In today’s briefing:
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
- Shenzhen Intl (152 HK): A Decent Rebound
- Portfolio Update: March 2024
- Dongfang Electric (1072 HK): Good Profit, Record Orders
- GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers
- Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts
- MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses
Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
- In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
- Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
- These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].
Shenzhen Intl (152 HK): A Decent Rebound
- Shenzhen International (152 HK) saw its FY23 earnings reaccelerated, supported by gains from the logistics park transformation business. Earnings even surged 169.1% YoY in 2H23.
- REIT issuance on two logistics assets, increase in areas of logistics projects, gains from South China Logistics Park transformation, and better Shenzhen Expressway (548 HK) will fuel FY24.
- A better debt structure will save finance costs. Its 0.45x P/B, or 1.5SD below the 5-year average, is cheap given its proven ability to realise underlying asset value.
Portfolio Update: March 2024
- I recently had a conversation with a close friend and fellow investor, during which he shared his current research interest in the dollar store concept.
- He emphasized that this business model aligns with criteria conducive to long-term shareholder returns.
- Given the scarce presence of dollar stores in Germany, primarily due to socioeconomic factors, I sought clarification on the underlying concept from him.
Dongfang Electric (1072 HK): Good Profit, Record Orders
- Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
- Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
- DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.
GMS Inc.: Initiation Of Coverage – A Story Of Improved Selling Prices and Anticipated Recovery in Single-Family Market! – Major Drivers
- This is our first report on GMS Inc. Despite facing adverse weather conditions and steel price deflation, GMS reported a growth in net sales and lauded the volume growth across all its major product categories owing to its organic efforts and recent acquisitions.
- Still, the company reported a net income of $51.9 million and adjusted EBITDA of $128 million, indicating robust financial performance.
- Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
Griffon Corporation: 4 Major Catalysts For Its Growth In 2024 & Beyond! – Financial Forecasts
- This is our first report on Griffon Corporation.
- The company’s latest earnings for fiscal 2024’s first quarter showcased a company navigating the complexities of market demands, supply chain logistics, and strategic growth initiatives.
- The company reported a commendable start to the fiscal year, marked by a robust free cash flow of $133 million, underscoring its operational efficiency and financial prudence.
MillerKnoll, Inc – 3QFY24 EPS Beats; Revenue Misses
As noted earlier, MillerKnoll’s 3QFY24 EPS beat expectations but revenue missed widely. 4QFY24 guidance was also below pre-report estimates.
With the misses, the stock gapped down by the mid-teens (~$5.00), closing at $24.76, thereby truncating and halting its recent rebound.
Y/Y revenue comparisons were negative in all three segments: Americas Contract (AC) at -9% to $441 million, International Contract & Specialty (IC&S) at -10.4% to $217 million, and Global Retail (GR) at -17% to $214 million.
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