In today’s briefing:
- Toyo Construction (1890 JP): YFO’s Potential Revised Offer at JPY1,255
- Disco (6146 JP): Rolling Over
- Ryobi (5851) | Re-Rating as Die-Casting Becomes Gigacasting
- Seizing a Trading Opportunity Aimed at HMM’s New Stock Listing Date
- COSCO Shipping Energy (1138 HK): Clearly Over-Optimistic
Toyo Construction (1890 JP): YFO’s Potential Revised Offer at JPY1,255
- YFO has returned with a potential tender offer price of JPY1,255 per share for Toyo Construction (1890 JP), 25.5% above its previous offer of JPY1,000 per share.
- The offer is conditional on due diligence access to confirm the feasibility of the medium-term management plan and no material accounting, tax, or legal issues.
- The due diligence will take a month, with the offer expected to commence in late December. Expect due diligence access as the revised offer represents a 10-year high.
Disco (6146 JP): Rolling Over
- After more than doubling between early April and the end of August, Disco has dropped back. The outlook for demand and valuations suggest potential downside of 20%.
- Operating profit was down 21% YoY in the June quarter on a 10% decline in sales. Management is guiding for 18% and 32% declines this quarter.
- Over-Optimistic expectations regarding the pace and degree of cyclical recovery are being squeezed out of the share price.
Ryobi (5851) | Re-Rating as Die-Casting Becomes Gigacasting
- Ryobi is a global manufacturer of high-quality aluminum die castings used for transmission cases, engine parts, and other vehicle parts
- Ryobi has recently gained market attention following an announcement that the company will produce large electric-vehicle body parts using “gigacasting”
- The stock is expected to benefit from EV adoption with improved earnings and increased market recognition
Seizing a Trading Opportunity Aimed at HMM’s New Stock Listing Date
- Should the stock conversion decision be reached this week, the new shares will be listed on the 15th of the upcoming month. So, they will officially debut on October 16th.
- On the day of the new share listing during the immediate previous case, the price dropped by 2.36%, and on the very next trading day, it declined by 3.72%.
- Given the present dilution rate of 30%, there is a higher probability of even more pronounced price movements in the same direction.
COSCO Shipping Energy (1138 HK): Clearly Over-Optimistic
- Cosco Shipping Energy Transportation (1138 HK) has rallied sharply on strong earnings recovery, but this is too excessive. We think unrealistic expectation has been built on 2H23 earnings.
- Over the last three months, the spot VLCC rate has collapsed by 90%, indicating a weakened demand outlook. The resilient share price has clearly not yet factored in this movement.
- The recent surge in crude oil is driven by supply, not demand, factors. This has led to a 14% increase in bunker price which will heighten CSET’s fuel bill.
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