Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On 11 November 2021, mobile ad platform provider <a href="https://www.smartkarma.com/entities/adways-inc" target="_blank" data-smartkarma-citation="entities:14696:1" rel="noopener">Adways Inc (2489 JP)</a><a href="https://ir.adways.net/irnews/20211111_222D3s.pdf" target="_blank" rel="noopener">announced</a> a placement of treasury shares, and a small new share issuance to Hakuhodo DY totalling 3.6mm shares.</li>
<li>On 1 December 2021, the company announced a buyback of up to 6 million shares between here and May 2022.</li>
<li>That sets up an interesting offset of accretion and squeeze. And details matter.</li>
</ul>


On 11 November 2021, mobile ad platform provider Adways Inc (2489 JP)announced a placement of treasury shares, and a small new share issuance to Hakuhodo DY totalling 3.6mm shares.
On 1 December 2021, the company announced a buyback of up to 6 million shares between here and May 2022.
That sets up an interesting offset of accretion and squeeze. And details matter.


Adways (2489 JP) - A Dilutive Placement Before and a New Accretive Bigly Buyback

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>At its Monetary Policy Meeting that concluded on 19 March, the Bank of Japan (BOJ) announced that they would purchase ETFs and J-REIT as necessary with upper limits of about 12 trillion yen and about 180 billion yen respectively. While the upper limits were originally set as a temporary measure in response to the impact of COVID-19, the Bank will maintain them even after COVID-19 subsides.</p><p>The big change was the announcement that the BOJ would only purchase ETFs tracking the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a>. This means no more flows to 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> and JPX Nikkei 400 ETFs.</p><p>From the increase in ETF AUM over calendar year 2020, we estimate that around 88% of the BOJ buying went into <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> ETFs, with smaller amounts going into 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> and JPX Nikkei 400 ETFs.</p><p>While the impact of BOJ only buying <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> linked ETFs is not material for single stocks in ADV terms, there could be a bigger impact on 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> constituents if other NKY ETF holders redeem their units and sell the underlying shares.</p><p>The NT ratio (NKY/TPX) had started to move lower over the last 15 trading days due to the shift from growth to value stocks. The BOJ announcement could take the ratio lower in the short term on a change in sentiment and short term flows due to repositioning of portfolios.</p><p><a href="https://www.smartkarma.com/entities/nissan-chemical-industries" target="_blank" data-smartkarma-citation="entities:4102:1" rel="noopener">Nissan Chemical Industries (4021 JP)</a>, <a href="https://www.smartkarma.com/entities/comsys-holdings-corp" target="_blank" data-smartkarma-citation="entities:20548:1" rel="noopener">Comsys Holdings (1721 JP)</a>, <a href="https://www.smartkarma.com/entities/konami-holdings-corp" target="_blank" data-smartkarma-citation="entities:13236:1" rel="noopener">Konami Holdings (9766 JP)</a>, <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1" rel="noopener">Kikkoman Corp (2801 JP)</a> and <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> will be among the most negatively affected stocks, but the impact is quite small.</p><p><a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> stocks (that will have passive BOJ inflows of at least US$5m) that will have the largest impact in terms of ADV to trade are <a href="https://www.smartkarma.com/entities/hankyu-hanshin-holdings-inc" target="_blank" data-smartkarma-citation="entities:13058:1" rel="noopener">Hankyu Hanshin Holdings (9042 JP)</a>, <a href="https://www.smartkarma.com/entities/kintetsu-group-holdings-co-l" target="_blank" data-smartkarma-citation="entities:18507:1" rel="noopener">Kintetsu Group Holdings Co L (9041 JP)</a>, <a href="https://www.smartkarma.com/entities/hisamitsu-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:17008:1" rel="noopener">Hisamitsu Pharmaceutical Co (4530 JP)</a>, <a href="https://www.smartkarma.com/entities/bank-of-kyoto-ltd" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank Of Kyoto (8369 JP)</a> and <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo Dy Holdings (2433 JP)</a>. </p>

