Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>This week in StubWorld ...</p>
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<p>A change of pace with two infrequently discussed stubs in unwind territory:<br><a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener"></a></p>
<p><a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/news-corp-class-b" target="_blank" data-smartkarma-citation="entities:5990:1" rel="noopener">News Corp (NWSA US)</a><a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener">  / </a><a href="https://www.smartkarma.com/entities/rea-group-ltd" target="_blank" data-smartkarma-citation="entities:699:1" rel="noopener">REA Group Ltd (REA AU)</a>, and<br><a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener">Jafco Co Ltd (8595 JP)</a> / <a href="https://www.smartkarma.com/entities/nomura-research-institute-ltd" target="_blank" data-smartkarma-citation="entities:18129:1" rel="noopener">Nomura Research Institute Ltd (4307 JP)</a>.</p>
<p><em>and ...</em></p>
<p>two lesser-known stubs in set-up territory:<br><br><a href="https://www.smartkarma.com/entities/iljin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:11265:1" rel="noopener">Iljin Holdings (015860 KS)</a> / <a href="https://www.smartkarma.com/entities/iljin-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:4098:1" rel="noopener">Iljin Electric (103590 KS)</a>, and<br><a href="https://www.smartkarma.com/entities/sakata-inx-corp" target="_blank" data-smartkarma-citation="entities:19446:1" rel="noopener">Sakata Inx Corp (4633 JP)</a>  / <a href="https://www.smartkarma.com/entities/siix-corp" target="_blank" data-smartkarma-citation="entities:13244:1" rel="noopener">Siix Corp (7613 JP)</a>.</p>
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<p>Preceding my comments on these holding company relationships<a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener"></a> are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p>As always, more below the fold.</p>
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This week in StubWorld ...



A change of pace with two infrequently discussed stubs in unwind territory: 
News Corp (NWSA US)  / REA Group Ltd (REA AU), and Jafco Co Ltd (8595 JP) / Nomura Research Institute Ltd (4307 JP).
and ...
two lesser-known stubs in set-up territory:  Iljin Holdings (015860 KS) / Iljin Electric (103590 KS), and Sakata Inx Corp (4633 JP)  / Siix Corp (7613 JP).



Preceding my comments on these holding company relationships are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


As always, more below the fold.


StubWorld: News Corp/REA Group, Jafco/Nomura Research, Iljin Holdings/Iljin Electric, Sakata/SIIX

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Quantitative Analysis

<p>* Our Q3-2019 Small-Mid Cap High-Risk list of stocks ( <a href="https://www.smartkarma.com/insights/screening-the-silkroad-small-mid-cap-high-risk-names-to-avoid-q3-2019" target="_blank" data-smartkarma-citation="insights:31999" rel="noopener">Screening the Silkroad: Small-Mid Cap High-Risk Names to Avoid: Q3 2019 ) </a> produced a market cap average price return of 5%. In comparison, the MSCI Asia Pacific Index posted 8.5% over the same period. The stock rank quality of the Q3 2019 list declined 5.1 points or 6.6% for the period. <br>* 16-stocks appear in our Q4 2019 screen, compared to 14, 19 and 26 in Q3, Q2 and Q1 respectively. The average stock rank has decreased marginally to 74.9 points from the 76.9 points in August 2019. The fact that the screen presents with a high stock rank remains a concern. In our view, this reflects the increased level of risk in the market which is being seen in other metrics as well.<br>* Deteriorating credit metrics support our view that the level of risk appears is increasing within the small-mid cap universe. </p>

* Our Q3-2019 Small-Mid Cap High-Risk list of stocks ( Screening the Silkroad: Small-Mid Cap High-Risk Names to Avoid: Q3 2019 )  produced a market cap average price return of 5%. In comparison, the MSCI Asia Pacific Index posted 8.5% over the same period. The stock rank quality of the Q3 2019 list declined 5.1 points or 6.6% for the period.  * 16-stocks appear in our Q4 2019 screen, compared to 14, 19 and 26 in Q3, Q2 and Q1 respectively. The average stock rank has decreased marginally to 74.9 points from the 76.9 points in August 2019. The fact that the screen presents with a high stock rank remains a concern. In our view, this reflects the increased level of risk in the market which is being seen in other metrics as well. * Deteriorating credit metrics support our view that the level of risk appears is increasing within the small-mid cap universe. 

