Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Today after the close, <a href="https://www.smartkarma.com/entities/bandai-namco-holdings-inc" target="_blank" data-smartkarma-citation="entities:13435:1" rel="noopener">Bandai Namco Holdings (7832 JP)</a> announced that its Tender Offer for <a href="https://www.smartkarma.com/entities/sotsu-co-ltd" target="_blank" data-smartkarma-citation="entities:12978:1" rel="noopener">Sotsu Co Ltd (3711 JP)</a> had been completed successfully, with Bandai Namco having bought 8,683,500 shares against the minimum of 7.21mm shares.
So that is that. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/107/932/original/gundam%20chopped.gif?1574769393" class="editor-image img-responsive" data-smartkarma-image-id="107932"></figure>

The combination of the founder Nasu Yuji's personally-held and personal asset management company shares got the Tender Offer over the hurdle anyway, and the Sotsu Foundation's shares got them a bit further. 
HOWEVER, if one assumes Founder Nasu Yuji and the foundation tendered, that would mean another 973,500 shares were tendered out of the unaffiliated 3,604,255 shares.
That is 27% of the unaffiliated shares. 
So a large Controlling Shareholder, long affiliated with the Buyer, standing by to negotiate with the Buyer to buy one company from the Target Company and sell shares in another Related Party Transaction to the Target Company agreed with Buyer to sell his shares in Target Company such that Buyer could squeeze out all the other minorities with not a single one of those minorities having a say in the result other than through a court process. 
<div class="content-highlight">
EVERY SINGLE NON-AFFILIATED SHAREHOLDER COULD HAVE "VOTED AGAINST" by not tendering and this deal still gets done. 
As it happens, it appears "only" 73+% of non-affiliated shareholders "voted against" by not tendering.
</div>
There are those who would say that represents a reason why Japan's Takeover rules need review. "Fair" M&amp;A Guidelines are - in truth - far more function than form. And the Fair M&amp;A Guidelines for MBOs (and this is functionally an MBO) are far from perfect, but even then it seems reasonably clear the standards were not quite met. 
A lot of the minorities felt undercut by the process.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/107/934/original/gundam%20gif%202%20defeated.gif?1574769439" class="editor-image img-responsive" data-smartkarma-image-id="107934"></figure>
As often seems the case in Japan, no matter what precedent says, "whether or not the Transactions would be disadvantageous to the minority shareholders of the Target Company" (when it is a decision about one current stakeholder buying out another stakeholder) is not sufficiently determined without more effort than shown. If you have not asked minorities to agree, or conducted a serious market check, how can you know whether you are not doing transactions disadvantageous to minority shareholders? Was any single consultant to the process a registered investment advisor?
Bandai Namco and Sotsu have not done right by Sotsu minority shareholders.

Today after the close, Bandai Namco Holdings (7832 JP) announced that its Tender Offer for Sotsu Co Ltd (3711 JP) had been completed successfully, with Bandai Namco having bought 8,683,500 shares against the minimum of 7.21mm shares.
So that is that. 


The combination of the founder Nasu Yuji's personally-held and personal asset management company shares got the Tender Offer over the hurdle anyway, and the Sotsu Foundation's shares got them a bit further. 
HOWEVER, if one assumes Founder Nasu Yuji and the foundation tendered, that would mean another 973,500 shares were tendered out of the unaffiliated 3,604,255 shares.
That is 27% of the unaffiliated shares. 
So a large Controlling Shareholder, long affiliated with the Buyer, standing by to negotiate with the Buyer to buy one company from the Target Company and sell shares in another Related Party Transaction to the Target Company agreed with Buyer to sell his shares in Target Company such that Buyer could squeeze out all the other minorities with not a single one of those minorities having a say in the result other than through a court process. 

EVERY SINGLE NON-AFFILIATED SHAREHOLDER COULD HAVE "VOTED AGAINST" by not tendering and this deal still gets done. 
As it happens, it appears "only" 73+% of non-affiliated shareholders "voted against" by not tendering.

There are those who would say that represents a reason why Japan's Takeover rules need review. "Fair" M&amp;A Guidelines are - in truth - far more function than form. And the Fair M&amp;A Guidelines for MBOs (and this is functionally an MBO) are far from perfect, but even then it seems reasonably clear the standards were not quite met. 
A lot of the minorities felt undercut by the process.