At its Monetary Policy Meeting that concluded on 19 March, the Bank of Japan (BOJ) announced that they would purchase ETFs and J-REIT as necessary with upper limits of about 12 trillion yen and about 180 billion yen respectively. While the upper limits were originally set as a temporary measure in response to the impact of COVID-19, the Bank will maintain them even after COVID-19 subsides.The big change was the announcement that the BOJ would only purchase ETFs tracking the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX). This means no more flows to the Nikkei 225 (NKY INDEX) and JPX Nikkei 400 ETFs.From the increase in ETF AUM over calendar year 2020, we estimate that around 88% of the BOJ buying went into Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) ETFs, with smaller amounts going into the Nikkei 225 (NKY INDEX) and JPX Nikkei 400 ETFs.While the impact of BOJ only buying Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) linked ETFs is not material for single stocks in ADV terms, there could be a bigger impact on the Nikkei 225 (NKY INDEX) constituents if other NKY ETF holders redeem their units and sell the underlying shares.The NT ratio (NKY/TPX) had started to move lower over the last 15 trading days due to the shift from growth to value stocks. The BOJ announcement could take the ratio lower in the short term on a change in sentiment and short term flows due to repositioning of portfolios.Nissan Chemical Industries (4021 JP), Comsys Holdings (1721 JP), Konami Holdings (9766 JP), Kikkoman Corp (2801 JP) and Fast Retailing (9983 JP) will be among the most negatively affected stocks, but the impact is quite small.Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) stocks (that will have passive BOJ inflows of at least US$5m) that will have the largest impact in terms of ADV to trade are Hankyu Hanshin Holdings (9042 JP), Kintetsu Group Holdings Co L (9041 JP), Hisamitsu Pharmaceutical Co (4530 JP), Bank Of Kyoto (8369 JP) and Hakuhodo Dy Holdings (2433 JP). 

BOJ Buying to Focus on TOPIX ETFs: Big Headline, Smaller Impact

Equity Capital Markets

Recruit Holdings / Equity Capital Markets

<p>Today (30 Nov 2020) after the close, <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a><a href="https://recruit-holdings.co.jp/ir/ir_news/20201130_01.html" target="_blank" rel="noopener">announced</a> (Japanese only so far) a selldown of shares by eight different companies with a total share sale amounting to 86.111mm shares (plus greenshoe) for an ex-ante expected Offering size of ¥416.8bn or US$4.0 billion. </p><p>This has happened twice before since IPO as corporate shareholders who owned most of Recruit prior to its IPO sell shares down. </p><p>Like in large secondary share sales conducted in previous years, there is a <a href="https://recruit-holdings.co.jp/ir/ir_news/20201130_02.html" target="_blank" rel="noopener">buyback</a> (Japanese only so far) attached where Recruit will buy back a non-negligible portion of the offering, and having learned from the mini-debacle in 2016, in 2019 the company started its buyback post-offering. This year it is the same.</p><p>There are, as always, interesting investor placement dynamics and buyback and index implications, discussed below, along with the history of the prior events.</p><p>The real difference this year is that pricing happens speedily. This week. Probably on Wednesday. That's fast. The last two were 9 and 13 days after announcement. </p>

Today (30 Nov 2020) after the close, Recruit Holdings (6098 JP)announced (Japanese only so far) a selldown of shares by eight different companies with a total share sale amounting to 86.111mm shares (plus greenshoe) for an ex-ante expected Offering size of ¥416.8bn or US$4.0 billion. This has happened twice before since IPO as corporate shareholders who owned most of Recruit prior to its IPO sell shares down. Like in large secondary share sales conducted in previous years, there is a buyback (Japanese only so far) attached where Recruit will buy back a non-negligible portion of the offering, and having learned from the mini-debacle in 2016, in 2019 the company started its buyback post-offering. This year it is the same.There are, as always, interesting investor placement dynamics and buyback and index implications, discussed below, along with the history of the prior events.The real difference this year is that pricing happens speedily. This week. Probably on Wednesday. That's fast. The last two were 9 and 13 days after announcement. 

