Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Japan Tissue Engineering Co / Event-Driven

On Friday 29 January 2021 after the close, Japanese textiles and materials giant <a href="https://www.smartkarma.com/entities/teijin-ltd" target="_blank" data-smartkarma-citation="entities:5097:1" rel="noopener">Teijin Ltd (3401 JP)</a> announced a Tender Offer to buy 65% of the shares outstanding of <a href="https://www.smartkarma.com/entities/japan-tissue-engineering-co" target="_blank" data-smartkarma-citation="entities:8211:1" rel="noopener">Japan Tissue Engineering Co (7774 JP)</a> (colloquially known as J-TEC). Current parent company <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">FUJIFILM Holdings (4901 JP)</a> has agreed to tender their 50.1% stake. The two sides went through the motions of finding a "fair price" for DCF purposes but effectively, that was to frame the agreed-upon transaction price between Teijin and FUJIFILM.This sets up an interesting trade on the front end, and mechanically higher than minimum pro-ration, but even for those who love partial offers, I would not crack out the champagne yet.I f you like the prospects for this business, there is a possibility this creates an interesting set-up.

On Friday 29 January 2021 after the close, Japanese textiles and materials giant Teijin Ltd (3401 JP) announced a Tender Offer to buy 65% of the shares outstanding of Japan Tissue Engineering Co (7774 JP) (colloquially known as J-TEC). Current parent company FUJIFILM Holdings (4901 JP) has agreed to tender their 50.1% stake. The two sides went through the motions of finding a "fair price" for DCF purposes but effectively, that was to frame the agreed-upon transaction price between Teijin and FUJIFILM.This sets up an interesting trade on the front end, and mechanically higher than minimum pro-ration, but even for those who love partial offers, I would not crack out the champagne yet.I f you like the prospects for this business, there is a possibility this creates an interesting set-up.

Teijin Partial TOB For Japan Tissue Engineering (7774)

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

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.

It was reported by several news media outlets including the Nikkei, Bloomberg and Reuters that <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a>  is planning to sell a 60% stake in its overseas home appliance business to major Turkish consumer electronics maker Arcelik AS.The two companies are in advanced talks and an agreement is expected to be reached over the next few weeks. The deal could be valued at around US$300-500m.Hitachi’s home appliance business generates only about 20% of its revenues from overseas markets whereas China and Southeast Asia accounting for bulk of the overseas revenues.<a href="https://www.smartkarma.com/entities/arcelik-as" target="_blank" data-smartkarma-citation="entities:24759:1" rel="noopener">Arcelik AS (ARCLK TI)</a> , together with its subsidiaries produces and sells consumer durable goods and consumer electronics in Turkey and internationally. Its products are sold under Arcelik, Beko, Blomberg, Arctic, Leisure, Defy and several other brands.By partnering up with Arcelik, Hitachi aims to expand the sale of its consumer appliances products in markets such as Europe and Africa, where Arcelik has a strong foothold in these markets.

It was reported by several news media outlets including the Nikkei, Bloomberg and Reuters that Hitachi Ltd (6501 JP)  is planning to sell a 60% stake in its overseas home appliance business to major Turkish consumer electronics maker Arcelik AS.The two companies are in advanced talks and an agreement is expected to be reached over the next few weeks. The deal could be valued at around US$300-500m.Hitachi’s home appliance business generates only about 20% of its revenues from overseas markets whereas China and Southeast Asia accounting for bulk of the overseas revenues.Arcelik AS (ARCLK TI) , together with its subsidiaries produces and sells consumer durable goods and consumer electronics in Turkey and internationally. Its products are sold under Arcelik, Beko, Blomberg, Arctic, Leisure, Defy and several other brands.By partnering up with Arcelik, Hitachi aims to expand the sale of its consumer appliances products in markets such as Europe and Africa, where Arcelik has a strong foothold in these markets.

Hitachi to Sell Overseas Home Appliance Business; Attempt to Reach Its Mid-Term Management Targets

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya Corp (7741 JP)</a>  reported its 2QFY03/2021 results on Tuesday (27th October) which saw both revenues and operating profits declining YoY by 9% and 4% respectively. The reported revenue was 1% higher than consensus estimates while OP beat consensus estimates by a large margin of 15.4%.The reported revenue was 3.4% higher than the company’s own guidance which called for revenues of JPY135.7bn for 2QFY03/2021. The company’s earnings were impacted for a third quarter due to the Covid-19 outbreak, 2QFY03/2021 results show that the severity of the virus outbreak has declined.Hoya also announced a JPY4bn share buyback which will run from 28th October to 20th January 2021.

Hoya Corp (7741 JP)  reported its 2QFY03/2021 results on Tuesday (27th October) which saw both revenues and operating profits declining YoY by 9% and 4% respectively. The reported revenue was 1% higher than consensus estimates while OP beat consensus estimates by a large margin of 15.4%.The reported revenue was 3.4% higher than the company’s own guidance which called for revenues of JPY135.7bn for 2QFY03/2021. The company’s earnings were impacted for a third quarter due to the Covid-19 outbreak, 2QFY03/2021 results show that the severity of the virus outbreak has declined.Hoya also announced a JPY4bn share buyback which will run from 28th October to 20th January 2021.