As often seems the case in Japan, no matter what precedent says, "whether or not the Transactions would be disadvantageous to the minority shareholders of the Target Company" (when it is a decision about one current stakeholder buying out another stakeholder) is not sufficiently determined without more effort than shown. If you have not asked minorities to agree, or conducted a serious market check, how can you know whether you are not doing transactions disadvantageous to minority shareholders? Was any single consultant to the process a registered investment advisor?
Bandai Namco and Sotsu have not done right by Sotsu minority shareholders.

I expected an "easy" Tender Offer in <a href="https://www.smartkarma.com/entities/bandai-namco-holdings-inc" target="_blank" data-smartkarma-citation="entities:13435:1" rel="noopener">Bandai Namco Holdings (7832 JP)</a>'s "cleanup" of Gundam merchandising IP licensee/owner <a href="https://www.smartkarma.com/entities/sotsu-co-ltd" target="_blank" data-smartkarma-citation="entities:12978:1" rel="noopener">Sotsu Co Ltd (3711 JP)</a> founder Nasu Yuji's 49.2% stake, which then leads to Bandai Namco owning more than two-thirds, which allows Bandai Namco to squeeze out minorities. Done at a 66% premium to last close and an EV/EBITDA multiple of almost 10x, with almost 90% of the register easily accounted for, I had expected this to go quite smoothly. While it is not a knock-out price, given the founder is selling out his 49.2%, I had not expected anyone would come out against it vocally, but someone has. RMB Capital (“RMB”), an independent investment advisory firm based in Chicago, issued a <a href="https://www.businesswire.com/news/home/20191105006284/en/" target="_blank" rel="noopener">press release</a> early this morning Asia time outlining their beef. This is a burger with multiple patties.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/104/769/original/Screenshot%202019-11-06%20at%209.52.17%20AM.png?1573005152" class="editor-image img-responsive" data-smartkarma-image-id="104769"></figure><div class="content-caption">excerpt from the <a href="https://www.businesswire.com/news/home/20191105006284/en/" target="_blank" rel="noopener">Press Release</a>
</div>RMB explains their issues in more detail, and they are interesting. I dig in below.And because it is Sotsu... I offer a gratuitous Gundam gif (the cool retro "tokusatsu" vids are in the previous piece <a href="https://www.smartkarma.com/insights/bandai-namco-gets-that-last-bit-of-gundam-tender-offer-for-sotsu-3711-jp" target="_blank" data-smartkarma-citation="insights:33017" rel="noopener">Bandai Namco Gets That Last Bit of Gundam: Tender Offer for Sotsu (3711 JP)</a> <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/104/826/original/gundam.gif?1573019136" class="editor-image img-responsive" data-smartkarma-image-id="104826"></figure><hr>For more about the rules, regulations, quirks, and foibles of Japanese M&amp;A, please see the <a href="https://www.smartkarma.com/insights/quiddity-japan-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:28911" rel="noopener">Quiddity Japan M&amp;A Guide 2019</a>.

I expected an "easy" Tender Offer in Bandai Namco Holdings (7832 JP)'s "cleanup" of Gundam merchandising IP licensee/owner Sotsu Co Ltd (3711 JP) founder Nasu Yuji's 49.2% stake, which then leads to Bandai Namco owning more than two-thirds, which allows Bandai Namco to squeeze out minorities. Done at a 66% premium to last close and an EV/EBITDA multiple of almost 10x, with almost 90% of the register easily accounted for, I had expected this to go quite smoothly. While it is not a knock-out price, given the founder is selling out his 49.2%, I had not expected anyone would come out against it vocally, but someone has. RMB Capital (“RMB”), an independent investment advisory firm based in Chicago, issued a press release early this morning Asia time outlining their beef. This is a burger with multiple patties.excerpt from the Press Release
RMB explains their issues in more detail, and they are interesting. I dig in below.And because it is Sotsu... I offer a gratuitous Gundam gif (the cool retro "tokusatsu" vids are in the previous piece Bandai Namco Gets That Last Bit of Gundam: Tender Offer for Sotsu (3711 JP) For more about the rules, regulations, quirks, and foibles of Japanese M&amp;A, please see the Quiddity Japan M&amp;A Guide 2019.

