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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.</li>
<li>Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).</li>
<li>
<a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a> is a delete from the JPX Nikkei 400 Index but a high probability inclusion 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> at the September rebalance.</li>
</ul>


There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).

Oriental Land (4661 JP) is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the Nikkei 225 (NKY INDEX) at the September rebalance.


JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks

The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.These are the stocks that have been included and excluded from the index.<table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 181pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 197pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td>Name</td>
<td>Code</td>
<td>Name</td>
<td>Code</td>
</tr>
<tr>
<td>1766.T</td>
<td>Token Corp</td>
<td>2124.T</td>
<td>Jac Recruitment Co Ltd</td>
</tr>
<tr>
<td>2222.T</td>
<td>Kotobuki Spirits Co Ltd</td>
<td>2206.T</td>
<td>Ezaki Glico Co Ltd</td>
</tr>
<tr>
<td>2264.T</td>
<td>Morinaga Milk Industry Co Ltd</td>
<td>2432.T</td>
<td>DeNA Co Ltd</td>
</tr>
<tr>
<td>2317.T</td>
<td>Systena Corp</td>
<td>3254.T</td>
<td>Pressance Corp</td>
</tr>
<tr>
<td>2593.T</td>
<td>Ito En Ltd</td>
<td>3668.T</td>
<td>Colopl Inc</td>
</tr>
<tr>
<td>2811.T</td>
<td>Kagome Co Ltd</td>
<td>4246.T</td>
<td>DaikyoNishikawa Corp</td>
</tr>
<tr>
<td>3563.T</td>
<td>Sushiro Global Holdings Ltd</td>
<td>4587.T</td>
<td>PeptiDream Inc</td>
</tr>
<tr>
<td>3635.T</td>
<td>Koei Tecmo Holdings Co Ltd</td>
<td>4681.T</td>
<td>Resorttrust Inc</td>
</tr>
<tr>
<td>4189.T</td>
<td>KH Neochem Co Ltd</td>
<td>4751.T</td>
<td>CyberAgent Inc</td>
</tr>
<tr>
<td>4348.T</td>
<td>Infocom Corp</td>
<td>4902.T</td>
<td>Konica Minolta Inc</td>
</tr>
<tr>
<td>4527.T</td>
<td>Rohto Pharmaceutical Co Ltd</td>
<td>5486.T</td>
<td>Hitachi Metals Ltd</td>
</tr>
<tr>
<td>4686.T</td>
<td>Justsystems Corp</td>
<td>5703.T</td>
<td>Nippon Light Metal Holdings Co Ltd</td>
</tr>
<tr>
<td>4816.T</td>
<td>Toei Animation Co Ltd</td>
<td>5714.T</td>
<td>DOWA Holdings Co Ltd</td>
</tr>
<tr>
<td>4921.T</td>
<td>Fancl Corp</td>
<td>5975.T</td>
<td>Topre Corp</td>
</tr>
<tr>
<td>5105.T</td>
<td>Toyo Tire Corp</td>
<td>6269.T</td>
<td>Modec Inc</td>
</tr>
<tr>
<td>5631.T</td>
<td>Japan Steel Works Ltd</td>
<td>6324.T</td>
<td>Harmonic Drive Systems Inc</td>
</tr>
<tr>
<td>5857.T</td>
<td>Asahi Holdings Inc</td>
<td>6463.T</td>
<td>TPR Co Ltd</td>
</tr>
<tr>
<td>6005.T</td>
<td>Miura Co Ltd</td>
<td>6473.T</td>
<td>Jtekt Corp</td>
</tr>
<tr>
<td>6035.T</td>
<td>IR Japan Holdings Ltd</td>
<td>6641.T</td>
<td>Nissin Electric Co Ltd</td>
</tr>
<tr>
<td>6134.T</td>
<td>Fuji Corp (Aichi)</td>
<td>6755.T</td>
<td>Fujitsu General Ltd</td>
</tr>
<tr>
<td>6465.T</td>
<td>Hoshizaki Corp</td>
<td>6806.T</td>
<td>Hirose Electric Co Ltd</td>
</tr>
<tr>
<td>6532.T</td>
<td>BayCurrent Consulting Inc</td>
<td>7012.T</td>
<td>Kawasaki Heavy Industries Ltd</td>
</tr>
<tr>
<td>6670.T</td>
<td>MCJ Co Ltd</td>
<td>7606.T</td>
<td>United Arrows Ltd</td>
</tr>
<tr>
<td>6753.T</td>
<td>Sharp Corp</td>
<td>7867.T</td>
<td>Tomy Co Ltd</td>
</tr>
<tr>
<td>6754.T</td>
<td>Anritsu Corp</td>
<td>8227.T</td>
<td>Shimamura Co Ltd</td>
</tr>
<tr>
<td>8354.T</td>
<td>Fukuoka Financial Group Inc</td>
<td>8628.T</td>
<td>Matsui Securities Co Ltd</td>
</tr>
<tr>
<td>8572.T</td>
<td>Acom Co Ltd</td>
<td>9404.T</td>
<td>Nippon Television Holdings Inc</td>
</tr>
<tr>
<td>9044.T</td>
<td>Nankai Electric Railway Co Ltd</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9142.T</td>
<td>Kyushu Railway Co</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9504.T</td>
<td>Chugoku Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9509.T</td>
<td>Hokkaido Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9603.T</td>
<td>H.I.S. Co Ltd</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.These are the stocks that have been included and excluded from the index.








