Daily Brief Energy/Materials: LG Chem , Dropsuite Ltd, Solar Industries India, Base Oil, Magnolia Oil & Gas , Quadrise Fuels International and more

• In this insight, we discuss a pair trade between LG Chem Ltd (051910 KS) (common) and LG Chem (051915 KS) (preferred). 
• The price ratio (LG Chem common/preferred) is now at 2.16x, which is more than 2 STD (standard deviations). Our trading strategy involves revert to the mean. 
• One of the key reasons why LG Chem (preferred)’s share price has fared much worse YTD than LG Chem (common) is due to much larger selling by the foreign investors. 

• The Dropsuite Ltd (DSE AU) IE considers NinjaOne’s A$5.90 offer fair and reasonable as it is above its A$3.92-5.88 valuation range.
• The offer is conditional on shareholder and FIRB approval. Despite the largest shareholder’s selldown, the vote remains low-risk.  
• The offer is attractive and represents an all-time high. At the last close and for a 30 May payment, the gross/annualised spread is 1.7%/11.5%.  

• We currently forecast 10 stocks moving from MidCap to LargeCap, 10 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 11 stocks from MidCap to SmallCap.
• From the new listings, 2 stocks are expected to be added to Mid Cap, and multiple stocks to Small Cap.
• There are multiple stocks among the AMFI changes that will be changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) and/or Nifty Midcap 150 Index in September.

• US base oils export price-discount to US domestic prices stays narrower in Q1 2025 vs year-earlier.
• Narrower export price-discount points to more manageable supply surplus at end-2024 and early this year, when domestic demand faced seasonal slowdown.
• More manageable supply surplus follows firm export volumes through H2 2024 and early this year.

• On the 28th January 2025, Dropsuite Ltd (DSE AU), a backup, recovery and protection software company, entered into a Scheme Implementation Deed with Texas-based IT automation outfit NinjaOne.
• NinjaOne’s A$5.90/share Offer was a 34.1% premium to undisturbed. The Offer had the backing of Dropsuite’s largest shareholder, Topline Capital (31% – at the time!). Board/management held a further 9%.
• The Scheme Booklet is now out, with a Court Meeting on the 9th May, and expected payment on or before the 30th May. The IE (BDO) says “fair & reasonable“.

• Global base oils prices slip relative to firmer feedstock/competing fuel prices.
• Base oils margins in most markets remain at levels that point to balanced-to-tight supply-demand fundamentals, incentivizing refiners to maintain higher output.
• FOB Asia base oils prices fall vs gasoil prices.

• US base oils demand typically rises around this time of year to meet seasonal pick-up in lube consumption.
• US spot base oils prices mostly hold steady, even with round of plant maintenance work and higher crude oil prices that keep margins under pressure.
• Steady prices, despite rangebound margins and lower supply, suggest demand is lower than usual and lower than expected for the time of year.

• Magnolia Oil & Gas Corporation reported its fourth quarter and full-year 2024 financial and operating results, demonstrating a strong performance across multiple aspects of its operations.
• The company achieved record production volumes at 93.1 million barrels of oil equivalent per day (Mboe/d) in Q4, with a full-year production growth of 9% and an 11% increase in oil production, surpassing their initial expectations.
• This growth was partially fueled by the company’s efforts in the Giddings area, where production rose 16% due to strategic acquisitions and enhanced well productivity.

• US base oils prices mostly stay in narrow range vs VGO prices, contrast with surging premium to VGO this time a year ago.
• Margins hold in narrow range this year even as extensive round of plant maintenance tightens supply.
• Supply could face additional disruption from markets like Canada, depending on impact and reaction to imposition of any US tariffs.

Quadrise raised £6.5m (before costs) in January through a placing and retail offer, increasing the company’s cash reserves to £7.1m as of 28 February 2025. Management stated these funds will support Quadrise through to revenues and positive cashflow generation, expected from mid 2026 based on forecast project timelines.Post-results, Quadrise announced the signing of a joint development agreement with Australian-based sustainable fuels pioneer Licella Holdings. Both parties will seek to progress the use of Licella’s catalytic hydrothermal reactor bio-intermediate as a potential cost-effective renewable feedstock for bioMSAR and bioMSAR-zero. Additionally, Quadrise signed a services supply agreement with MAC2, under which MAC2 will provide jetty space, utilities, permits and ad-hoc support services during the marine vessel trials on board the MSC Leandra V, expected to commence in Q225.