Gundam Gets Jiggy - A Voice Cries "Chotto Matte"

In the mid-1960s, Japan's most successful baseball franchise - the Yomiuri Giants - designated a small company called "Toyo Agency" as its sole agent to design and manufacture team merchandise. Several years later, Toyo Agency branched out and started an eminently cheesy and entirely forgettable tokusatsu* series called Thundermask (サンダーマスク) which thankfully has been lost to the mists of time (except a couple of cuts, one of which is below, in the Appendix).
Toyo Agency changed its name to Sotsu Agency five years later in 1977, and a couple of months later launched its first anime series called "SUPER MACHINE ZANBOT 3" (opening scenes of Episode 1 below). Super machine Zanbot 3 was created by now-famous anime creator and director Yoshiyuki Tomino (who got his career started in the 1960s with Osamu Tezuka's Astroboy and later Ashita no Joe) who by then was part of the Sunrise Studio (which was founded by members of Tezuka's Mushi Productions who wanted to produce their own work (Tezuka was the only producer at Mushi)). Sunrise concentrated on robots, starting with mecha anime "super robot" series ("super robots" were implausibly large robots which could do unbelievable things - an obvious derivative of the tokusatsu genre). 
<iframe src="https://www.youtube.com/embed/32JJ7O65nm0" width="840" height="472" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe>
Sunrise and Tomino had started with a popular series called Brave Raideen, which was sponsored by another company (not Sotsu), followed by Daitarn3 which was somewhat kid-friendly, but Tomino-san was very much a story-teller and wanted to tell darker stories which did not glorify war but instead showed its horrors. Zanbot 3 ends in a total bloodbath.
By the late 1970s, Tomino was also a bit sick of "super robots" and had decided to shift his work to "real robots" which were a sub-genre bringing a bit more realism (real effects, real sizes, concerns about aerodynamics, etc) to the robot anime genre.
In 1979, Sotsu Agency launched Sunrise's Mobile Suit Gundam, created and directed by Tomino. The series was sponsored by toy company Clover, which hoped to sell toys related to the series.  There were 43 episodes over the next nine months but the show was cancelled before it got to the end of its planned 50-episode run because it couldn't sustain sufficient viewership, even with Clover's interference trying to make the series less gory.
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/101/449/original/gundam%20gif.gif?1570627553" class="editor-image img-responsive" data-smartkarma-image-id="101449">​</figure>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/101/451/original/gundam3%20gif.gif?1570627596" class="editor-image img-responsive" data-smartkarma-image-id="101451">​</figure>
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Clover never made any money from the series, but in 1980, Bandai introduced Gun-pura (ガンプラ) which stands for 'GUNdam suit PLAstic' models - plastic model kits where kids could put them together, paint them, pose them, and then do more as more characters came out. The plastic models were a hit. 
That led to more models, better model tech with less painting and better joint manoeuvrability. It also led to a trio of movies, which led to more mobile suit characters which of course meant more models to assemble and collect for fans. 
Tomino's original series was dark, and was explicitly designed to make viewers understand the horrors of war. Brooding, gray robots and main characters dying mid-series (his nickname was "皆殺しの富野 Minagoroshi no Tomino" ('Kill'em all!' Tomino)) don't make for commercial success so the robots were made more colorful, and the themes lighter, and he was pressured to kill off fewer of the characters. Tomino got his royalties but he also re-released the original series in a trilogy of novels in the early 1980s. He later directed a series of movies, and follow-up movies, and there were followup TV series of different types. 
15 years later Sunrise became part of Bandai, which had a bunch of the licenses for Gundam. 20 years after the first series, Bandai had sold 300+ million Gun-pura and total Gundam-related revenues from all sources had hit US$5 billion. By the end of 2018, that number was estimated to be $20 billion. A TV series which couldn't get to the end of its first run turned out OK.
40 years on from the introduction of Mobile Suit Gundam, Sotsu is still in the business of promoting anime, including Gundam characters and merchandise.
This year has seen an unexpected star rise in the Gundam universe.
<iframe src="https://www.youtube.com/embed/Lotw0yxtSUo" width="840" height="472" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe> 
<h2>The New News</h2>
The new news is that <a href="https://www.smartkarma.com/entities/bandai-namco-holdings-inc" target="_blank" data-smartkarma-citation="entities:13435:1" rel="noopener">Bandai Namco Holdings (7832 JP)</a>, which has owned 20+% of the shares outstanding since 2000, has <a href="https://www.bandainamco.co.jp/cgi-bin/releases/index.cgi/en/press/9558?entry_id=6673" target="_blank" rel="noopener">announced</a> (the doc, in English) that it will buy out <a href="https://www.smartkarma.com/entities/sotsu-co-ltd" target="_blank" data-smartkarma-citation="entities:12978:1" rel="noopener">Sotsu Co Ltd (3711 JP)</a> in a tender offer at ¥3100/share - as far as I can tell, a lifetime high, and a 66% premium to the last close.
This is an easy one. Co-founder Nasu Yuji, who between himself and his asset management company Nusco own 49.2% (and his foundation owns a bit more), has agreed to tender his shares.
That gets Bandai past two-thirds ownership, which allows them to squeeze out minorities.
It also gives Bandai the ability to better deal with the Gundam franchise. I expect Kitty-chan as Gundam cameo may not survive the winter.
More details below.
<hr>
<div class="content-remarks">
*tokusatsu means "special filming" (Godzilla is probably the origin but Ultraman and others are classics) and is a media type which relies heavily on "special effects" of suits/costumes and miniaturized sets and fake explosions and smoke to create a different world. 
</div>
<hr>
For more about the rules, regulations, quirks, and foibles of Japanese M&amp;A, please see the <a href="https://www.smartkarma.com/insights/quiddity-japan-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:28911" rel="noopener">Quiddity Japan M&amp;A Guide 2019</a>

