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.

Event-Driven

<ul>
<li>Murakami's entity, City Index Eleventh, and daughter <a href="https://disclosure2dl.edinet-fsa.go.jp/searchdocument/pdf/S100U45I.pdf?sv=2020-08-04&amp;st=2024-07-29T08%3A22%3A26Z&amp;se=2029-07-30T15%3A00%3A00Z&amp;sr=b&amp;sp=rl&amp;sig=X40vp7lhAgBEyEZOwezOlfvKZ1e%2FyjZkQLMnZs1gx%2FI%3D" target="_blank" rel="noopener">reported</a> a 5.05% position in <a href="https://www.smartkarma.com/entities/heiwa-real-estate-co-ltd" target="_blank" data-smartkarma-citation="entities:749:1" rel="noopener">Heiwa Real Estate (8803 JP)</a>. The shares were purchased from 24 May to 22 July.</li>
<li>Murakami's average buy-in price is JPY3,907.38, a 6.7% discount to the last close price. Recently, Simplex (the previous largest shareholder) sold its entire stake to <a href="https://www.smartkarma.com/entities/taisei-co-ltd-aichi" target="_blank" data-smartkarma-citation="entities:3079:1" rel="noopener">Taisei Co Ltd (4649 JP)</a>.</li>
<li>Murakami's disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. Recent precedents indicate the latter.</li>
</ul>


Murakami's entity, City Index Eleventh, and daughter reported a 5.05% position in Heiwa Real Estate (8803 JP). The shares were purchased from 24 May to 22 July.
Murakami's average buy-in price is JPY3,907.38, a 6.7% discount to the last close price. Recently, Simplex (the previous largest shareholder) sold its entire stake to Taisei Co Ltd (4649 JP).
Murakami's disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. Recent precedents indicate the latter.


Heiwa Real Estate (8803 JP): Murakami Becomes a Substantial Shareholder

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

The Nikkei Asia <a href="https://asia.nikkei.com/Business/Business-deals/1bn-bid-for-Tokyo-Dome-planned-by-developer-Mitsui-Fudosan" target="_blank" rel="noopener">reported</a> this morning (Japanese article link <a href="https://www.nikkei.com/article/DGXMZO66704090X21C20A1MM8000" target="_blank" rel="noopener">here</a>) that <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> intended to partner with someone to launch a Tender Offer to take private <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>, spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at <a href="https://www.abettertokyodome.com/" target="_blank" rel="noopener">abettertokyodome.com</a>. There main presentation is linked <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">here</a>. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis <a href="https://www.businesswire.com/news/home/20201111005501/en/Oasis-Key-Messages-for-Tokyo-Dome-Shareholders-Regarding-the-EGM-on-December-17-2020" target="_blank" rel="noopener">responded</a> the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/563/original/Screenshot%202020-11-27%20at%2010.27.27%20AM.png?1606444069" class="editor-image img-responsive" data-smartkarma-image-id="174563"></figure></section>As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (<a href="https://www.mitsuifudosan.co.jp/corporate/ir/library/news/2020/pdf/news_201127.pdf" target="_blank" rel="noopener">Mitsui Fudosan</a>, <a href="https://contents.xj-storage.jp/xcontents/AS01950/1667e514/ffcc/4644/b6a6/6313ea0899ad/140120201127428865.pdf" target="_blank" rel="noopener">Tokyo Dome</a>) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate <a href="https://www.smartkarma.com/entities/yomiuri-land-co-ltd" target="_blank" data-smartkarma-citation="entities:12813:1" rel="noopener">Yomiuri Land (9671 JP)</a> private as discussed in <a href="https://www.smartkarma.com/insights/yomiuri-land-9671-takeover-probably-the-wrong-price-but-whaddya-gonna-do" target="_blank" data-smartkarma-citation="insights:45025" rel="noopener">Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?</a>. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a> shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

The Nikkei Asia reported this morning (Japanese article link here) that Mitsui Fudosan (8801 JP) intended to partner with someone to launch a Tender Offer to take private Tokyo Dome Corp (9681 JP), spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at abettertokyodome.com. There main presentation is linked here. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis responded the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (Mitsui Fudosan, Tokyo Dome) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate Yomiuri Land (9671 JP) private as discussed in Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of Japan Needs More Cowbell shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

David Blennerhassett

This week's two-part Holdco overview is chock-full of charts, covering the performance of all 566 stubs in my stub monitor, across all countries, and liquidity baskets, in the midst of the recent correction in markets.
This insight covers Japan and Korea.
The results, as always, are interesting, with some baskets clearly outperforming others. If you take the view that more liquid parents vis-à-vis less liquid subs will either underperform or outperform during these unprecedented times, the answer is not always clear cut, from one country to the next. 
As always, there is more below the fold.

