Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Tokyo Electric Power (TEPCO) / Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power (TEPCO) (9501 JP)</a> trade is to short or long-sell into exuberance. Shorts should wait until the pump exhausts itself (or appears to).</li>
<li>At 0.34x forward P/B, <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (19 HK)</a> is cheap. <a href="https://www.smartkarma.com/entities/swire-properties-ltd" target="_blank" data-smartkarma-citation="entities:5775:1" rel="noopener">Swire Properties (1972 HK)</a> at 0.33x is also inexpensive. But HK IP drags. Ger exposure to the stub.</li>
<li>Elliott sees <a href="https://www.smartkarma.com/entities/mitsui-o-s-k-lines-ltd" target="_blank" data-smartkarma-citation="entities:20717:1" rel="noopener">Mitsui O.S.K. Lines (9104 JP)</a> as undervalued. Best to be long than short on an outright basis, but there is not a lot of detail out there yet.</li>
</ul>


The Tokyo Electric Power (TEPCO) (9501 JP) trade is to short or long-sell into exuberance. Shorts should wait until the pump exhausts itself (or appears to).
At 0.34x forward P/B, Swire Pacific (19 HK) is cheap. Swire Properties (1972 HK) at 0.33x is also inexpensive. But HK IP drags. Ger exposure to the stub.
Elliott sees Mitsui O.S.K. Lines (9104 JP) as undervalued. Best to be long than short on an outright basis, but there is not a lot of detail out there yet.


Last Week In Event SPACE: TEPCO, Swire, Mitsui O.S.K. Lines. CK Hutchison

<ul>
<li>I tally 33 - mostly firm, mostly Asia-Pac - arb transactions currently being discussed and analysed on Smartkarma. Those arbs metrics and upcoming events are detailed below.</li>
<li>No new deals were discussed on Smartkarma this week; however <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power (TEPCO) (9501 JP)</a> is possibly in the crosshairs. </li>
<li>Key updates/news also took place on: <a href="https://www.smartkarma.com/entities/pepper-money-ltd-australia" target="_blank" data-smartkarma-citation="entities:24157:1" rel="noopener">Pepper Money (PPM AU)</a>, <a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a>, <a href="https://www.smartkarma.com/entities/mcj-co-ltd" target="_blank" data-smartkarma-citation="entities:14132:1" rel="noopener">MCJ Co Ltd (6670 JP)</a>, <a href="https://www.smartkarma.com/entities/rohm-co-ltd" target="_blank" data-smartkarma-citation="entities:2953:1" rel="noopener">ROHM Co Ltd (6963 JP)</a>, and <a href="https://www.smartkarma.com/entities/ijm-corp-bhd" target="_blank" data-smartkarma-citation="entities:16784:1" rel="noopener">Ijm Corp Bhd (IJM MK)</a>.</li>
</ul>


I tally 33 - mostly firm, mostly Asia-Pac - arb transactions currently being discussed and analysed on Smartkarma. Those arbs metrics and upcoming events are detailed below.
No new deals were discussed on Smartkarma this week; however Tokyo Electric Power (TEPCO) (9501 JP) is possibly in the crosshairs. 
Key updates/news also took place on: Pepper Money (PPM AU), Toyota Industries (6201 JP), MCJ Co Ltd (6670 JP), ROHM Co Ltd (6963 JP), and Ijm Corp Bhd (IJM MK).


Asia-Pac M&A Weekly Wrap: Pepper Money, Toyota Industries, MCJ Co, ROHM Co, IJM Corp

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian dollar was trading below fair value. &nbsp;After what had been a strong period of out-performance from US dollar earners, I concluded that without the tailwind of A$ over-valuation - which prevailed through most of 2014 - their returns in the near term would be capped. In this post, I show that recent currency appreciation has eliminated the modest under-valuation and been associated with under-performance from US$ earners. The basket is trading on a median 12 mth forward PE of 20x, which represents a 25% premium to the median estimate for the ASX100, slightly higher than historical norms. The premium reflects the fact that offshore earners have strong growth expectations and low betas, thanks to their defensive business models. I highlight that the stocks suffering from the highest level of analyst bearishness remain Cochlear, Treasury Wine Estates and Westfield, which each attract less than 20% of buy recommendations from analysts.&nbsp;

Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian dollar was trading below fair value. &nbsp;After what had been a strong period of out-performance from US dollar earners, I concluded that without the tailwind of A$ over-valuation - which prevailed through most of 2014 - their returns in the near term would be capped. In this post, I show that recent currency appreciation has eliminated the modest under-valuation and been associated with under-performance from US$ earners. The basket is trading on a median 12 mth forward PE of 20x, which represents a 25% premium to the median estimate for the ASX100, slightly higher than historical norms. The premium reflects the fact that offshore earners have strong growth expectations and low betas, thanks to their defensive business models. I highlight that the stocks suffering from the highest level of analyst bearishness remain Cochlear, Treasury Wine Estates and Westfield, which each attract less than 20% of buy recommendations from analysts.&nbsp;

A new narrative for the Australian dollar (update)

In a wide ranging speech delivered overnight in New York,&nbsp;Glenn Stevens, provided more colour on his prior communications in which he has bemoaned the low level of entrepreneurial risk taking across Australia's corporate sector and implored businesses to invest for future growth prospects.&nbsp; Mr Stevens has acknowledged that lower returns on safe assets have not&nbsp;pulled down the cost of capital because there has been an offsetting rise in the equity risk premium.&nbsp;&nbsp; The risk free rate is low due to factors that are restraining corporate investment: low expected earnings growth and a high expected risk premium.&nbsp; I show that the lower risk free rate and lift in the risk premium have contributed to the relative rise in multiples of defensive stocks, and expect their lofty valuations to persist as long as animal spirits remain dormant.

In a wide ranging speech delivered overnight in New York,&nbsp;Glenn Stevens, provided more colour on his prior communications in which he has bemoaned the low level of entrepreneurial risk taking across Australia's corporate sector and implored businesses to invest for future growth prospects.&nbsp; Mr Stevens has acknowledged that lower returns on safe assets have not&nbsp;pulled down the cost of capital because there has been an offsetting rise in the equity risk premium.&nbsp;&nbsp; The risk free rate is low due to factors that are restraining corporate investment: low expected earnings growth and a high expected risk premium.&nbsp; I show that the lower risk free rate and lift in the risk premium have contributed to the relative rise in multiples of defensive stocks, and expect their lofty valuations to persist as long as animal spirits remain dormant.

The market is firmly expecting another rate cut from the RBA at today&rsquo;s Board meeting. The domestic data flow has not delivered any large negative surprises, but the key swing factor over the past month appears to have been the 25% slide in the iron ore price, reflecting lower steel demand associated with renewed weakness in Chinese housing markets but also a lift in expected future iron ore production. Importantly, short-term gyrations in volatile commodity markets are unlikely to sway the RBA, nor does the the slide in the iron ore price provide a positive narrative to ease monetary policy. The RBA has plenty of scope to cut interest rates: the economy remains stuck in a nominal recession, revenue conditions are subdued, there is still considerable slack in the labour market, growth in private sector wages has reached a record low and the inflation outlook does not pose an obstacle to another rate cut.&nbsp;&nbsp; But the central bank will likely wait for another month.

The market is firmly expecting another rate cut from the RBA at today&rsquo;s Board meeting. The domestic data flow has not delivered any large negative surprises, but the key swing factor over the past month appears to have been the 25% slide in the iron ore price, reflecting lower steel demand associated with renewed weakness in Chinese housing markets but also a lift in expected future iron ore production. Importantly, short-term gyrations in volatile commodity markets are unlikely to sway the RBA, nor does the the slide in the iron ore price provide a positive narrative to ease monetary policy. The RBA has plenty of scope to cut interest rates: the economy remains stuck in a nominal recession, revenue conditions are subdued, there is still considerable slack in the labour market, growth in private sector wages has reached a record low and the inflation outlook does not pose an obstacle to another rate cut.&nbsp;&nbsp; But the central bank will likely wait for another month.

Another line ball decision for the RBA, but expect no change in April

Australia

Humm Group Limited provides consumer finance solutions. This Company offers product ecosystem of buy now pay later, credit cards, and business financing. Humm Group serves shoppers, retailers, and small and medium enterprises in Australia, New Zealand, and Ireland.

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Humm Group (HUM AU)

Last Week In Event SPACE: TEPCO, Swire, Mitsui O.S.K. Lines. CK Hutchison

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Asia-Pac M&A Weekly Wrap: Pepper Money, Toyota Industries, MCJ Co, ROHM Co, IJM Corp

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

A new narrative for the Australian dollar (update)

Two months ago, Evidente published a report which suggested that contrary to the RBA's view that the currency remained over-valued, the Australian...

Sam Ferraro

Beware of bubble talk, for now

In a wide ranging speech delivered overnight in New York, Glenn Stevens, provided more colour on his prior communications in which he has bemoaned...

Sam Ferraro

Another line ball decision for the RBA, but expect no change in April

The market is firmly expecting another rate cut from the RBA at today’s Board meeting. The domestic data flow has not delivered any large negative...

Sam Ferraro

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