In the mid-1960s, Japan's most successful baseball franchise - the Yomiuri Giants - designated a small company called "Toyo Agency" as its sole agent to design and manufacture team merchandise. Several years later, Toyo Agency branched out and started an eminently cheesy and entirely forgettable tokusatsu* series called Thundermask (サンダーマスク) which thankfully has been lost to the mists of time (except a couple of cuts, one of which is below, in the Appendix).
Toyo Agency changed its name to Sotsu Agency five years later in 1977, and a couple of months later launched its first anime series called "SUPER MACHINE ZANBOT 3" (opening scenes of Episode 1 below). Super machine Zanbot 3 was created by now-famous anime creator and director Yoshiyuki Tomino (who got his career started in the 1960s with Osamu Tezuka's Astroboy and later Ashita no Joe) who by then was part of the Sunrise Studio (which was founded by members of Tezuka's Mushi Productions who wanted to produce their own work (Tezuka was the only producer at Mushi)). Sunrise concentrated on robots, starting with mecha anime "super robot" series ("super robots" were implausibly large robots which could do unbelievable things - an obvious derivative of the tokusatsu genre). 

Sunrise and Tomino had started with a popular series called Brave Raideen, which was sponsored by another company (not Sotsu), followed by Daitarn3 which was somewhat kid-friendly, but Tomino-san was very much a story-teller and wanted to tell darker stories which did not glorify war but instead showed its horrors. Zanbot 3 ends in a total bloodbath.
By the late 1970s, Tomino was also a bit sick of "super robots" and had decided to shift his work to "real robots" which were a sub-genre bringing a bit more realism (real effects, real sizes, concerns about aerodynamics, etc) to the robot anime genre.
In 1979, Sotsu Agency launched Sunrise's Mobile Suit Gundam, created and directed by Tomino. The series was sponsored by toy company Clover, which hoped to sell toys related to the series.  There were 43 episodes over the next nine months but the show was cancelled before it got to the end of its planned 50-episode run because it couldn't sustain sufficient viewership, even with Clover's interference trying to make the series less gory.




