Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

In the month of January 2021, one of the most anticipated TOPIX Inclusion candidates, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> announced its move to TSE1 triggering what could potentially be one of the largest TOPIX Inclusion events in recent memory. The stock could see its TOPIX Inclusion take place at the end of February, along with <a href="https://www.smartkarma.com/entities/sansan-inc" target="_blank" data-smartkarma-citation="entities:28112:1" rel="noopener">Sansan Inc (4443 JP)</a> - another larger-than-usual candidate - and two other super-high-impact names <a href="https://www.smartkarma.com/entities/bull-dog-sauce-co-ltd" target="_blank" data-smartkarma-citation="entities:16235:1" rel="noopener">Bull Dog Sauce (2804 JP)</a> and <a href="https://www.smartkarma.com/entities/alps-logistics-co-ltd" target="_blank" data-smartkarma-citation="entities:3935:1" rel="noopener">Alps Logistics (9055 JP)</a>. There is plenty to look forward to. In this insight, I have provided performance updates for 6 "Live" event stocks (including the names mentioned above) which are expected to have Inclusion Events at the end of February 2021 and 14 "Post" event stocks that completed their Inclusion Events at the end of December 2020 and January 2021 (on 28 January 2021).Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future.

In the month of January 2021, one of the most anticipated TOPIX Inclusion candidates, Toshiba Corp (6502 JP) announced its move to TSE1 triggering what could potentially be one of the largest TOPIX Inclusion events in recent memory. The stock could see its TOPIX Inclusion take place at the end of February, along with Sansan Inc (4443 JP) - another larger-than-usual candidate - and two other super-high-impact names Bull Dog Sauce (2804 JP) and Alps Logistics (9055 JP). There is plenty to look forward to. In this insight, I have provided performance updates for 6 "Live" event stocks (including the names mentioned above) which are expected to have Inclusion Events at the end of February 2021 and 14 "Post" event stocks that completed their Inclusion Events at the end of December 2020 and January 2021 (on 28 January 2021).Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 

With the Section Transfer Requirements to move to TSE1 becoming more stringent, some small-cap candidates have been rushing to enter TSE1 so that they can avoid having to face the new regulations under which they may struggle to qualify. This trend has resulted in a "flurry" of TOPIX Inclusion Trades in the month of December 2020 as <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> predicted in <a href="https://www.smartkarma.com/insights/the-tse-s-listing-criteria-revisions-part-i" target="_blank" data-smartkarma-citation="insights:43150" rel="noopener">The TSE's Listing Criteria Revisions - Part I</a>.
<blockquote>
For index inclusion and event traders taking advantage of a large number of interesting trades, the number will suddenly go waaaay down. This means <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> likely has a flurry of interesting trade ideas to read about in the next few months, but after about March next year, things will drop off in a hurry.
</blockquote>
In this insight, I have provided performance updates for 11 "Live" event stocks which are expected to have Inclusion Events at the end of January 2021 and 6 "Post" event stocks that completed their Inclusion Events at the end of November 2020 and December 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future.

With the Section Transfer Requirements to move to TSE1 becoming more stringent, some small-cap candidates have been rushing to enter TSE1 so that they can avoid having to face the new regulations under which they may struggle to qualify. This trend has resulted in a "flurry" of TOPIX Inclusion Trades in the month of December 2020 as Travis Lundy predicted in The TSE's Listing Criteria Revisions - Part I.

For index inclusion and event traders taking advantage of a large number of interesting trades, the number will suddenly go waaaay down. This means Janaghan Jeyakumar, CFA likely has a flurry of interesting trade ideas to read about in the next few months, but after about March next year, things will drop off in a hurry.

In this insight, I have provided performance updates for 11 "Live" event stocks which are expected to have Inclusion Events at the end of January 2021 and 6 "Post" event stocks that completed their Inclusion Events at the end of November 2020 and December 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Last Week in Event SPACE: Haier, Tokyo Dome, Cowell, Infratil, Link Admin, Sapporo/Asahi, Mcdonald's

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/cafe-de-coral-holdings-ltd" target="_blank" data-smartkarma-citation="entities:2568:1" rel="noopener">Cafe De Coral Holdings (341 HK)</a> business in Hong Kong and China are recovering nicely due to the calming down of the COVID-19 as well as the strategy change to focus on the delivery and take away markets. One of the key initiatives is to redesign the menu offering so that it is more suitable for the delivery and take away customers. However, empirical evidence tells that the company is yet to reach a popular status in one of the food delivery apps in Hong Kong which is quite worrying. 
The recent dining restrictions do not seem to bother investors much at all therefore there is still an opportunity to short Cafe de Coral in the short run.

