EQUISEARCH Capital

10 Taiwan PMI Output and new orders both fall at fastest rates since August Destocking activity persists Inflationary pressures continue to ease

9 China NMI improving "Services activity expands at quickest pace for five months in December" ". As a result, firms tentatively raised their workforce numbers for the first time in three months, while optimism regarding the year ahead also improved."

8 China PMI improving ". Firms signalled stronger increases in output and new orders amid reports of firmer market demand. At the same time, new export business fell at the softest rate in six months. However, business confidence regarding the year-ahead remained historically subdued and firms maintained a cautious approach to employment, as staffing levels fell for the fourth straight month."

#3 Dec '23 PMI negative. New orders shrinking.

UPDATE #2 Leading indicators for Msia shrinking, mainly due to semiconductors.

MACRO UPDATE #1 Yield Curve shrinking

Some interesting developments in the Silicon Carbide space.

Europe’s STMicroelectronics and China’s Sanan Optoelectronics will form a joint venture (JV) in Chongqing,  a tech collaboration that promises to boost China’s electric vehicle (EV) industry while also underscoring the limits of US efforts to disrupt China’s semiconductor production. On June 7, STMicroelectronics said that the JV will produce silicon carbide, or SiC, power devices using its proprietary manufacturing process on 200mm SiC substrates to be made in a separate dedicated facility to be built, owned and operated by Sanan Optoelectronics. The two companies plan to start production in the fourth quarter of 2025 and reach maximum targeted capacity by 2028. In addition to automotive products, the JV will make power semiconductor devices for other industrial and energy applications such as solar and wind.

Potential bottom for SiM prices?

$KLSE-PMBTECH AGM highlights I attended the AGM, expecting a low turnout due to a weak / down cycle period of the silicon metal & weak share price movement. To my surprise, it was as crowded as last year! Here are some important points from the AGM. 1) PMBTECH is rebranding themselves. Different logo, different purpose - all to set up for being a company and a participant of a more sustainable future, in reducing global carbon footprint. 2) In the corporate video, it was mentioned that the current area is to target 5 phases of development. 3) 80% utilisation rate for FY22 4) Competition derived producers in China, Brazil, U.S. and Norway. Competitive advantage of PMBT is their long term supply of green energy and strategic location 5) Avg amount of silicon metal sold and asp: in 2022, 52k MT sold at avg price of RM14.4k. Compare to 2021, where 48k MT sold at avg price of RM12.7k 6) Construction of phase 3 is already running. Phase 3 part 1 burner is already at testing stage. part 2 on the way... Expected a return of 7-10% per annum of the RM350m capex investment, subject to fluctuations of commodity prices. Capex is 60% funded by bank borrowings. 7) Once phase 3 is up, 80% of capacity will be taken up immediately - phase 3 will help production during other facility's scheduled maintenance. 8) Breakdown on exporting region: Export in 2022 is different than 2021... Europe constitute of 53%, USA 4% and Asia 43% (recall when it comes to ASP, Asia is the lowest, followed by Europe and US) 9) Breakdown of silicon metal grade sold: 70% grade 553 as Europe was in shortage / tight squeeze. PMBT also sells #2202 #3303, polysillicon grade silicon metal to be sold to players like OCIM, LONGI etc... For context, asp for #3303 at the moment can be 40% higher than #553 due to its purity 10) One of the great thing abt PMBT is how they're able to run a new phase with lesser power supply from SESCO. Each phase should need around 52MW of power, but they could run phase 3 with only additional 25MW of power. 11) PMBT and $KLSE-PMETAL could do a solar farm and feed to the grid (SELCO) on electricity they self generate, but its not economic as its more expensive to do so. 12) Management is optimistic on long term supply and demand dynamics of silicon metal. Right now, 50% of supply comes from XinJiang in China. There's only around 30% of non Chinese silicon metal, and the European peers are struggling with high energy circumstances to deal with. This exact problem is also leading to high barrier to entry for US producers to come in. Management highlights that it takes higher power to produce silicon than to produce aluminium. Additionally, on demand side, solar power will drive the future 13) Challenges on opening a new phase would be - Sarawak power supply. Baleh damn is still several years away. Sabah a possibility if the gas input price is right. 14) There's some discussions on siloxane and polysillicon but nothing concrete yet 15) On the second business segment - construction and fabrication - many projects are still coming from HK as Malaysia is competitive and not many projects. Overall orderbook is around RM330m and tenderbook around RM600m. This business should be performing in the range of the past 5 years. Verdict: Overall, despite being fully aware that times are challenging in the short term for PMBTECH as ASP is dropping rapidly, the AGM gives encouragement and a feel on how the long term direction of the company will be and a sense of how the company will be run by these management team. For short term investors, be mindful of the ASP drop, as it can only be covered in parts by additional volume to be produced and delivered from phase 3 (50% additional volume). Expect lower top and bottom line. For long term investors, manage your short term expectation but I think the company is in good hands for the long haul. Old post from my good friend, Rondy. Stockbit handle- Ryunanda

A compelling buy-in opportunity?

APB Resources said to be buying founder’s stake in Globetronics - The Edge Weekly Share sale agreement is set to be signed before year end. Block of shares to fetch as much as RM2 per share. Ng family collectively owns about 8% of Globetronics. Talk has been circulating in the past few months that they’re looking to cash out from the business. APB Resources is involved in the fabrication of specialised design process equipment for the petrochemical, oleochemical, oil and gas, power as well as F&B industries. Its cash balance stands at RM60m. PMAH co-founder Datuk Koon Poh Tat emerged as the single largest shareholder of APB in June.

Ooi Keng Thye?