​


​




Clover never made any money from the series, but in 1980, Bandai introduced Gun-pura (ガンプラ) which stands for 'GUNdam suit PLAstic' models - plastic model kits where kids could put them together, paint them, pose them, and then do more as more characters came out. The plastic models were a hit. 
That led to more models, better model tech with less painting and better joint manoeuvrability. It also led to a trio of movies, which led to more mobile suit characters which of course meant more models to assemble and collect for fans. 
Tomino's original series was dark, and was explicitly designed to make viewers understand the horrors of war. Brooding, gray robots and main characters dying mid-series (his nickname was "皆殺しの富野 Minagoroshi no Tomino" ('Kill'em all!' Tomino)) don't make for commercial success so the robots were made more colorful, and the themes lighter, and he was pressured to kill off fewer of the characters. Tomino got his royalties but he also re-released the original series in a trilogy of novels in the early 1980s. He later directed a series of movies, and follow-up movies, and there were followup TV series of different types. 
15 years later Sunrise became part of Bandai, which had a bunch of the licenses for Gundam. 20 years after the first series, Bandai had sold 300+ million Gun-pura and total Gundam-related revenues from all sources had hit US$5 billion. By the end of 2018, that number was estimated to be $20 billion. A TV series which couldn't get to the end of its first run turned out OK.
40 years on from the introduction of Mobile Suit Gundam, Sotsu is still in the business of promoting anime, including Gundam characters and merchandise.
This year has seen an unexpected star rise in the Gundam universe.
 
The New News
The new news is that Bandai Namco Holdings (7832 JP), which has owned 20+% of the shares outstanding since 2000, has announced (the doc, in English) that it will buy out Sotsu Co Ltd (3711 JP) in a tender offer at ¥3100/share - as far as I can tell, a lifetime high, and a 66% premium to the last close.
This is an easy one. Co-founder Nasu Yuji, who between himself and his asset management company Nusco own 49.2% (and his foundation owns a bit more), has agreed to tender his shares.
That gets Bandai past two-thirds ownership, which allows them to squeeze out minorities.
It also gives Bandai the ability to better deal with the Gundam franchise. I expect Kitty-chan as Gundam cameo may not survive the winter.
More details below.


*tokusatsu means "special filming" (Godzilla is probably the origin but Ultraman and others are classics) and is a media type which relies heavily on "special effects" of suits/costumes and miniaturized sets and fake explosions and smoke to create a different world. 


For more about the rules, regulations, quirks, and foibles of Japanese M&amp;A, please see the Quiddity Japan M&amp;A Guide 2019

Bandai Namco Gets That Last Bit of Gundam: Tender Offer for Sotsu (3711 JP)

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

• RELATIVE PRICE SCORE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/178/original/2019-09-06_09-42-35.png?1567730614" class="editor-image img-responsive" data-smartkarma-image-id="98178"></figure><div class="content-caption">Source: Japan Analytics</div>INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> has just joined <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1" rel="noopener">Goldwin (8111 JP)</a> in being only the second large-cap RPS 'ten-baggers' in the last twenty years. <div class="content-highlight">This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</div><div></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/046/original/2019-09-05_12-46-46.png?1567655232" class="editor-image img-responsive" data-smartkarma-image-id="98046"></figure><div class="content-caption">Source: Japan Analytics</div>STATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.<hr>• RELATIVE PRICE SCORE 'TOPS' •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/055/original/2019-09-05_13-06-30.png?1567656423" class="editor-image img-responsive" data-smartkarma-image-id="98055"></figure><div class="content-caption">Source: Japan Analytics</div>RPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/suzuken-co-ltd" target="_blank" data-smartkarma-citation="entities:14996:1" rel="noopener">Suzuken (9987 JP)</a>, <a href="https://www.smartkarma.com/entities/infomart-corp" target="_blank" data-smartkarma-citation="entities:1301:1" rel="noopener">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/nichirei-corp" target="_blank" data-smartkarma-citation="entities:7168:1" rel="noopener">Nichirei (2871 JP)</a>, and <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl (4921 JP)</a>. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/096/original/2019-09-05_16-25-39.png?1567668352" class="editor-image img-responsive" data-smartkarma-image-id="98096"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/097/original/2019-09-05_16-27-09.png?1567668441" class="editor-image img-responsive" data-smartkarma-image-id="98097"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/098/original/2019-09-05_16-28-42.png?1567668548" class="editor-image img-responsive" data-smartkarma-image-id="98098"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/099/original/2019-09-05_16-30-29.png?1567668640" class="editor-image img-responsive" data-smartkarma-image-id="98099"></figure><div class="content-caption">Source: Japan Analytics</div><hr>• RELATIVE PRICE SCORE 'BOTTOMS' •<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/056/original/2019-09-05_13-12-52.png?1567656806" class="editor-image img-responsive" data-smartkarma-image-id="98056"></figure><div class="content-caption">Source: Japan Analytics</div>
</div>RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP) </a>and <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/100/original/2019-09-05_16-35-47.png?1567668972" class="editor-image img-responsive" data-smartkarma-image-id="98100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/102/original/2019-09-05_16-36-50.png?1567669047" class="editor-image img-responsive" data-smartkarma-image-id="98102"></figure><div class="content-caption">Source: Japan Analytics</div>As we noted in our June <a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393" rel="noopener">Insight: -</a><blockquote><a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   </blockquote>In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