Inclusions
Exclusions


Name
Code
Name
Code


1766.T
Token Corp
2124.T
Jac Recruitment Co Ltd


2222.T
Kotobuki Spirits Co Ltd
2206.T
Ezaki Glico Co Ltd


2264.T
Morinaga Milk Industry Co Ltd
2432.T
DeNA Co Ltd


2317.T
Systena Corp
3254.T
Pressance Corp


2593.T
Ito En Ltd
3668.T
Colopl Inc


2811.T
Kagome Co Ltd
4246.T
DaikyoNishikawa Corp


3563.T
Sushiro Global Holdings Ltd
4587.T
PeptiDream Inc


3635.T
Koei Tecmo Holdings Co Ltd
4681.T
Resorttrust Inc


4189.T
KH Neochem Co Ltd
4751.T
CyberAgent Inc


4348.T
Infocom Corp
4902.T
Konica Minolta Inc


4527.T
Rohto Pharmaceutical Co Ltd
5486.T
Hitachi Metals Ltd


4686.T
Justsystems Corp
5703.T
Nippon Light Metal Holdings Co Ltd


4816.T
Toei Animation Co Ltd
5714.T
DOWA Holdings Co Ltd


4921.T
Fancl Corp
5975.T
Topre Corp


5105.T
Toyo Tire Corp
6269.T
Modec Inc


5631.T
Japan Steel Works Ltd
6324.T
Harmonic Drive Systems Inc


5857.T
Asahi Holdings Inc
6463.T
TPR Co Ltd


6005.T
Miura Co Ltd
6473.T
Jtekt Corp


6035.T
IR Japan Holdings Ltd
6641.T
Nissin Electric Co Ltd


6134.T
Fuji Corp (Aichi)
6755.T
Fujitsu General Ltd


6465.T
Hoshizaki Corp
6806.T
Hirose Electric Co Ltd


6532.T
BayCurrent Consulting Inc
7012.T
Kawasaki Heavy Industries Ltd


6670.T
MCJ Co Ltd
7606.T
United Arrows Ltd


6753.T
Sharp Corp
7867.T
Tomy Co Ltd


6754.T
Anritsu Corp
8227.T
Shimamura Co Ltd


8354.T
Fukuoka Financial Group Inc
8628.T
Matsui Securities Co Ltd


8572.T
Acom Co Ltd
9404.T
Nippon Television Holdings Inc


9044.T
Nankai Electric Railway Co Ltd




9142.T
Kyushu Railway Co




9504.T
Chugoku Electric Power Co Inc




9509.T
Hokkaido Electric Power Co Inc




9603.T
H.I.S. Co Ltd






JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

Today after the close it was <a href="https://www.globenewswire.com/news-release/2020/10/06/2103999/0/en/Danone-intends-to-sell-its-stake-in-Yakult.html" target="_blank" rel="noopener">announced</a> that <a href="https://www.smartkarma.com/entities/danone-sa" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> - currently the largest shareholder in <a href="https://www.smartkarma.com/entities/yakult-honsha-co-ltd" target="_blank" data-smartkarma-citation="entities:17153:1" rel="noopener">Yakult Honsha (2267 JP)</a> - intended to sell down the last of its stake after a 20-year run.The press release notes "Danone's collaboration with Yakult began in 2004."That's saying it nicely. Danone bought 5% in 2000 then bought up to 20% in the market in 2003 in an effort to get Yakult to collaborate. It was not done with Yakult's permission, but it got their attention.<div>
Yakult and Danone signed an Alliance Agreement in March 2004. That agreement was renewed in 2008 so the agreement would stay in place until 2012. In 2012, negotiations on the future alliance were extended and extended and finally, in late April 2013 - after a year-plus of jawboning and speculation of a hostile bid, occasionally dampened by public promises to the contrary by Danone executives - the two companies decided they could not, in the end, agree, and they cancelled their Strategic Alliance and signed a Memorandum of Understanding on a Collaborative Relationship.
The lack of hostile action by Danone may have been the result of the fact that Yakult-friendly Japanese corporate investors bought shares in the meantime, lifting the share price by 60-70% in a year and lifting the friendly ownership to over 50%, making hostile action essentially futile. 
</div><div>
That relationship basically stood as a standstill agreement with 3 Danone appointees named to the Yakult board, and ongoing JV operation in their 50/50 Vietnam and 80/20 (Yakult/Danone) Joint Ventures and ongoing 'collaboration' in the probiotics business. Since the big buy in 2003, including dividends, Danone was up 500% on its investment as of February 2018 when it decided to sell down a very large stake after activist Corvex Management had taken on Danone and urged it to reduce capital assets which didn't provide much. At the time, Yakult traded at 20x EV/EBITDA and 36x PER. 