A Speedy Recruit Offering (And Slower Buyback)

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>Thursday's best and worst pairing is <a href="https://www.smartkarma.com/entities/mcdonald-s-holdings-co-japan" target="_blank" data-smartkarma-citation="entities:985:1" rel="noopener">Mcdonald's Japan (2702 JP)</a> and ad agency <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo (2433 JP)</a>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/166/original/2020-11-13_06-23-39.png?1605216232" class="editor-image img-responsive" data-smartkarma-image-id="171166"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/167/original/2020-11-13_06-24-59.png?1605216326" class="editor-image img-responsive" data-smartkarma-image-id="171167"></figure></section>
</div><div><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></div><hr><div><p style="text-align: center;"><strong>DAILY STATS</strong></p></div><hr><div><p style="text-align: center;"><strong>384 Quarterly Results</strong></p></div><div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 42% Positive / 8% Neutral / 49% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> -0.9 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -6.9% Quarter YoY / -3.2% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change:</strong> -3.7 ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 23%</p></li>
</ul></div><hr><div><p style="text-align: center;"><strong>142 Annual • 15 Interim Forecasts/Revisions</strong></p></div><div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score</strong>: 41% Positive / 13% Neutral / 46% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 47% Positive / 13% Neutral / 40% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -1.9 points</p></li>
</ul></div>

• BEST &amp; WORST •
Thursday's best and worst pairing is Mcdonald's Japan (2702 JP) and ad agency Hakuhodo (2433 JP).

Source for all charts &amp; tables: Japan AnalyticsDAILY STATS384 Quarterly Results
Results Score: 42% Positive / 8% Neutral / 49% Negative
Average Results Score Change: -0.9 points
Average % Change in Revenue: -6.9% Quarter YoY / -3.2% Rolling TTM YoY 
Average Operating Profit Margin Change: -3.7 ppt
Percentage Making Quarterly Losses: 23%
142 Annual • 15 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 41% Positive / 13% Neutral / 46% Negative
Interim Forecast/Revision Score Change: 47% Positive / 13% Neutral / 40% Negative
Average Forecast/Revision Score Change: -1.9 points


🇯🇵 JAPAN • Results & Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​​12 McDonald's, Nissan, Hikari, H'hodo

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/586/original/2020-09-02_15-03-28.png?1599026640" class="editor-image img-responsive" data-smartkarma-image-id="156586"></figure>
<div class="content-caption">Source for all charts: Japan Analytics</div>
<p><strong>NEV IN JAPAN</strong> - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV). Based on a sample of 842,133 traded months for the 3,826 currently-listed non-financial companies in our universe since 1993, NEV-traded months represent 8%. One thousand and eleven companies have spent at least one month with a negative EV and the average NEV 'period' is just over two years.  The number of NEV companies has varied over the last thirty years, from only one in 1994 (Sanyu Construction 1841 JP) to a peak of 437 in 2009 - 15.4% of the universe. In the last two years, the percentage has doubled to 10% or 366 companies, most of which are small-cap.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/590/original/2020-09-02_15-13-33.png?1599027223" class="editor-image img-responsive" data-smartkarma-image-id="156590"></figure>
<p><strong>50 BPS</strong> -Accordingly, the aggregate (inverted) value of NEV stocks is ¥2.5 trillion or just 50 basis points of the aggregate of the universe. Nevertheless, the current value is at the upper end of the thirty-year range. We have excluded four non-financial companies - Z Holdings, Rakuten, Japan Post, and Sony - as they have financial subsidiaries on their balance sheets.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/595/original/2020-09-02_15-36-40.png?1599028611" class="editor-image img-responsive" data-smartkarma-image-id="156595"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/866/original/2020-09-03_16-43-25.png?1599119017" class="editor-image img-responsive" data-smartkarma-image-id="156866"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/596/original/2020-09-02_15-37-56.png?1599028687" class="editor-image img-responsive" data-smartkarma-image-id="156596"></figure>
<p><strong>NEV 'BUYS'</strong> - Brief periods, and occasionally extended, when higher-quality companies dip into NEV are often good long-term buying opportunities as shown above with <a href="https://www.smartkarma.com/entities/temp-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1428:1" rel="noopener">Persol (2181 JP)</a>, <a href="https://www.smartkarma.com/entities/toei-animation-co-ltd" target="_blank" data-smartkarma-citation="entities:18641:1" rel="noopener">Toei Animation (4816 JP)</a>  and <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo DY (2433 JP)</a>. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/623/original/2020-09-02_17-57-38.png?1599037069" class="editor-image img-responsive" data-smartkarma-image-id="156623"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/625/original/2020-09-02_18-04-05.png?1599037457" class="editor-image img-responsive" data-smartkarma-image-id="156625"></figure>
<p><strong>NEV 'TRAPS'</strong> - Conversely, NEV can persist for years, 'trapping' both value investors and activists, particularly where management remain 'cloth-eared' such as <a href="https://www.smartkarma.com/entities/tokyo-broadcasting-system" target="_blank" data-smartkarma-citation="entities:12981:1" rel="noopener">Tokyo Broadcasting System (9401 JP)</a> and <a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP).</a></p>
<div class="content-highlight">
<p>In the <strong>DETAIL</strong> section below, we will review the current large-cap NEV companies, as well the most persistent and the largest peak to trough NEV ranges and make some specific stock recommendations.</p>
</div>


