Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).</li>
<li>If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.</li>
<li>This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.</li>
</ul>


Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.


Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

<ul>
<li>Overnight, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> has released an <a href="https://www.global.toshiba/content/dam/toshiba/ww/ir/corporate/news/20220719_2.pdf" target="_blank" rel="noopener">update</a> "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  </li>
<li>Nikkei <a href="https://asia.nikkei.com/Spotlight/Toshiba-in-turmoil/Japan-Industrial-Partners-Bain-advance-in-bidding-for-Toshiba" target="_blank" rel="noopener">reported</a> those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.</li>
<li>Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). </li>
</ul>


Overnight, Toshiba Corp (6502 JP) has released an update "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  
Nikkei reported those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.
Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). 


Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari Inc (4385 JP)</a> will be added to the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> at the close on 28 July.</li>
<li>There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.</li>
<li>We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).</li>
</ul>



Mercari Inc (4385 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 28 July.
There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.
We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).


TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>Regarding the Nikkei article, "Mitsubishi Electric to Reform Strict Governance to Revamp Organization," I would like to summarize the points and discussed the issues.</li>
<li>This case proves that we cannot rely on the appearance of board practices alone. We can think of companies with similar organizational structures that have had repeated scandals.</li>
<li>I will focus on the board diversity from the perspective of whether Mitsubishi Electric can seriously change its corporate culture to one that accepts different values and discusses issues head-on.</li>
</ul>


Regarding the Nikkei article, "Mitsubishi Electric to Reform Strict Governance to Revamp Organization," I would like to summarize the points and discussed the issues.
This case proves that we cannot rely on the appearance of board practices alone. We can think of companies with similar organizational structures that have had repeated scandals.
I will focus on the board diversity from the perspective of whether Mitsubishi Electric can seriously change its corporate culture to one that accepts different values and discusses issues head-on.


Why Do Bigger Companies in Japan Repeat Scandals? - Learning from Mitsubishi Electric -

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> sees its AGM next week with new directors and a possible privatisation process ongoing. But the AGM is a done deal and privatisation is not.</li>
<li>The event-i-ness of Toshiba keeps it "supported" while its better-valued and higher-growth peers fall harder in the face of recent overall market weakness. </li>
<li>Toshiba promised transparency on its privatisation process, and so far, it has delivered everything it promised. The next "transparency" likely comes in November. </li>
</ul>



Toshiba Corp (6502 JP) sees its AGM next week with new directors and a possible privatisation process ongoing. But the AGM is a done deal and privatisation is not.
The event-i-ness of Toshiba keeps it "supported" while its better-valued and higher-growth peers fall harder in the face of recent overall market weakness. 
Toshiba promised transparency on its privatisation process, and so far, it has delivered everything it promised. The next "transparency" likely comes in November. 


Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance

Japan

Mitsubishi Electric Corporation develops, manufactures, and markets electronic equipment.  The Company's products include industrial machinery, heavy electric machinery, data communications systems, electronic devices, and consumer electronics.

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Mitsubishi Electric (6503 JP)

Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

The IRR to be obtained by buying Toshiba and expecting Probability X% of a Privatisation and (1-X%) of no deal has gone up sharply since end-June....

Travis Lundy

Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

Toshiba (6502) is -8% vs Peer Basket after the late June pop on a "¥7,000 deal." Semi/memory peers weaker while industrials better. That lifts IRR...

Travis Lundy

TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade

Mercari will be added to the TPX at the close on 28 July. There are a lot of FFW changes that will result in one-way turnover of 0.56% leading to a...

Brian Freitas

Why Do Bigger Companies in Japan Repeat Scandals? - Learning from Mitsubishi Electric -

Regarding the case of Mitsubishi Electric, I would like to summarize the points and discussed the issues Why are scandals repeated in the same...

Metrical Inc

Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance

Weak earnings/forecasts and 3yr highs vs Peers make Toshiba's relative valuation un-compelling. Lack of near-term news means on a risk-on rebound,...

Travis Lundy

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