<h2>The NEW News</h2>
Danone is bailing on the rest of the stake while the existing commercial partnerships, "including joint-ventures in India and Vietnam remain in place" (according to the <a href="https://ml-eu.globenewswire.com/Resource/Download/768c55f8-a7c0-4ba7-b4e8-9f01bf4bef68" target="_blank" rel="noopener">announcement</a>).
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/665/original/Screenshot%202020-10-06%20at%204.58.37%20PM.png?1601974734" class="editor-image img-responsive" data-smartkarma-image-id="163665"></figure>
The weekly chart shows they did not catch the top last time (14 Feb 2018 announcement when the stock was ¥7940/share), but they enjoyed a nice run-up from a year prior. At the time, both TOPIX and TOPIX FOOD Sector indices had taken a sharp drop.
After the announcement the last time, the shares fell 6.8% on the next day. That time was a Public Offering which required a book building phase and then delivery saw a couple of weeks of large volume. The shares traded in line with market and sector before falling in April and May 2018. Since then, the shares have largely underperformed both TOPIX and the sector.
This deal is an Accelerated Block Offering. It makes things more interesting. Valuations are different than last time and the shareholder structure is different too. 
Much more below the fold.
</div>

Today after the close it was announced that Danone SA (BN FP) - currently the largest shareholder in Yakult Honsha (2267 JP) - intended to sell down the last of its stake after a 20-year run.The press release notes "Danone's collaboration with Yakult began in 2004."That's saying it nicely. Danone bought 5% in 2000 then bought up to 20% in the market in 2003 in an effort to get Yakult to collaborate. It was not done with Yakult's permission, but it got their attention.
Yakult and Danone signed an Alliance Agreement in March 2004. That agreement was renewed in 2008 so the agreement would stay in place until 2012. In 2012, negotiations on the future alliance were extended and extended and finally, in late April 2013 - after a year-plus of jawboning and speculation of a hostile bid, occasionally dampened by public promises to the contrary by Danone executives - the two companies decided they could not, in the end, agree, and they cancelled their Strategic Alliance and signed a Memorandum of Understanding on a Collaborative Relationship.
The lack of hostile action by Danone may have been the result of the fact that Yakult-friendly Japanese corporate investors bought shares in the meantime, lifting the share price by 60-70% in a year and lifting the friendly ownership to over 50%, making hostile action essentially futile. 

That relationship basically stood as a standstill agreement with 3 Danone appointees named to the Yakult board, and ongoing JV operation in their 50/50 Vietnam and 80/20 (Yakult/Danone) Joint Ventures and ongoing 'collaboration' in the probiotics business. Since the big buy in 2003, including dividends, Danone was up 500% on its investment as of February 2018 when it decided to sell down a very large stake after activist Corvex Management had taken on Danone and urged it to reduce capital assets which didn't provide much. At the time, Yakult traded at 20x EV/EBITDA and 36x PER. 
The NEW News
Danone is bailing on the rest of the stake while the existing commercial partnerships, "including joint-ventures in India and Vietnam remain in place" (according to the announcement).

