Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Mazda’s domestic unit volume was up 24% in September, compared to an industrywide total of only 1.1%.</li>
<li>Meanwhile, Q2 consensus EBIT estimates have come down by 32% since the release of Q1 results.</li>
<li>But the yield is over 6%, and the Payout ratio is only 17% even on the new estimates.</li>
</ul>


Mazda’s domestic unit volume was up 24% in September, compared to an industrywide total of only 1.1%.
Meanwhile, Q2 consensus EBIT estimates have come down by 32% since the release of Q1 results.
But the yield is over 6%, and the Payout ratio is only 17% even on the new estimates.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

<ul>
<li>Today, <a href="https://www.smartkarma.com/entities/toenec-corp" target="_blank" data-smartkarma-citation="entities:9957:1" rel="noopener">Toenec Corp (1946 JP)</a> - an integrated facilities company 50+% owned by <a href="https://www.smartkarma.com/entities/chubu-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:14574:1" rel="noopener">Chubu Electric Power Co (9502 JP)</a> announced Chubu EPCO would sell down 7.7% to go to 43%+.</li>
<li>This is surprising. It suggests there are more selldowns to come. It's also "big" at 88 days of ADV and about 26% of Max Real World Float (85% retail).</li>
<li>This is an odd sell-down. Chubu EPCO obviously doesn't want to buy it in. That means overhang for years.</li>
</ul>


Today, Toenec Corp (1946 JP) - an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
This is surprising. It suggests there are more selldowns to come. It's also "big" at 88 days of ADV and about 26% of Max Real World Float (85% retail).
This is an odd sell-down. Chubu EPCO obviously doesn't want to buy it in. That means overhang for years.


Toenec (1946 JP) Offering - Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>The <a href="https://asia.nikkei.com/Spotlight/Toshiba-in-turmoil/Japanese-consortium-makes-final-offer-on-Toshiba-buyout" target="_blank" rel="noopener">Nikkei reports</a> that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>’s Board.</li>
<li>Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).</li>
<li>The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.</li>
</ul>


The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.


Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part

<ul>
<li>
<a href="https://www.bloomberg.com/news/articles/2023-01-31/japan-banks-extend-deadline-for-toshiba-bid-s-loan-decision#xj4y7vzkg" target="_blank" rel="noopener">Bloomberg reports</a> that Japan Industrial Partners (JIP), the preferred bidder, has again extended the deadline for securing bank financing of around JPY1.2 trillion (US$8.8 billion).</li>
<li>A new issue has pushed the deadline to 3 February. If JIP manages to secure financing for an offer of around JPY5,100, the next challenge is securing Board support.</li>
<li>The 3QFY2022 update on 14 February needs to avoid further downgrades to keep the deal alive. Toshiba’s multiples are unattractive to peers. Remain on the sidelines for now.</li>
</ul>



Bloomberg reports that Japan Industrial Partners (JIP), the preferred bidder, has again extended the deadline for securing bank financing of around JPY1.2 trillion (US$8.8 billion).
A new issue has pushed the deadline to 3 February. If JIP manages to secure financing for an offer of around JPY5,100, the next challenge is securing Board support.
The 3QFY2022 update on 14 February needs to avoid further downgrades to keep the deal alive. Toshiba’s multiples are unattractive to peers. Remain on the sidelines for now.


Toshiba (6502 JP): Financing Deadline Slips Again as the 3Q Update Looms

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

<ul>
<li>JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.</li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.</li>
<li>Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-January 2023.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-January 2023.


Japan

Chubu Electric Power Company, Incorporated generates, transmits, distributes, and sells electricity in Chubu area.  The Company's service area includes Aichi, Gifu, Mie, Nagano, and part of Shizuoka Prefecture.

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Chubu Electric Power Co (9502 JP)

Unloved Japan Roundup: Bracing for Q3

Mazda’s domestic volume up 24% in September, compared to industrywide average of 1.1%. Q2 estimates down by 32% in 3 months, but yield over 6%,...

Michael Allen

Toenec (1946 JP) Offering - Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

Chubu Electric is offering 1.4mm shares of Toenec (1946). This is only 7% of the company, but it is a sign it will not be a parent buy-in. That...

Travis Lundy

Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part

The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to...

Arun George

Toshiba (6502 JP): Financing Deadline Slips Again as the 3Q Update Looms

The ongoing financing deadline extensions and a looming 3Q update add to the deal uncertainty. While the price ratio is undemanding, Toshiba’s...

Arun George

JPX-Nikkei 400 Rebal 2023: End-Jan 2023

There are 45 Potential ADDs and 42 Potential DELs presented in the current Leaderboard and I expect the Potential ADDs to outperform the Potential...

Janaghan Jeyakumar, CFA

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