Cafe De Coral Holdings (341 HK) business in Hong Kong and China are recovering nicely due to the calming down of the COVID-19 as well as the strategy change to focus on the delivery and take away markets. One of the key initiatives is to redesign the menu offering so that it is more suitable for the delivery and take away customers. However, empirical evidence tells that the company is yet to reach a popular status in one of the food delivery apps in Hong Kong which is quite worrying. 
The recent dining restrictions do not seem to bother investors much at all therefore there is still an opportunity to short Cafe de Coral in the short run. 

Cafe De Coral (341): Still Unfazed by the New Restriction

The disposition of <a href="https://www.smartkarma.com/entities/mcdonald-s-corp" target="_blank" data-smartkarma-citation="entities:1425:1" rel="noopener">McDonald's Corp (MCD US)</a>'s ownership in <a href="https://www.smartkarma.com/entities/mcdonald-s-holdings-co-japan" target="_blank" data-smartkarma-citation="entities:985:1" rel="noopener">McDonald's Holdings Co Japan (2702 JP)</a> has been a widely discussed topic in the past several years. However, in July 2020, <a href="https://www.smartkarma.com/entities/mcdonald-s-corp" target="_blank" data-smartkarma-citation="entities:1425:1" rel="noopener">Mcdonald's Corp (MCD US)</a> confirmed in its 2020 FQ2 earnings call that they were planning to sell part of their stake. 
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<blockquote>
Consistent with enhancing financial flexibility and our franchising strategy, we're planning to divest a portion of our stake in McDonald's Japan. As a result of the strong performance of the McDonald's Japan business over the past few years and our confidence in the local management team, we believe it's the right time to gradually reduce our ownership stake in the market. This will take some time because of the low trading volume of McDonald's Japan shares. As a reminder, we currently own about 49% of the business, and we will retain at least 35% ownership. This decision provides us with additional financial flexibility to execute our capital allocation strategy while also demonstrating our commitment to our Japanese business.
</blockquote>
According to Capital IQ - and the last filing on the parent currently holds around 43.8% which means <a href="https://www.smartkarma.com/entities/mcdonald-s-corp" target="_blank" data-smartkarma-citation="entities:1425:1" rel="noopener">Mcdonald's Corp (MCD US)</a> has sold around 6.1% of the planned total of ~14%. 
To get to 35% from the current level, they would have to sell another ~11mn shares (~8.2% of total shares) and there is more than one way they could go about that. 
That is where things get interesting. 
More below the fold. 
</div>

The disposition of McDonald's Corp (MCD US)'s ownership in McDonald's Holdings Co Japan (2702 JP) has been a widely discussed topic in the past several years. However, in July 2020, Mcdonald's Corp (MCD US) confirmed in its 2020 FQ2 earnings call that they were planning to sell part of their stake. 


Consistent with enhancing financial flexibility and our franchising strategy, we're planning to divest a portion of our stake in McDonald's Japan. As a result of the strong performance of the McDonald's Japan business over the past few years and our confidence in the local management team, we believe it's the right time to gradually reduce our ownership stake in the market. This will take some time because of the low trading volume of McDonald's Japan shares. As a reminder, we currently own about 49% of the business, and we will retain at least 35% ownership. This decision provides us with additional financial flexibility to execute our capital allocation strategy while also demonstrating our commitment to our Japanese business.

According to Capital IQ - and the last filing on the parent currently holds around 43.8% which means Mcdonald's Corp (MCD US) has sold around 6.1% of the planned total of ~14%. 
To get to 35% from the current level, they would have to sell another ~11mn shares (~8.2% of total shares) and there is more than one way they could go about that. 
That is where things get interesting. 
More below the fold. 


2021 High Conviction: McDonald's Japan -  A TOPIX Inclusion BIG Bet

Japan

McDonald's Holdings Company (Japan), Ltd. operates a hamburger fast food restaurant chain throughout Japan.  The Company operates its own stores and franchise stores.

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Mcdonald's Japan (2702 JP)

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The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Cafe De Coral (341): Still Unfazed by the New Restriction

The recent dining restrictions do not seem to bother investors much at all therefore there is still an opportunity to short Cafe de Coral in the...

Henry Soediarko

2021 High Conviction: McDonald's Japan - A TOPIX Inclusion BIG Bet

Parent McDonald's Corp announced in July it would sell down its stake in McDonald's Japan from 49% to 35+%. It has sold about 40% of that so far....

Janaghan Jeyakumar, CFA

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