The weekly chart shows they did not catch the top last time (14 Feb 2018 announcement when the stock was ¥7940/share), but they enjoyed a nice run-up from a year prior. At the time, both TOPIX and TOPIX FOOD Sector indices had taken a sharp drop.
After the announcement the last time, the shares fell 6.8% on the next day. That time was a Public Offering which required a book building phase and then delivery saw a couple of weeks of large volume. The shares traded in line with market and sector before falling in April and May 2018. Since then, the shares have largely underperformed both TOPIX and the sector.
This deal is an Accelerated Block Offering. It makes things more interesting. Valuations are different than last time and the shareholder structure is different too. 
Much more below the fold.


Danone Sells The Last of Their Yakult - Buy the Cleanup

'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/485/original/2020-09-01_16-17-11.png?1598992358" class="editor-image img-responsive" data-smartkarma-image-id="156485"></figure>
<div class="content-caption">Source for all charts: Japan Analytics</div>
DAILY RESULTS &amp; REVISIONS REVIEW - We resume our series of daily Insights reviewing the results and revisions released by Japanese companies in the last 24 hours. Our purpose is to provide brief commentary on notable changes in trends in earnings for individual companies as well as offering an early warning system on any sector and peer group trends. Where relevant, we shall also comment on valuation and relative price outliers using our proprietary models. Our coverage covers all listed companies until the number of reporting companies precludes it. Since our last 'R&amp;R' Insight covering 14th August, both our aggregate Results Score and Revision Score have continued to set new lows, the latter driven mostly by interim revisions. The companies currently reporting are mainly those with January, April, July, and October year-ends. Accordingly, the results reflect the period of greatest COVID-19 economic dislocation.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/486/original/2020-09-01_18-43-01.png?1598993171" class="editor-image img-responsive" data-smartkarma-image-id="156486"></figure>
SECTOR TIMELINES - The significant Sector changes since our last Insight have been declines in the Commercial Services<a href="https://www.smartkarma.com/entities/funai-soken-holdings-inc" target="_blank" data-smartkarma-citation="entities:4622:1" rel="noopener">Funai Soken (9757 JP)</a> and <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit (6098 JP)</a>) and Other Commercial Products (<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>) Sectors.  Only three Sectors -  Internet, Information Technology, and Non-Bank Finance have positive Scores. The Energy Sector has the strongest positive earnings momentum, while Transportation &amp; Logistics has the worst negative trend.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/487/original/2020-09-02_06-40-13.png?1598996429" class="editor-image img-responsive" data-smartkarma-image-id="156487"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/489/original/2020-09-02_06-41-01.png?1598996496" class="editor-image img-responsive" data-smartkarma-image-id="156489"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/490/original/2020-09-02_06-42-02.png?1598996538" class="editor-image img-responsive" data-smartkarma-image-id="156490"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/491/original/2020-09-02_06-44-36.png?1598996694" class="editor-image img-responsive" data-smartkarma-image-id="156491"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/492/original/2020-09-02_06-46-39.png?1598996814" class="editor-image img-responsive" data-smartkarma-image-id="156492"></figure>

DAILY STATS - With only nine announcements, our statistics section is brief. All four results scored negatively with an average Results Score of -6.0. The average year-on-year quarterly revenue change was -12%, and OPM declined by 2.7 percentage points. Only one of the five revisions scored positively - the average Forecast/Revision Score was -15.6.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/493/original/2020-09-01_16-10-30.png?1598997263" class="editor-image img-responsive" data-smartkarma-image-id="156493"></figure>
MEANWHILE - The Bank of Japan appears content with current market levels and has only intervened once in the last twenty trading sessions and for 20% less than the previous sixteen occasions.


Source for all charts: Japan Analytics
DAILY RESULTS &amp; REVISIONS REVIEW - We resume our series of daily Insights reviewing the results and revisions released by Japanese companies in the last 24 hours. Our purpose is to provide brief commentary on notable changes in trends in earnings for individual companies as well as offering an early warning system on any sector and peer group trends. Where relevant, we shall also comment on valuation and relative price outliers using our proprietary models. Our coverage covers all listed companies until the number of reporting companies precludes it. Since our last 'R&amp;R' Insight covering 14th August, both our aggregate Results Score and Revision Score have continued to set new lows, the latter driven mostly by interim revisions. The companies currently reporting are mainly those with January, April, July, and October year-ends. Accordingly, the results reflect the period of greatest COVID-19 economic dislocation.