• RELATIVE PRICE SCORE •Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Lasertec (6920 JP) has just joined Goldwin (8111 JP) in being only the second large-cap RPS 'ten-baggers' in the last twenty years. This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.• RELATIVE PRICE SCORE 'TOPS' •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been Suzuken (9987 JP), Infomart (2492 JP), Nichirei (2871 JP), and Fancl (4921 JP). Source: Japan Analytics• RELATIVE PRICE SCORE 'BOTTOMS' •
Source: Japan Analytics
RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are Otsuka Holdings (4578 JP) and LINE (3938 JP).Source: Japan AnalyticsAs we noted in our June Insight: -LINE (3938 JP)- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

After the close today, The Nikkei Inc <a href="https://indexes.nikkei.co.jp/en/nkave/archives/news/20190904E_1.pdf" target="_blank" rel="noopener">announced</a> that <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a> would join the Nikkei 225 and would replace <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a>. <hr><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/937/original/Screenshot%202019-09-04%20at%203.43.33%20PM.png?1567583098" class="editor-image img-responsive" data-smartkarma-image-id="97937"></figure><hr>This appears to be a little bit of a surprise given the lack of buildup in excess volumes, even though M3 was on the short list of the Consumer sector for most event analysts (the other names commonly thrown around were <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> and <a href="https://www.smartkarma.com/entities/kenedix-inc" target="_blank" data-smartkarma-citation="entities:11321:1" rel="noopener">Kenedix Inc (4321 JP)</a>, and Tokyo Dome has been on the cusp of being deleted for years. All in all, these should not be too surprising, but either way, it is a lot of volume - more than 30 days of ADV on each side. If you are involved in M3, Tokyo Dome, or their competitors, I would have a look at the flows.

After the close today, The Nikkei Inc announced that M3 Inc (2413 JP) would join the Nikkei 225 and would replace Tokyo Dome Corp (9681 JP). This appears to be a little bit of a surprise given the lack of buildup in excess volumes, even though M3 was on the short list of the Consumer sector for most event analysts (the other names commonly thrown around were ZOZO Inc (3092 JP) and Kenedix Inc (4321 JP), and Tokyo Dome has been on the cusp of being deleted for years. All in all, these should not be too surprising, but either way, it is a lot of volume - more than 30 days of ADV on each side. If you are involved in M3, Tokyo Dome, or their competitors, I would have a look at the flows. 

Japan

Bandai Namco Holdings Inc is a holding company established through merger of Bandai and Namco.  The Group manufactures toys, stuffed animals, character goods, video games, commercial- and home-use game equipment and software. Namco Bandai also operates video game arcades and theme parks.

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Bandai Namco Holdings (7832 JP)

Gundam Has Fallen! Long Live Gundam!

Today after the close, Bandai Namco Holdings (7832 JP) announced that its Tender Offer for Sotsu Co Ltd (3711 JP) had been completed successfully,...

Travis Lundy

Gundam Gets Jiggy - A Voice Cries "Chotto Matte"

I expected an "easy" Tender Offer in Bandai Namco Holdings (7832 JP)'s "cleanup" of Gundam merchandising IP licensee/owner Sotsu Co Ltd (3711 JP)...

Travis Lundy

Bandai Namco Gets That Last Bit of Gundam: Tender Offer for Sotsu (3711 JP)

In the mid-1960s, Japan's most successful baseball franchise - the Yomiuri Giants - designated a small company called "Toyo Agency" as its sole...

Travis Lundy

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

• RELATIVE PRICE SCORE •INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

Nikkei 225 Rebal - M3 IN, Tokyo Dome OUT

After the close today, The Nikkei Inc announced that M3 Inc (2413 JP) would join the Nikkei 225 and would replace Tokyo Dome Corp (9681 JP). This...

Travis Lundy

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