Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>The S&amp;P DJI Global Indices team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201211-1277389/1277389_tes15aircaivspindnkn4.pdf?force_download=true" target="_blank" rel="noopener">confirmed</a> Friday night that <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with <a href="https://www.smartkarma.com/entities/apartment-invt-mgmt-co-a" target="_blank" data-smartkarma-citation="entities:2193:1" rel="noopener">Apartment Invt &amp; Mgmt Co A (AIV US)</a> coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing <a href="https://www.smartkarma.com/entities/dunkin-brands-group-inc" target="_blank" data-smartkarma-citation="entities:15866:1" rel="noopener">Dunkin' Brands Group (DNKN US)</a> in the S&amp;P Midcap 400, and <a href="https://www.smartkarma.com/entities/occidental-petroleum-corp" target="_blank" data-smartkarma-citation="entities:17075:1" rel="noopener">Occidental Petroleum (OXY US)</a> coming out of the S&amp;P100 but staying in the S&amp;P500. </p><p>When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. </p><p>My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.</p><p>Which is a lot.</p><p>The arithmetic, and an explanation of why it matters, follow.</p>

The S&amp;P DJI Global Indices team confirmed Friday night that Tesla Motors (TSLA US) would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with Apartment Invt &amp; Mgmt Co A (AIV US) coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing Dunkin' Brands Group (DNKN US) in the S&amp;P Midcap 400, and Occidental Petroleum (OXY US) coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>There were no large-cap announcements yesterday, so our best and worst pairing are small-caps  - roadworks specialist <a href="https://www.smartkarma.com/entities/subaru-enterprise-co-ltd" target="_blank" data-smartkarma-citation="entities:3983:1" rel="noopener">Subaru Enterprise (9632 JP)</a> and independent auto-parts supplier <a href="https://www.smartkarma.com/entities/hi-lex-corp" target="_blank" data-smartkarma-citation="entities:3961:1" rel="noopener">Hi-Lex (7279 JP)</a>. Both have strong value 'favour'—for more see the <strong>DETAIL</strong> below.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/177/337/original/2020-12-09_07-05-32.png?1607465147" class="editor-image img-responsive" data-smartkarma-image-id="177337"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/177/338/original/2020-12-09_07-06-28.png?1607465200" class="editor-image img-responsive" data-smartkarma-image-id="177338"></figure></section>
</div><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>

• BEST &amp; WORST •
There were no large-cap announcements yesterday, so our best and worst pairing are small-caps  - roadworks specialist Subaru Enterprise (9632 JP) and independent auto-parts supplier Hi-Lex (7279 JP). Both have strong value 'favour'—for more see the DETAIL below.

Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Results & Revisions 12/​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​08 - Subaru Ent & Hi-Lex for Sale?

David Blennerhassett

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<p>This week in StubWorld ...</p>
<p><a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a> is up 37% in the past six months compared to ~4% for 8.5%-held <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> and ~13% for the TOPIX. As a result, the implied stub is at a decade high.</p>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/733/original/image_39133792071606794763925.png?1606794767" class="editor-image img-responsive" data-smartkarma-image-id="175733"></figure>
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<div class="content-caption">Source: CapIQ. Lines for 6201 &amp; 7203 are base 100 from 10 years ago</div>
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<p>The stub expansion is likely driven by the demand for materials handling equipment, such as forklifts. Yet the implied stub ops have increased ¥482bn in value since late August. This is excessive. </p>
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<p>More below the fold.</p>
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<p>Preceding my comments on Toyota are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...
Toyota Industries (6201 JP) is up 37% in the past six months compared to ~4% for 8.5%-held Toyota Motor (7203 JP) and ~13% for the TOPIX. As a result, the implied stub is at a decade high.





Source: CapIQ. Lines for 6201 &amp; 7203 are base 100 from 10 years ago


The stub expansion is likely driven by the demand for materials handling equipment, such as forklifts. Yet the implied stub ops have increased ¥482bn in value since late August. This is excessive. 


More below the fold.

Preceding my comments on Toyota are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.





StubWorld: Toyota Industries Unjustified Outperformance Vs. Toyota Motors

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

<p><a href="https://asia.nikkei.com/Business/Energy/Japan-taps-Australia-and-Brunei-for-hydrogen-import-goal" target="_blank" rel="noopener">Momentum is building within East Asia to propel the Hydrogen economy forward</a> as Japan, Korea and China have demonstrated interest in investing heavily in the technology, a call that is being answered by a variety of players through the supply chain. We examine below the key investment opportunities and timelines for these players.</p>

Momentum is building within East Asia to propel the Hydrogen economy forward as Japan, Korea and China have demonstrated interest in investing heavily in the technology, a call that is being answered by a variety of players through the supply chain. We examine below the key investment opportunities and timelines for these players.

Equity Bottom-Up

<p>Honda delivered strong 2Q results with operating margins in particular surprising to the upside. There were some small concerns on earnings quality as a reduction in SG&amp;A spend was a key driver of profitability and the sustainability of that trend is a question mark.</p>

Honda delivered strong 2Q results with operating margins in particular surprising to the upside. There were some small concerns on earnings quality as a reduction in SG&amp;A spend was a key driver of profitability and the sustainability of that trend is a question mark.

Honda – Profit Jump as Costs Are Suppressed

Japan

Honda Motor Co., Ltd. develops, manufactures, and distributes motorcycles, automobiles, and power products such as generators and farm machinery. The Company also operates a financial credit business. Honda Motor has manufacturing facilities in the US, Canada, the UK, France, Italy, Spain, Brazil, Mexico, India, and Thailand.

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Honda Motor (7267 JP)

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 12/08 - Subaru Ent & Hi-Lex for Sale?

There were no large-cap announcements yesterday, so our best and worst pairing are small-caps - roadworks specialist Subaru Enterprise (9632 JP)...

Campbell Gunn

StubWorld: Toyota Industries Unjustified Outperformance Vs. Toyota Motors

If you are in the Stub, unwind it here (sell 6201 buy back 7203). If you are not in the Stub/Holdco Trade, put it on in reverse. At least, it...

David Blennerhassett

Asia’s Hydrogen Economy

China's increasing favour towards hydrogen is starting to generate investor interest in potential hydrogen economy and FCV plays. We examine...

Mio Kato

Honda – Profit Jump as Costs Are Suppressed

Honda Motor's 2Q results were a continuation of a strong recovery trend in the auto sector. However, a focus on SG&A and R&D expense cuts raises...

Mio Kato

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Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 12/​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​08 - Subaru Ent & Hi-Lex for Sale?

There were no large-cap announcements yesterday, so our best and worst pairing are small-caps - roadworks specialist Subaru Enterprise (9632 JP)...

Campbell Gunn

StubWorld: Toyota Industries Unjustified Outperformance Vs. Toyota Motors

If you are in the Stub, unwind it here (sell 6201 buy back 7203). If you are not in the Stub/Holdco Trade, put it on in reverse. At least, it...

David Blennerhassett

Asia’s Hydrogen Economy

China's increasing favour towards hydrogen is starting to generate investor interest in potential hydrogen economy and FCV plays. We examine...

Mio Kato

Honda – Profit Jump as Costs Are Suppressed

Honda Motor's 2Q results were a continuation of a strong recovery trend in the auto sector. However, a focus on SG&A and R&D expense cuts raises...

Mio Kato

🇯🇵 JAPAN • Results & Revisions 12/08 - Subaru Ent & Hi-Lex for Sale?