Source for all charts: Japan Analytics
NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV). Based on a sample of 842,133 traded months for the 3,826 currently-listed non-financial companies in our universe since 1993, NEV-traded months represent 8%. One thousand and eleven companies have spent at least one month with a negative EV and the average NEV 'period' is just over two years.  The number of NEV companies has varied over the last thirty years, from only one in 1994 (Sanyu Construction 1841 JP) to a peak of 437 in 2009 - 15.4% of the universe. In the last two years, the percentage has doubled to 10% or 366 companies, most of which are small-cap.

50 BPS -Accordingly, the aggregate (inverted) value of NEV stocks is ¥2.5 trillion or just 50 basis points of the aggregate of the universe. Nevertheless, the current value is at the upper end of the thirty-year range. We have excluded four non-financial companies - Z Holdings, Rakuten, Japan Post, and Sony - as they have financial subsidiaries on their balance sheets.



NEV 'BUYS' - Brief periods, and occasionally extended, when higher-quality companies dip into NEV are often good long-term buying opportunities as shown above with Persol (2181 JP), Toei Animation (4816 JP)  and Hakuhodo DY (2433 JP). 


NEV 'TRAPS' - Conversely, NEV can persist for years, 'trapping' both value investors and activists, particularly where management remain 'cloth-eared' such as Tokyo Broadcasting System (9401 JP) and Toppan Printing (7911 JP).

In the DETAIL section below, we will review the current large-cap NEV companies, as well the most persistent and the largest peak to trough NEV ranges and make some specific stock recommendations.


🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

Japan

HAKUHODO DY HOLDINGS INCORPORATED is a holding company established through the merger of Hakuhodo Inc., Daiko Advertising Inc., and Yomiko Advertising Inc. The Company, through its subsidiaries, provides comprehensive advertising services.

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

Hakuhodo Dy Holdings (2433 JP)

Adways (2489 JP) - A Dilutive Placement Before and a New Accretive Bigly Buyback

Adways announced a placement of shares earlier in November. It didn't need the money but Hakuhodo wanted to raise its stake. Now they have a buyback.

Travis Lundy

BOJ Buying to Focus on TOPIX ETFs: Big Headline, Smaller Impact

The BOJ will only buy ETFs linked to the TOPIX going forward. While this makes for a big headline, the impact on the stocks is much more muted....

Brian Freitas

A Speedy Recruit Offering (And Slower Buyback)

A Large and Speedily-Executed Secondary Offering by Recruit may test investor appetite. The reaction could be sharp in the next two days, leading...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 11/12 McDonald's, Nissan, Hikari, H'hodo

• BEST & WORST • Thursday's best and worst pairing is Mcdonald's Japan (2702 JP) and ad agency Hakuhodo (2433 JP)..................

Campbell Gunn

🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV)....

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Adways (2489 JP) - A Dilutive Placement Before and a New Accretive Bigly Buyback

Adways announced a placement of shares earlier in November. It didn't need the money but Hakuhodo wanted to raise its stake. Now they have a buyback.

Travis Lundy

BOJ Buying to Focus on TOPIX ETFs: Big Headline, Smaller Impact

The BOJ will only buy ETFs linked to the TOPIX going forward. While this makes for a big headline, the impact on the stocks is much more muted....

Brian Freitas

A Speedy Recruit Offering (And Slower Buyback)

A Large and Speedily-Executed Secondary Offering by Recruit may test investor appetite. The reaction could be sharp in the next two days, leading...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​​12 McDonald's, Nissan, Hikari, H'hodo

• BEST & WORST • Thursday's best and worst pairing is Mcdonald's Japan (2702 JP) and ad agency Hakuhodo (2433 JP)..................

Campbell Gunn

🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV)....

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 11/12 McDonald's, Nissan, Hikari, H'hodo