In today’s briefing:
- Zijin Mining: Gold IPO De-Risks, Copper Upside Remains
- Zijin Gold IPO Valuation Analysis
- Fuji Oil (5017 JP): Idemitsu Kosan (5019 JP)’s Tender Offer at JPY480
- China’s Tire Sector Shifts To Next Gear In Global Consolidation
- Asian Energy-Oilmax Merger: From Service Provider to Integrated Energy Player?
- Consolidation of The Copper Kingdom – The Anglo Teck Merger
- Covestro / ADNOC: FSR Is the Hinge, Clean-Up the Catalyst
- DRX: Soft Q2 Financials; Excellent Backlog Growth
- AUAU: Name Change, $10.5M Raised, & Exploration Commences
Zijin Mining: Gold IPO De-Risks, Copper Upside Remains
- Dilution: The gold IPO trims attributable EBITDA by ~3% as minority interests rise.
- Parent Impact: Zijin parent emerges leaner, with net debt falling by US$4bn and copper now ~70% of EBITDA.
- Valuation: At ~7× EV/EBITDA, the stock offers 15–30% upside on our estimates, stretching to 25–45% at spot.
Zijin Gold IPO Valuation Analysis
- Our base case valuation of Zijin Gold suggests implied EV of US$40.4 billion and market cap of US$42.9 billion.
- Our EV/EBITDA valuation multiple of 14.3x is based on a 50% premium to the comps’ valuation multiple in 2026.
- We believe a 50% premium valuation to the comps’ average EV/EBITDA multiple is appropriate for Zijin Gold mainly due its higher sales growth, EBITDA margins, and ROE than the comps.
Fuji Oil (5017 JP): Idemitsu Kosan (5019 JP)’s Tender Offer at JPY480
- Fuji Oil Co Ltd (5017 JP) has recommended a tender offer from Idemitsu Kosan (5019 JP) at JPY480, a 44.1% premium to the last close.
- While the offer implies a P/B of 0.54x, it is reasonable as it is above the midpoint of the IFA DCF valuation range and at a premium to historical ranges.
- Nevertheless, the offer is susceptible to a bump as it is far from a knockout bid, and Fuji Oil previously had activists on the register.
China’s Tire Sector Shifts To Next Gear In Global Consolidation
- Sailun revives Bridgestone’s idle TBR plant, breaks ground in Egypt
- Chinese pneumatic tire exports climb 4.6% in value in H1 2025
- Jiangsu General ramps up projects in Thailand and Cambodia
Asian Energy-Oilmax Merger: From Service Provider to Integrated Energy Player?
- Asian Energy Services (AOS IN) has received board approval for the merger of promoter entity Oilmax Energy, with share swap ratio: 117 shares of AESL for 10 shares of Oilmax.
- The merger is a strategic move to consolidate OEPL’s asset ownership, including producing oil and gas fields, with AESL’s execution and services capabilities.
- The valuation of the parent company is looking costlier, and a reduction in promoter stake makes things skeptical in transaction.
Consolidation of The Copper Kingdom – The Anglo Teck Merger
- Anglo American (AAL LN) – BHP Group Ltd (BHP AU) fails in May 2024; 17 months later, Anglo American (AAL LN) – Teck Resources (TECK US) merge.
- The Anglo Teck portfolio will have more than 1.2 million tonnes of annual copper production, anchored by six world-class copper assets with more than 70% copper exposure.
- The company will divest its non-core assets, including DeBeers, steelmaking coal, nickel, and other similar assets, and pivot to consolidating/growing its copper operations.
Covestro / ADNOC: FSR Is the Hinge, Clean-Up the Catalyst
- ADNOC’s €62 per share bid for Covestro has 91.3% acceptance and antitrust clearance; the Foreign Subsidies Regulation review remains the gating item, with remedies on capital increase, guarantees, and IP.
- At €58.74, Covestro trades 5.55% below €62, implying 24–30% annualized IRRs if FSR approval and closing arrive by year-end; a Q1’26 slip still screens ~18%; break downside approximates −22% today.
- New buyers need a clean-up event: squeeze-out ≥95% or delisting/merger squeeze-out; DPLTA excluded until 2028. ADNOC needs ~6.7–7.0m shares to reach 95%, costing roughly €395–433m at €58.74–€62 post-approval and execution.
DRX: Soft Q2 Financials; Excellent Backlog Growth
- ADF reported Q2 financials that missed our expectations on the back of uncertainty from U.S. tariffs, similar to Q1.
- Revenue came in at $53.0M (-29% YoY) vs. our estimate of $58.2M and EBITDA came in at $3.7M vs. our estimate of $10.0M.
- ADF remains well-positioned for H2 given that its backlog was $468.0M, (+60% since Q4), all of its employees have returned on a full-time basis, and its acquisition of LAR Group will provide further growth.
AUAU: Name Change, $10.5M Raised, & Exploration Commences
- Allegiant launched a fully funded 2,000m drill program within the McIntosh zone; the first phase of a 20,000m campaign at Eastside.
- Results from the ongoing drill program are expected in October and November, as we anticipate a news-heavy fall and winter.
- The recent $10.5M financing, led by Kinross and including Eric Sprott, leaves AUAU cashed up with $14M to aggressively advance exploration.
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