to global indices with the earliest inclusion scheduled for June 2025. So, limited passive buying in the medium-term.

• Constellation Brands delivered mixed results in its Q2 Fiscal Year 2025 earnings, reflecting resilience amid a challenging macroeconomic environment.
• The performance of the company’s segments varied, with strong growth in the Beer Business offset by headwinds in the Wine and Spirits division.
• Starting on a positive note, Constellation Brands’ Beer Business continued its streak as a sector leader, demonstrating robust financial performance with net sales and operating income growing by nearly 6% and 13%, respectively.

• Unisuper is looking to raise A$500m (US$333m) via trimming a portion of its stake in APA Group (APA AU).
• The deal will be a large one to digest at 24 days of the stock’s three month ADV. 
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Veolia is an attractive investment opportunity in waste and water management sectors
• Currently trading at a low multiple with a 4.5% dividend yield, expected to provide a mid-teens IRR
• Factors like recent stock sell-offs, potential cyclical recovery in Europe, and USD weakening could create an opportunistic time to invest

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• NTPC Green Energy Ltd (2214556D IN) is looking to raise around US$1.2bn in its upcoming India IPO.
• NTPC Green Energy Limited (NGEL) is a renewable energy public sector enterprise and a wholly owned subsidiary of NTPC Limited, a Maharatna central public sector enterprise (PSU).
• In this note, we will talk about the not so positive aspects of the deal.

• NTPC Green Energy Ltd (2214556D IN) is looking to raise around US$1.2bn in its upcoming India IPO.
• NTPC Green Energy Limited (NGEL) is a renewable energy public sector enterprise and a wholly owned subsidiary of NTPC Limited, a Maharatna central public sector enterprise (PSU). 
• In this note, we will talk about the positive aspects of the deal.

• CWCO is a utility company operating in the water infrastructure sector, providing resilience to its earnings
• The company’s strong balance sheet, underestimated receivables, and potential for higher-than-expected earnings in 2025/26 make it undervalued compared to peers
• With limited sell-side coverage and a market cap around $400 million, CWCO is underfollowed, offering room for growth potential in the evolving water infrastructure market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Greenko Energy Holdings

• Major indexes in the three largest global equity markets (U.S., Europe, Japan) all remain below critical resistances of 5783 on SPX, 5000-5120 on EURO STOXX 50, and 2740-2820 on TOPIX
• Additionally, broad global MSCI indexes (local currency) including the ACWI, ACWI ex-U.S., and EAFE all remain at/below resistance from their YTD highs; reduce exposure or shift to defensives.
• In late-July we discussed expectations for a 1-to 4-month pullback/consolidation period on MSCI ACWI. We believe it seems likely to last closer to four months, and potentially 4- to 6-months