Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Yesterday, post-close, Bloomberg reported a headline "<strong>*SILCHESTER REPORTS NIKON STAKE; MAY SEEK CAPITAL POLICY CHANGES</strong>"</li>
<li>That was exciting. It was in all caps. It was activist-ish-y. Today the stock rose 10.3% and we got another article saying it was up because of Silchester's filing.</li>
<li>Beware the Bloomberg headline. Nuance is sometimes lost. They aren't always designed to help investors invest. Often, the main purpose is clickbait.</li>
</ul>


Yesterday, post-close, Bloomberg reported a headline "*SILCHESTER REPORTS NIKON STAKE; MAY SEEK CAPITAL POLICY CHANGES"
That was exciting. It was in all caps. It was activist-ish-y. Today the stock rose 10.3% and we got another article saying it was up because of Silchester's filing.
Beware the Bloomberg headline. Nuance is sometimes lost. They aren't always designed to help investors invest. Often, the main purpose is clickbait.


Nikon (7731) - Beware The Bloomberg Headline But There's Value Here

Event-Driven

<ul>
<li>Yesterday, <a href="https://www.smartkarma.com/entities/kyocera-corp" target="_blank" data-smartkarma-citation="entities:753:1" rel="noopener">Kyocera Corp (6971 JP)</a> announced Q2 results and lowered its full-year forecast. Then the CEO said it was "reconsidering" what to do with KDDI shares (after an AGM disaster).</li>
<li>The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago. </li>
<li>The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.</li>
</ul>


Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was "reconsidering" what to do with KDDI shares (after an AGM disaster).
The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago. 
The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.


Kyocera (6971) And Their $10bn KDDI Stake - Did They Get CorpGov Religion?

<ul>
<li>40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.</li>
<li>92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.</li>
<li>Big tables with data, reasons for guidance changes, and buyback history of each presented below.</li>
</ul>


40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.


Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

<ul>
<li>Four months ago, <a href="https://www.smartkarma.com/entities/rakuten-bank-ltd" target="_blank" data-smartkarma-citation="entities:35638:1" rel="noopener">Rakuten Bank (5838 JP)</a> was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.</li>
<li>Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they're going up. </li>
<li>Given expected 5yr earnings growth, Rakuten Bank at current price is probably "wrong." But it has much less "bankness" than most banks, so you have to think about it differently.</li>
</ul>


Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they're going up. 
Given expected 5yr earnings growth, Rakuten Bank at current price is probably "wrong." But it has much less "bankness" than most banks, so you have to think about it differently.


Rakuten Bank (5838) - 4 Months On, Volume Decay and RB's Place Among Banks

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-kyoto" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank of Kyoto (8369 JP)</a> has been on a relative tear recently. This is a bit surprising.  On a static equity-portfolio discount measure, it has outperformed regional banks.</li>
<li>On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.</li>
<li>Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That's the dream scenario. But I don't see it coming soon.</li>
</ul>



Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising.  On a static equity-portfolio discount measure, it has outperformed regional banks.
On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That's the dream scenario. But I don't see it coming soon.


Japan

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

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Bank of Kyoto (8369 JP)

Nikon (7731) - Beware The Bloomberg Headline But There's Value Here

Nikon is a cheap company with dual personalities, which keeps its multiple low. It has cash and securities too. Silchester bought 5% and Bloomberg...

Travis Lundy

Kyocera (6971) And Their $10bn KDDI Stake - Did They Get CorpGov Religion?

Kyocera yesterday announced a downward revision AND an intention to "reconsider" the disposition of its KDDI shares after the June AGM hurt. That...

Travis Lundy

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

The macro backdrop for Japanese banks is pretty good. Business restructuring efforts are bearing fruit. Global macro is adding fees. Stocks are up,...

Travis Lundy

Rakuten Bank (5838) - 4 Months On, Volume Decay and RB's Place Among Banks

Since the day after Rakuten Bank's IPO, the Banks Index is +25%, and Rakuten Bank's guided growth to March 2024 is well above TPNBNK average. But...

Travis Lundy

Bank of Kyoto (8369) - Too Far Too Fast

Bank of Kyoto (8369) has a 50% payout but its shareholder base isn’t that supportive of activism need to monetise the value of the equity...

Travis Lundy

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