In this briefing:
- Halla Holdings Stub Trade: Downwardly Mean Reversion in Favor of Mando
- GUNKUL (GUNKUL TB): Solar to Drive Top-Line Growth
- ASAP: Weak Profitability Priced In, While Growth Still Intact
- New Pride Rights Offer: Tempting but Tricky
- Maruti Suzuki- Q2FY19 Results Update
1. Halla Holdings Stub Trade: Downwardly Mean Reversion in Favor of Mando
- Halla Holdings is falling nearly 5% today. Holdco said it’d give a ₩2,000 div per share. This is about 4.5% div yield at yesterday’s closing price. 5% drop today shouldn’t be much as an ex-dividend date price drop. Mando fell 5%. Mando was oversold relative to the other local auto stocks, particularly to Halla Holdings. They are still close to +1 σ on a 20D MA.
- Mando-Hella Elec has been another reason behind Holdco’s valuation divergence against Mando lately. I believe Mando-Hella is being overhyped. Mando-Hella-caused divergence should no longer be effective. I expect ‘downwardly’ mean reversion from now on. I’d go short Holdco and long Mando at this point.
2. GUNKUL (GUNKUL TB): Solar to Drive Top-Line Growth
- Good payout ratio, good growth in core profit, and strong long-term sales growth relative to its sector
- Acquisition of 49% stake in a 30MW solar farm in Malaysia with a commercial operation date (COD) set for 1Q20 to support revenue growth
- High volume of solar rooftop installation projects planned for Charoen Pokphand Foods Pub (CPF TB) and other private firms to boost GUNKUL’s construction revenue
- Attractive at 19CE* PEG ratio of 0.5 relative to ASEAN Industry at 1.6
- Risk: Lower than expected electricity demand, unfavorable weather conditions
* Consensus Estimates
3. ASAP: Weak Profitability Priced In, While Growth Still Intact
We maintain a BUY rating on ASAP with new 2019E target price of Bt3.80 (from Bt6.50), derived from 19.6xPE, which is 1.0x PEG of earnings growth in 2019-20E.
The story:
- Trimmed 2018-20F earnings forecast by 35%
- Not a falling knife, but fallen angel
- Potential disruptor in car rental industry
- Expect a 20% CAGR for earnings in 2019-20E
Risks:
- Contract termination of airport space leases
- Participating in a highly competitive industry
- Cash-flow management will be a challenge in a growth phase
4. New Pride Rights Offer: Tempting but Tricky
- New Pride Corp (900100 KS) announced a ₩36.2bil rights offer. This is a public offering, so there won’t be subscription rights to trade. Pricing will be done as 3-day VWAP on Jan 9~11 at a 30% discount.
- Supposedly, we can have ample opportunity to arb trade. This may be what the company is hoping. Simply, we wait until Jan 16~17 (subscription period) and see the spread. At this much discount, there must be a huge spread opening.
- Proration risk can be much more annoying than a usual stockholder offering. In the previous public offering event by New Pride, subscription rate went as high as 370 to 1. It should be way much lower this time. But still this is risky enough.
5. Maruti Suzuki- Q2FY19 Results Update
Maruti Suzuki’s Q2FY19 results were below our expectations. Sales grew by only 2% YoY in Q2FY19 led by a 3.7% increase in realization per unit. But the volumes declined by 1.5% YoY in the same period. We analyze the results.