Hoya 2Q Results: Earnings Decline Ameliorates and There Is a Small Buyback

<a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> has, for over a decade, been restructuring itself - selling subsidiaries here and buying them in there. There are two remaining after the recent sale of <a href="https://www.smartkarma.com/entities/hitachi-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:14457:1" rel="noopener">Hitachi Chemical (4217 JP)</a>, de-consolidation of <a href="https://www.smartkarma.com/entities/hitachi-capital-corp" target="_blank" data-smartkarma-citation="entities:14410:1" rel="noopener">Hitachi Capital (8586 JP)</a>, and buy-in of <a href="https://www.smartkarma.com/entities/hitachi-high-tech-corporation" target="_blank" data-smartkarma-citation="entities:7046:1" rel="noopener">Hitachi High-Tech (8036 JP)</a>. The earnings call in May occasioned another presentation - that of the update on <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a.html" target="_blank" rel="noopener">Progress of the Mid-Term Management Plan</a> (with a webcast and a <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a/f_200529apre.pdf" target="_blank" rel="noopener">presentation deck</a>), where the CEO responded to a question thusly:<div><blockquote>
QUESTION:  Next question is regarding the, against the backdrop of COVID-19, is this going to have an impact on the reorganisation of the listed subsidiaries?
ANSWER BY CEO HIGASHIHARA:  Regarding the listed subsidiary answer. Hitachi Construction Machinery and Hitachi Metals remain. And what we are telling the top management is that, in the time frame of fiscal year 2021 to 2024, we have to make sure these companies are able to compete globally. They are now evaluating this. It is not just a matter of COVID-19. Mid- to long-term growth strategy will be emphasised so the reorganisation strategy for the listed subsidiaries will not be impacted by COVID-19.
</blockquote></div><div>
FY 2021 to FY 2024 is a three year window starting next April, with FY2021 ending in March 2022 and FY2024 ending in March 2025.
<div>
That was May 29, less than five months ago and the situation was discussed in <a href="https://www.smartkarma.com/insights/hitachi-s-capital-case-liquidating-land-policy-holdings-what-about-the-subs" target="_blank" data-smartkarma-citation="insights:39920" rel="noopener">Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs?</a>.
Friday saw an article out of the Nikkei suggesting Hitachi might sell half its stake in <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> ("HCM") to a third party, at a discount, and that it might start a sale process on <a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener">Hitachi Metals (5486 JP)</a> "this month."
</div>
<div>
It strikes me as unlikely Hitachi would themselves be throwing in the towel 5 months later before the start of the time frame in which top management of the two subsidiaries are supposed to be able to compete globally. All of this is likely getting done with the will and direction of the subsidiaries themselves. This strikes me as some kind of agreement with management of HCM that they would not be averse to receiving expert help from outside while remaining listed. 
This changes things.
Hitachi becomes a different animal. It becomes a non-stub trade (parent vs significant value of listed short-able subs) for the first time in a very long time. And the optics change quite a bit.
</div>
</div>

Hitachi Ltd (6501 JP) has, for over a decade, been restructuring itself - selling subsidiaries here and buying them in there. There are two remaining after the recent sale of Hitachi Chemical (4217 JP), de-consolidation of Hitachi Capital (8586 JP), and buy-in of Hitachi High-Tech (8036 JP). The earnings call in May occasioned another presentation - that of the update on Progress of the Mid-Term Management Plan (with a webcast and a presentation deck), where the CEO responded to a question thusly:
QUESTION:  Next question is regarding the, against the backdrop of COVID-19, is this going to have an impact on the reorganisation of the listed subsidiaries?
ANSWER BY CEO HIGASHIHARA:  Regarding the listed subsidiary answer. Hitachi Construction Machinery and Hitachi Metals remain. And what we are telling the top management is that, in the time frame of fiscal year 2021 to 2024, we have to make sure these companies are able to compete globally. They are now evaluating this. It is not just a matter of COVID-19. Mid- to long-term growth strategy will be emphasised so the reorganisation strategy for the listed subsidiaries will not be impacted by COVID-19.

FY 2021 to FY 2024 is a three year window starting next April, with FY2021 ending in March 2022 and FY2024 ending in March 2025.

That was May 29, less than five months ago and the situation was discussed in Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs?.
Friday saw an article out of the Nikkei suggesting Hitachi might sell half its stake in Hitachi Construction Machinery (6305 JP) ("HCM") to a third party, at a discount, and that it might start a sale process on Hitachi Metals (5486 JP) "this month."


It strikes me as unlikely Hitachi would themselves be throwing in the towel 5 months later before the start of the time frame in which top management of the two subsidiaries are supposed to be able to compete globally. All of this is likely getting done with the will and direction of the subsidiaries themselves. This strikes me as some kind of agreement with management of HCM that they would not be averse to receiving expert help from outside while remaining listed. 
This changes things.
Hitachi becomes a different animal. It becomes a non-stub trade (parent vs significant value of listed short-able subs) for the first time in a very long time. And the optics change quite a bit.



