Daily Brief Energy/Materials: Posco Chemical Co Ltd, Warrego Energy, Lygend Resources & Technology, Origin Energy, ABM Investama, Indocement Tunggal Prakarsa and more

• KRX unveiled the rebalancing results of the CSI KRX China-Korea indices for Korean constituents yesterday.
• There is still insufficient evidence data to estimate specific passive impact. The previous rebalancing in June showed no clear correlation between constituent changes and price impact.
• Although it may be risky to trade on this rebalancing, monitoring the correlation of their passive impact at this point, one year after the release, seems worthwhile.

• Gina Rinehart’s Hancock Prospecting has joined the bidding war for Warrego Energy (WGO AU) with a A$0.23/share, all cash, off-market Offer versus Beach Energy (BPT AU)‘s management-backed A$0.20/share Scheme Offer.
• Hancock has already lodged the Bidder’s Statement. There is no minimum acceptance condition attached to  this offer.
• Warrego currently recommends Beach’s Offer, subject to no superior proposal emerging. Beach has matching rights under the SID entered into on the 14 November. 

• Lygend Resources & Technology (2245 HK) priced its IPO at HK$15.80 per share to raise net proceeds of HK$3.5 billion (US$450 million). The shares will start trading tomorrow.
• We previously discussed the IPO in Lygend Resources & Technology IPO: Riding the Wave and Lygend Resources & Technology IPO: Valuation Insights.
• Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

• Hancock’s offer of A$0.23 is at a 15% premium to Beach Energy (BPT AU)’s A$0.20 offer and a 21.1% premium to Strike Energy (STX AU)’s scrip value on 29 November. 
• The Hancock off-market offer for Warrego Energy (WGO AU) has no minimum acceptance condition or a material adverse change clause. The offer closes on 31 January 2023.
• STX could be Hancock’s next logical target to facilitate Perth Basin consolidation. Between STX and BPT, BPT is more likely to return with an improved offer.  

• For the month of November, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$20bn.
• The average premium for the new deals announced (or first discussed) in November was ~52%, and a year-to-date average of 41%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

The Asia HY Trade Book for November 2022 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Lygend Resources & Technology (2245 HK) raised US$470m in its Hong Kong IPO.
• Lygend Resources & Technology (Lygend) is a nickel trading and production firm with a portfolio covering multiple areas across the nickel industry value chain.
• In this note we will talk about the trading dynamics.

• Indocement Tunggal Prakarsa (INTP IJ) has had a tough year with rising energy costs prompting price increases which impacted demand but 3Q2022 saw a strong rebound in sales growth.
• Margins remained under pressure but increasing prices and the use of alternative fuels are helping to offset the impact of energy costs and more recently coal prices have been declining. 
• Indocement continues to impress with its focus on sustainability, significantly beating on emissions and dust. Valuations look attractive versus history and with a potential recovery in earnings in 2023.