Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Yesterday after the close, well-known Japanese activist Murakami-san's preferred entity City Index Eleventh filed a Large Shareholder Report. </li>
<li>The blast across Bloomberg was "<strong>*AOZORA 5.4% STAKE REPORTED BY CITY INDEX ELEVENTH.</strong>" Sounds exciting after the shares dropped 34% in two days earlier this month after reporting big writedowns. </li>
<li>But there has to be a question here. Why? And Why this way? And what kind of activism would be possible? </li>
</ul>


Yesterday after the close, well-known Japanese activist Murakami-san's preferred entity City Index Eleventh filed a Large Shareholder Report. 
The blast across Bloomberg was "*AOZORA 5.4% STAKE REPORTED BY CITY INDEX ELEVENTH." Sounds exciting after the shares dropped 34% in two days earlier this month after reporting big writedowns. 
But there has to be a question here. Why? And Why this way? And what kind of activism would be possible? 


JAPAN ACTIVISM:  Is Murakami-San Going To Do A PacMetals Rug Pull on Aozora? Or Is This For Real?

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Index Rebalance

<ul>
<li>JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.</li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.</li>
<li>Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-December 2023.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-December 2023.


Quiddity JPX-Nikkei 400 Rebal 2024: End-Dec 2023

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>
<a href="https://www.smartkarma.com/entities/celsys-inc" target="_blank" data-smartkarma-citation="entities:20774:1" rel="noopener">CELSYS (3663 JP)</a> (formerly known as "Artspark") is a name we have been Bullish on in the last few months as it was a high-probability TOPIX Inclusion candidate.</li>
<li>In the last couple of trading days, the stock has popped more than 30%. In this insight, we take a closer look at this situation.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.

CELSYS (3663 JP) (formerly known as "Artspark") is a name we have been Bullish on in the last few months as it was a high-probability TOPIX Inclusion candidate.
In the last couple of trading days, the stock has popped more than 30%. In this insight, we take a closer look at this situation.


TOPIX Inclusions: Who Is Ready (May 2023)

Japan Petroleum Exploration / Event-Driven

<ul>
<li>Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.</li>
<li>The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.</li>
<li>In this insight I look at several possible rankings for potential large buyback targets.</li>
</ul>


Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.
The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.
In this insight I look at several possible rankings for potential large buyback targets.


JAPAN GOVERNANCE CHANGES II - Who Could Surprise on Buybacks? Quant Rankings

<ul>
<li>Two weeks ago, <a href="https://www.smartkarma.com/entities/toyo-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:1176:1" rel="noopener">Toyo Construction (1890 JP)</a> released a new Mid-Term Management Plan with a new investment plan, and a new capital plan (100% payout, ¥50/share minimum div til Mar-2026).</li>
<li>Obvious goal: get the stock above ¥1,000/share so YFO's ¥1,000 bid looks unattractive. Then they attacked on a FEFTA basis, saying YFO's foreign entities need permission to go over 10%.</li>
<li>Now Toyo has released a March 2024 forecast, with a ¥63/share dividend and 105% guided payout. The stock popped. LOTS of shares trading. Now only up small. </li>
</ul>


Two weeks ago, Toyo Construction (1890 JP) released a new Mid-Term Management Plan with a new investment plan, and a new capital plan (100% payout, ¥50/share minimum div til Mar-2026).
Obvious goal: get the stock above ¥1,000/share so YFO's ¥1,000 bid looks unattractive. Then they attacked on a FEFTA basis, saying YFO's foreign entities need permission to go over 10%.
Now Toyo has released a March 2024 forecast, with a ¥63/share dividend and 105% guided payout. The stock popped. LOTS of shares trading. Now only up small. 


Toyo Construction FY23 Profit Forecast - 105% Payout = 6.5%, Lots of Shares Changing Hands

Japan

JAFCO Co., Ltd. forms venture capital groups to invest primarily in domestic and foreign private companies with high potential for future growth.  The Company also provides management services to the groups, makes loans and offers consultation services to the invested companies.

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Jafco Co Ltd (8595 JP)

JAPAN ACTIVISM: Is Murakami-San Going To Do A PacMetals Rug Pull on Aozora? Or Is This For Real?

Murakami-san's daughter bought 5.4% of Aozora Bank. It could be activism or it could be another pump'n'dump like Pacific Metals. It is tough to...

Travis Lundy

Quiddity JPX-Nikkei 400 Rebal 2024: End-Dec 2023

In the last 12 months, the current medium conviction DELs basket has seen its price rise sharply while its forward EPS expectations have declined....

Janaghan Jeyakumar, CFA

TOPIX Inclusions: Who Is Ready (May 2023)

CELSYS has been working for a move to the Prime Market since August 2022 and with the recent rise in share price they could be able to satisfy all...

Janaghan Jeyakumar, CFA

JAPAN GOVERNANCE CHANGES II - Who Could Surprise on Buybacks? Quant Rankings

JAPAN GOVERNANCE: There is a buyback story coming. It will be big. Bigger than the past year or two, and it will continue. What to buy?

Travis Lundy

Toyo Construction FY23 Profit Forecast - 105% Payout = 6.5%, Lots of Shares Changing Hands

In Japan one doesn't usually officially announce the next FY's earnings + dividend forecast before the just-ended year is finalised. Toyo did. ¥63...

Travis Lundy

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