This week's two-part Holdco overview is chock-full of charts, covering the performance of all 566 stubs in my stub monitor, across all countries, and liquidity baskets, in the midst of the recent correction in markets.
This insight covers Japan and Korea.
The results, as always, are interesting, with some baskets clearly outperforming others. If you take the view that more liquid parents vis-à-vis less liquid subs will either underperform or outperform during these unprecedented times, the answer is not always clear cut, from one country to the next. 
As always, there is more below the fold.

Holdcos: Charts Amongst The Carnage. Part 1. Japan & Korea

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

We are Initiating Coverage of Mitsubishi Estate Corporation.Since the group’s first land acquisition in 1894, its increased business scale and its invaluable core-member status in the Mitsubishi group (the largest zaibatsu group in Japan, backed by the largest banking group in Japan) have allowed Mitsubishi Estate to embark on large projects ahead of its peers...Analysts: Philip Zhong &amp; Michael Wu, CAIA

We are Initiating Coverage of Mitsubishi Estate Corporation.Since the group’s first land acquisition in 1894, its increased business scale and its invaluable core-member status in the Mitsubishi group (the largest zaibatsu group in Japan, backed by the largest banking group in Japan) have allowed Mitsubishi Estate to embark on large projects ahead of its peers...Analysts: Philip Zhong &amp; Michael Wu, CAIA

The Critical Mass of Marunouchi Properties Offers Near-Term Positives but Long-Term Concerns.

After the close today, the Nikkei newspaper revealed the results of the annual review of the various 'traditional' Nikkei indices/averages, including for the Nikkei 225 Average.The results are published&nbsp;<a href="http://indexes.nikkei.co.jp/en/nkave/archives/news/20150904E_1.pdf" target="_blank">here</a>&nbsp;on the Nikkei website.In the Nikkei 225, the additions are DeNA (2432 JP) and Haseko Corporation (1808 JP). The deletions are Heiwa Real Estate (8803 JP) and Nitto Boseki (3110 JP).How much impact Nikkei inclusions and exclusions have is often difficult to know because the&nbsp;Nikkei 225 Average is a price-weighted index, not market-cap or float-cap-weighted.Here I make a quick stab at the numbers. The short and sweet is that based on outstanding ETFs and open-ended mutual funds in Japan (there is almost no pension money in Nikkei 225 so little money in non-listed funds), these funds should hold 17,651 Nikkei baskets worth of stock (or 17.651mm shares of each 50-yen par value stock). I expect the cash&amp;carry position is north of 4 trillion yen.&nbsp;&nbsp;The impact on the EXclusions should be bigger than for the INclusions in this situation but in the grand scheme of things, it is not a huge trade. Probably something like US$180mm to buy on the two inclusion names and it likely will end up being &lt;US$150mm to sell on the close for the two deletion names.More for subscribers&nbsp;below the fold...

After the close today, the Nikkei newspaper revealed the results of the annual review of the various 'traditional' Nikkei indices/averages, including for the Nikkei 225 Average.The results are published&nbsp;here&nbsp;on the Nikkei website.In the Nikkei 225, the additions are DeNA (2432 JP) and Haseko Corporation (1808 JP). The deletions are Heiwa Real Estate (8803 JP) and Nitto Boseki (3110 JP).How much impact Nikkei inclusions and exclusions have is often difficult to know because the&nbsp;Nikkei 225 Average is a price-weighted index, not market-cap or float-cap-weighted.Here I make a quick stab at the numbers. The short and sweet is that based on outstanding ETFs and open-ended mutual funds in Japan (there is almost no pension money in Nikkei 225 so little money in non-listed funds), these funds should hold 17,651 Nikkei baskets worth of stock (or 17.651mm shares of each 50-yen par value stock). I expect the cash&amp;carry position is north of 4 trillion yen.&nbsp;&nbsp;The impact on the EXclusions should be bigger than for the INclusions in this situation but in the grand scheme of things, it is not a huge trade. Probably something like US$180mm to buy on the two inclusion names and it likely will end up being &lt;US$150mm to sell on the close for the two deletion names.More for subscribers&nbsp;below the fold...

Japan

HEIWA REAL ESTATE CO., LTD. develops, constructs, sells, and leases real estate properties.  The Company also provides brokerage services on residential and commercial buildings as well as maintenance services.  Heiwa Real Estate provides consulting services on real estate and develops and operates resort places and facilities.

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Heiwa Real Estate (8803 JP)