SECTOR TIMELINES - The significant Sector changes since our last Insight have been declines in the Commercial ServicesFunai Soken (9757 JP) and Recruit (6098 JP)) and Other Commercial Products (Toppan Printing (7911 JP)) Sectors.  Only three Sectors -  Internet, Information Technology, and Non-Bank Finance have positive Scores. The Energy Sector has the strongest positive earnings momentum, while Transportation &amp; Logistics has the worst negative trend.






DAILY STATS - With only nine announcements, our statistics section is brief. All four results scored negatively with an average Results Score of -6.0. The average year-on-year quarterly revenue change was -12%, and OPM declined by 2.7 percentage points. Only one of the five revisions scored positively - the average Forecast/Revision Score was -15.6.

MEANWHILE - The Bank of Japan appears content with current market levels and has only intervened once in the last twenty trading sessions and for 20% less than the previous sixteen occasions. 

🇯🇵 JAPAN • Results & Revisions 09/01 - Ito En, Ain, Ride On Express

Ito En Ltd Preferred Shares / Event-Driven

This is always a hard thing to write about. But every now and then I throw myself on the mercy of the ho-humming crowd and write about the <a href="https://www.smartkarma.com/entities/ito-en-ltd-preferred-shares" target="_blank" data-smartkarma-citation="entities:24022:1" rel="noopener">Ito En Ltd Preferred Shares (25935 JP)</a>. Why now?There is no catalyst. There is no expectation terms will improve. I have no expectation that the company will buy back the Pref Shares in inordinate quantities because it is trading very cheap to the common shares. I do not expect Itoen to merge the commons with the prefs. But if you think that it is possible that the Itoen Prefs might get to a 50% discount to the common shares sometime in the next five years, this is probably a good replacement trade, albeit very illiquid. The issuance of these prefs was a disaster of governance. The fact they exist 13 years later is a disaster of governance. Seasoned Japan capital structure and relative value investors will look at the headline and ticker and might dismiss this insight out of hand. After all, the discount always widens.<div>
I will agree this has been an unfortunate outcome for shareholders of the common who received the prefs and did not bail immediately. And I am always reluctant to say "this time it is different."
Some will say "But why would I buy this at a 67% discount when I could have bought Softbank at a 60% discount to its parts?"  
My first answer will be, "I'm glad you made money following our recommendation in <a href="https://www.smartkarma.com/insights/softbank-starts-on-its-4-5trln-capital-plan-a-model-for-bullishness" target="_blank" rel="noopener">Softbank Starts on Its ¥4.5trln Capital Plan - A Model for Bullishness</a>.
</div>My second will be, "It's not at a 60+ discount any more, is it?"<div>Over the medium-long-term, it is strange that the company has not allocated its excess capital to buying back the prefs. It is accretive to everyone. </div><div>Much more below.</div>

This is always a hard thing to write about. But every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Ltd Preferred Shares (25935 JP). Why now?There is no catalyst. There is no expectation terms will improve. I have no expectation that the company will buy back the Pref Shares in inordinate quantities because it is trading very cheap to the common shares. I do not expect Itoen to merge the commons with the prefs. But if you think that it is possible that the Itoen Prefs might get to a 50% discount to the common shares sometime in the next five years, this is probably a good replacement trade, albeit very illiquid. The issuance of these prefs was a disaster of governance. The fact they exist 13 years later is a disaster of governance. Seasoned Japan capital structure and relative value investors will look at the headline and ticker and might dismiss this insight out of hand. After all, the discount always widens.
I will agree this has been an unfortunate outcome for shareholders of the common who received the prefs and did not bail immediately. And I am always reluctant to say "this time it is different."
Some will say "But why would I buy this at a 67% discount when I could have bought Softbank at a 60% discount to its parts?"  
My first answer will be, "I'm glad you made money following our recommendation in Softbank Starts on Its ¥4.5trln Capital Plan - A Model for Bullishness.
My second will be, "It's not at a 60+ discount any more, is it?"Over the medium-long-term, it is strange that the company has not allocated its excess capital to buying back the prefs. It is accretive to everyone. Much more below.

Itoen Pref (25935 JP) - Bigger Discount, Ongoing Governance Disappointment

Japan

ITO EN, LTD. produces various types of Japanese tea and canned beverages.

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Ito En Ltd (2593 JP)

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