Olympus reported its 1QFY03/2021 results yesterday (05th August 2020) which saw both revenue and operating income declining YoY by 21.7% and 91.9% respectively. During the quarter, all segments reported decline in revenue and operating income due to the Covid-19 outbreak and the operating profit for the quarter was driven by mainstay endoscopic solution segment.However, the reported revenues beat consensus by 6.8% while consensus expected the company to report operating losses, nevertheless, Olympus reported operating profits for the quarter surprising the market.<table class="table table-striped"><tbody>
<tr>
<td style="width: 50.0pt;">JPY (bn)</td>
<td style="text-align: right; width: 68pt;">1QFY03/2020</td>
<td style="text-align: right; width: 96pt;">1QFY03/2021</td>
<td style="text-align: right; width: 50pt;">% YoY</td>
<td style="text-align: right; width: 50pt;">Consensus</td>
<td style="text-align: right; width: 57pt;">Actual vs Consensus</td>
</tr>
<tr>
<td style="width: 50.0pt;">Revenue</td>
<td style="text-align: right; width: 68pt;">               181.9</td>
<td style="text-align: right; width: 96pt;">                           142.4</td>
<td style="text-align: right; width: 50pt;">-21.7%</td>
<td style="text-align: right; width: 50pt;">        133.3</td>
<td style="text-align: right; width: 57pt;">6.8%</td>
</tr>
<tr>
<td style="width: 50.0pt;">OP</td>
<td style="text-align: right; width: 68pt;">                 14.7</td>
<td style="text-align: right; width: 96pt;">                               1.2</td>
<td style="text-align: right; width: 50pt;">-91.9%</td>
<td style="text-align: right; width: 50pt;">-           8.1</td>
<td style="text-align: right; width: 57pt;">nm</td>
</tr>
<tr>
<td style="width: 50.0pt;">OPM</td>
<td style="text-align: right; width: 68pt;">8.1%</td>
<td style="text-align: right; width: 96pt;">0.8%</td>
<td style="text-align: right; width: 50pt;"> </td>
<td style="text-align: right; width: 50pt;"> </td>
<td style="text-align: right; width: 57pt;"> </td>
</tr>
</tbody></table><div class="content-caption">Source: Company Disclosures, Cap IQ</div>According to Olympus, Covid-19 is estimated to have impacted revenue by JPY34bn and operating profit by JPY11bn during the quarter.

Olympus reported its 1QFY03/2021 results yesterday (05th August 2020) which saw both revenue and operating income declining YoY by 21.7% and 91.9% respectively. During the quarter, all segments reported decline in revenue and operating income due to the Covid-19 outbreak and the operating profit for the quarter was driven by mainstay endoscopic solution segment.However, the reported revenues beat consensus by 6.8% while consensus expected the company to report operating losses, nevertheless, Olympus reported operating profits for the quarter surprising the market.

JPY (bn)
1QFY03/2020
1QFY03/2021
% YoY
Consensus
Actual vs Consensus


Revenue
               181.9
                           142.4
-21.7%
        133.3
6.8%


OP
                 14.7
                               1.2
-91.9%
-           8.1
nm


OPM
8.1%
0.8%
 
 
 

Source: Company Disclosures, Cap IQAccording to Olympus, Covid-19 is estimated to have impacted revenue by JPY34bn and operating profit by JPY11bn during the quarter.

Olympus: Recovery of Endoscopic Business and Sale of Imaging Business to Support Earnings Growth

Japan

FUJIFILM Holdings Corporation develops, sells and services Imaging, Information, and Document Solutions.  Its products include color films, digital cameras, photofinishing products and equipment.  The Group also manufactures medical and graphic art use equipment and materials, FPD materials, and optical devices, and provides services on office copy machines, printers, and related equipment.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

FUJIFILM Holdings (4901 JP)

Teijin Partial TOB For Japan Tissue Engineering (7774)

Teijin launches a Partial Tender for smallcap JTEC designed to transfer sponsorship control from FujiFilm to Teijin. Pro-ration should be in the 60...

Travis Lundy

Hitachi to Sell Overseas Home Appliance Business; Attempt to Reach Its Mid-Term Management Targets

It was reported by several news media outlets that Hitachi is planning to sell a 60% stake in its overseas home appliance business to major Turkish...

Shifara Samsudeen, FCMA, CGMA

Hoya 2Q Results: Earnings Decline Ameliorates and There Is a Small Buyback

Hoya reported its 3QFY03/2021 results on Tuesday (27th Oct) which saw both revenues and operating profits declining YoY by 9% and 4% respectively....

Shifara Samsudeen, FCMA, CGMA

The Right Trade May Be Hitachi

Hitachi is getting to the end of its Core vs Non-Core restructuring campaign. Two remaining subs have newsflow, and earnings announcements shortly....

Travis Lundy

Olympus: Recovery of Endoscopic Business and Sale of Imaging Business to Support Earnings Growth

Olympus reported its 1QFY03/2021 results yesterday (05th August 2020) which saw both revenue and operating income declining YoY by 21.7% and 91.9%...

Shifara Samsudeen, FCMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)