Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Late April, <a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a> announced a huge ¥500bn 200mm shares (10.2%) buyback. That was never ever going to happen. That needed a ¥2500 share price, not ¥4300+.</li>
<li>But it was big, and started in late May. Today, they announced how. It is a "Japan ASR", the Nomura version, this time with an interesting twist.</li>
<li>In response to a couple of reader questions today, I provide a brief overview of how these things work. </li>
</ul>


Late April, Shin Etsu Chemical (4063 JP) announced a huge ¥500bn 200mm shares (10.2%) buyback. That was never ever going to happen. That needed a ¥2500 share price, not ¥4300+.
But it was big, and started in late May. Today, they announced how. It is a "Japan ASR", the Nomura version, this time with an interesting twist.
In response to a couple of reader questions today, I provide a brief overview of how these things work. 


[Japan Buybacks] ShinEtsu Chem (4063) - How the FCSR Works

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a> reported FY earnings to beat January guidance for all four major measures, just slightly. They only guide 1 quarter out, and Q1 is up year-on-year... </li>
<li>...in revenues, but down in OP and NP. Note: OP and NP guidance is nearly identical to what they guided for Q1 last year on ¥585bn revenues (vs ¥610bn now)</li>
<li>The BIG news here is a Very Large Buyback. The company has long has huge piles of cash. This buyback (~90% of annual profit) starts to make use of it.</li>
</ul>



Shin Etsu Chemical (4063 JP) reported FY earnings to beat January guidance for all four major measures, just slightly. They only guide 1 quarter out, and Q1 is up year-on-year... 
...in revenues, but down in OP and NP. Note: OP and NP guidance is nearly identical to what they guided for Q1 last year on ¥585bn revenues (vs ¥610bn now)
The BIG news here is a Very Large Buyback. The company has long has huge piles of cash. This buyback (~90% of annual profit) starts to make use of it.


Shin-Etsu Chemical (4063) - OK Earnings, OK Forecast, But Ground-Breaking Buyback

<ul>
<li>Today, <a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a> announced a second buyback this year (first ¥100bn was announced in May, buying back 16.695mm shs (0.83%). This time, ~¥94bn via Own-Share Tender Offer.</li>
<li>Three non-life insurers and two banks who together hold 6+% will sell a total of ~1.01% at ~10% below last. They will then sell the rest of their shares later.</li>
<li>Cute, but not enough. Shin-Etsu is cash-rich, securities-rich, receivables and inventory-rich. And nearly ¥1trln of EBITDA. They are a key part of the tech infrastructure. They can borrow.</li>
</ul>


Today, Shin Etsu Chemical (4063 JP) announced a second buyback this year (first ¥100bn was announced in May, buying back 16.695mm shs (0.83%). This time, ~¥94bn via Own-Share Tender Offer.
Three non-life insurers and two banks who together hold 6+% will sell a total of ~1.01% at ~10% below last. They will then sell the rest of their shares later.
Cute, but not enough. Shin-Etsu is cash-rich, securities-rich, receivables and inventory-rich. And nearly ¥1trln of EBITDA. They are a key part of the tech infrastructure. They can borrow.


Shin-Etsu Chemical (4063) - Small/Large Below-Market Tender Offer Buyback, Followed by Overhang

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.</li>
<li>The strategy performs well if the Nifty 50 rises <em>and</em> outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.</li>
<li>Leverage increases both the strategy's payoff and probability of success.</li>
</ul>


This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
Leverage increases both the strategy's payoff and probability of success.


EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

<ul>
<li>The <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> has been trading sideways between 35,000 and 40,000 for the past eleven weeks.</li>
<li>A short straddle allows investors who believe that the Nikkei 225 continues to trade sideways to earn a profit of up to 7% in six weeks.</li>
<li>This Insight presents the strategy rationale, profit and loss profile, back-testing and risk management measures. </li>
</ul>


The Nikkei 225 (NKY INDEX) has been trading sideways between 35,000 and 40,000 for the past eleven weeks.
A short straddle allows investors who believe that the Nikkei 225 continues to trade sideways to earn a profit of up to 7% in six weeks.
This Insight presents the strategy rationale, profit and loss profile, back-testing and risk management measures. 


EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

Japan

Shin-Etsu Chemical Co., Ltd. produces and distributes synthetic resins and other chemical products such as fertilizers. The Company also manufactures electronic materials such as semiconductor silicon, synthetic, and rare earth quartz. Shin-Etsu Chemical operates in Japan and overseas.

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Shin Etsu Chemical (4063 JP)

[Japan Buybacks] ShinEtsu Chem (4063) - How the FCSR Works

The ShinEtsu Chem buyback can be sold Weds AM by ToSTNeT-3 if you want to sell $2.5bn of stock at one price. Otherwise, Nomura will be buying 7% of...

Travis Lundy

Shin-Etsu Chemical (4063) - OK Earnings, OK Forecast, But Ground-Breaking Buyback

ShinEtsu Chemical is plugging along. Earnings were OK, Guidance is OK not beautiful (is anyone's now?) but they announced a Very Big Buyback. 5x...

Travis Lundy

Shin-Etsu Chemical (4063) - Small/Large Below-Market Tender Offer Buyback, Followed by Overhang

Shin-Etsu Chem will buy 1% of shares in a Tender Offer Buyback. This highlights ShinEtsu is cash-rich, has crossholders who are selling and will...

Travis Lundy

EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Option strategy: exploit relative value in implied volatilities combined with directional positioning for a leveraged payoff in a long Nifty 50 vs....

Gaudenz Schneider

EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.

Gaudenz Schneider

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Japan Buybacks] ShinEtsu Chem (4063) - How the FCSR Works

The ShinEtsu Chem buyback can be sold Weds AM by ToSTNeT-3 if you want to sell $2.5bn of stock at one price. Otherwise, Nomura will be buying 7% of...

Travis Lundy

Shin-Etsu Chemical (4063) - OK Earnings, OK Forecast, But Ground-Breaking Buyback

ShinEtsu Chemical is plugging along. Earnings were OK, Guidance is OK not beautiful (is anyone's now?) but they announced a Very Big Buyback. 5x...

Travis Lundy

Shin-Etsu Chemical (4063) - Small/Large Below-Market Tender Offer Buyback, Followed by Overhang

Shin-Etsu Chem will buy 1% of shares in a Tender Offer Buyback. This highlights ShinEtsu is cash-rich, has crossholders who are selling and will...

Travis Lundy

EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Option strategy: exploit relative value in implied volatilities combined with directional positioning for a leveraged payoff in a long Nifty 50 vs....

Gaudenz Schneider

EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

​Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.

Gaudenz Schneider

Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.