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

Event-Driven

<ul>
<li>In late May, Toyota Group member <a href="https://www.smartkarma.com/entities/aisin-corp" target="_blank" data-smartkarma-citation="entities:11809:1" rel="noopener">Aisin (7259 JP)</a> announced it would sell its 37% stake in <a href="https://www.smartkarma.com/entities/exedy-corp" target="_blank" data-smartkarma-citation="entities:6516:1" rel="noopener">Exedy Corp (7278 JP)</a> . The market dropped. But that was the opportunity.</li>
<li>On 30 May, I said "Buy the deal, buy in the market. It's cheap and vulnerable." It's up 21.5% since (the day after). Peers are down 15-20%. </li>
<li>The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There's LOTS of cash left. </li>
</ul>


In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP) . The market dropped. But that was the opportunity.
On 30 May, I said "Buy the deal, buy in the market. It's cheap and vulnerable." It's up 21.5% since (the day after). Peers are down 15-20%. 
The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There's LOTS of cash left. 


[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) - LOTS of Room Left To Run

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.

Equity Capital Markets

<ul>
<li>Since the US$1.4 billion secondary placement announcement, <a href="https://www.smartkarma.com/entities/terumo-corp" target="_blank" data-smartkarma-citation="entities:6708:1" rel="noopener">Terumo Corp (4543 JP)</a>’s shares are down 3.5% from the undisturbed price of JPY2,771 per share (29 August).</li>
<li>Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Terumo’s shares have followed the pattern of previous large placements.</li>
<li>The offering will likely be priced on 10 September. Despite Kokusai and Honda's disappointing performance, the average large Japanese placement tends to generate positive returns.</li>
</ul>


Since the US$1.4 billion secondary placement announcement, Terumo Corp (4543 JP)’s shares are down 3.5% from the undisturbed price of JPY2,771 per share (29 August).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Terumo’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 10 September. Despite Kokusai and Honda's disappointing performance, the average large Japanese placement tends to generate positive returns.


David Blennerhassett

<ul>
<li>Buy dips on the possibility that 3DIP would not agree to Bain. Otherwise, at ¥9,000 <a href="https://www.smartkarma.com/entities/fuji-soft-inc" target="_blank" data-smartkarma-citation="entities:17504:1" rel="noopener">Fuji Soft (9749 JP)</a> is a buy, and at ¥9,500, it's probably a sell near-term.</li>
<li>Drilling down into its balance sheet uncovers additional value for <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>; but not enough to move the needle</li>
<li>
<a href="https://www.smartkarma.com/entities/exedy-corp" target="_blank" data-smartkarma-citation="entities:6516:1" rel="noopener">Exedy Corp (7278 JP)</a> completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There's LOTS of cash left.</li>
</ul>


Buy dips on the possibility that 3DIP would not agree to Bain. Otherwise, at ¥9,000 Fuji Soft (9749 JP) is a buy, and at ¥9,500, it's probably a sell near-term.
Drilling down into its balance sheet uncovers additional value for Jardine Matheson Holdings (JM SP); but not enough to move the needle

Exedy Corp (7278 JP) completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There's LOTS of cash left.


Last Week in Event SPACE: Fuji Soft, Jardine Matheson, Exedy, Henderson

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Hamamatsu Photonics Kk / Equity Capital Markets

<ul>
<li>
<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> aims to raise around US$190m via selling over a 4% stake in <a href="https://www.smartkarma.com/entities/hamamatsu-photonics-kk" target="_blank" data-smartkarma-citation="entities:14074:1" rel="noopener">Hamamatsu Photonics Kk (6965 JP)</a>.</li>
<li>This is another cross-shareholding unwind and hence, won’t be a huge surprise. Although given the recent share price weakness, the timing appears peculiar.</li>
<li>In this note, we will talk about the deal dynamics and run the deal through our ECM framework.</li>
</ul>



Toyota Motor (7203 JP) aims to raise around US$190m via selling over a 4% stake in Hamamatsu Photonics Kk (6965 JP).
This is another cross-shareholding unwind and hence, won’t be a huge surprise. Although given the recent share price weakness, the timing appears peculiar.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.


Hamamatsu Photonics Placement - Peculiar Timing

Japan

Aisin Corporation manufactures and distributes motor vehicle parts. The Company produces drive train, transmissions, clutches, disc brakes, anti-skid brake system, suspensions, oil pumps, power windows, power door locks, and more. Aisin operates sales and production subsidiaries worldwide.

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Aisin (7259 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

[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) - LOTS of Room Left To Run

Murakami-san is up to 18% in Exedy. But that is 20.9% of voting rights. And that is at a price higher than pre-offering announcement. Since he...

Travis Lundy

Terumo (4543 JP): The Current Playbook

The offering will likely be priced on 10 September. Looking at recent large Japanese placements is instructive to understand the potential trading...

Arun George

Last Week in Event SPACE: Fuji Soft, Jardine Matheson, Exedy, Henderson

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Hamamatsu Photonics Placement - Peculiar Timing

Toyota Motor (7203 JP) aims to raise around US$190m via selling over a 4% stake in Hamamatsu Photonics Kk (6965 JP). The timing of the selldown...

Sumeet Singh

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