Screening the Silk Road: Small-Mid Cap High Risk Names to Avoid: Q4 2019

<p><strong><a href="https://www.smartkarma.com/entities/708" target="_blank" data-smartkarma-citation="entities:708:1">Nine Entertainment Co Holdings (NEC AU)</a></strong>'s shares sharply declined (-10.32% to A$2.26) shortly after the announced deal on the 26th July, touching an intra-day low of $2.15 yesterday, implying an almost nil premium to <strong><a href="https://www.smartkarma.com/entities/8996" target="_blank" data-smartkarma-citation="entities:8996:1">Fairfax Media (FXJ AU)</a></strong>'s<strong> </strong>then share price, down from 21.9% at the time of the announcement. A recovery in Nine's share price to close today at $2.24 places an implied value for Fairfax of A$0.84, in line with my NAV/share, and a 3% premium to last close. </p>
<p>With ~97% of the merger…</p>

Nine Entertainment Co Holdings (NEC AU)'s shares sharply declined (-10.32% to A$2.26) shortly after the announced deal on the 26th July, touching an intra-day low of $2.15 yesterday, implying an almost nil premium to Fairfax Media (FXJ AU)'s then share price, down from 21.9% at the time of the announcement. A recovery in Nine's share price to close today at $2.24 places an implied value for Fairfax of A$0.84, in line with my NAV/share, and a 3% premium to last close. 
With ~97% of the merger…

Nine's Premium Fades, But Pricing for Fairfax Remains Full

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

<p>We raise our fair value estimate for <a href="https://www.smartkarma.com/entities/8996" target="_blank" data-smartkarma-citation="entities:8996:1">Fairfax Media Ltd (FXJ AU)</a> by 8%, or AUD 0.05 per share, to AUD 0.70, following the no-moat rated group's first post-<a href="https://www.smartkarma.com/entities/26033" target="_blank" data-smartkarma-citation="entities:26033:1">Domain Holdings Australia Ltd (DHG AU)</a> split result.</p><p>AUD 0.03 of the lift stems from an upgrade to our earnings estimates, reflecting better-than-expected progress on two cost fronts. First, the 15% year-on-year lift in first-half metropolitan publishing EBIT to AUD 28 million was eye-catching, with aggressive expense management more than…</p>

We raise our fair value estimate for Fairfax Media Ltd (FXJ AU) by 8%, or AUD 0.05 per share, to AUD 0.70, following the no-moat rated group's first post-Domain Holdings Australia Ltd (DHG AU) split result.AUD 0.03 of the lift stems from an upgrade to our earnings estimates, reflecting better-than-expected progress on two cost fronts. First, the 15% year-on-year lift in first-half metropolitan publishing EBIT to AUD 28 million was eye-catching, with aggressive expense management more than…

As Fairfax Media Steps Up Cost-Out, We Step Up FVE to AUD 0.70

<p><a href="https://www.smartkarma.com/entities/5543" target="_blank" data-smartkarma-citation="entities:5543:1">News Corp Class A (NWSA US)</a> is operating in an industry undergoing unprecedented changes, with the traditional print-based publishing business model being completely dismantled by proliferating news and information outlets in the digital space. This is exacerbated by ever-improving means for consumers to access them, driven by mobility and continuing device innovation. Consequently, News Corporation, with almost 40% of its core operating earnings still sourced from the print publishing industry, faces enormous structural headwinds, with consumers migrating from newspapers to the digital arena and advertisers following suit.</p><p>Having said that, we believe News Corporation is better placed than most peers to transition its publishing business to the digital age. It has some of the most venerable masthead brands in the industry (The Wall Street Journal, The Times), and boasts significant editorial resources, especially compared with those of its rivals, which have been dwindling. The company's financial position is strong, having split in 2013 from Twenty-First Century Fox, with no debt on the balance sheet and an enviable excess cash pile to transition the business to the digital age while also exploring opportunities to diversify away from the traditional newspaper business.</p><p>While News Corporation grapples with the structural challenges facing its publishing business, the company is partly shielded by its dominant Australian pay-television operations in Fox Sports and 50%-owned Foxtel, albeit the latter is also coming under increasing pressure from digital streaming alternatives to pay TV. Furthermore, then 62%-owned <a href="https://www.smartkarma.com/entities/699" target="_blank" data-smartkarma-citation="entities:699:1">REA Group Ltd (REA AU)</a>'s growth outlook remains robust in the online real estate classifieds space and the Move (acquired in November 2014) is making strong progress in the U.S. digital property advertising space. Lastly, management is actively looking to diversify the company's revenue base, armed with a strong net-debt-free balance sheet.</p><p><em>Analyst: Brian Han</em></p>

News Corp Class A (NWSA US) is operating in an industry undergoing unprecedented changes, with the traditional print-based publishing business model being completely dismantled by proliferating news and information outlets in the digital space. This is exacerbated by ever-improving means for consumers to access them, driven by mobility and continuing device innovation. Consequently, News Corporation, with almost 40% of its core operating earnings still sourced from the print publishing industry, faces enormous structural headwinds, with consumers migrating from newspapers to the digital arena and advertisers following suit.Having said that, we believe News Corporation is better placed than most peers to transition its publishing business to the digital age. It has some of the most venerable masthead brands in the industry (The Wall Street Journal, The Times), and boasts significant editorial resources, especially compared with those of its rivals, which have been dwindling. The company's financial position is strong, having split in 2013 from Twenty-First Century Fox, with no debt on the balance sheet and an enviable excess cash pile to transition the business to the digital age while also exploring opportunities to diversify away from the traditional newspaper business.While News Corporation grapples with the structural challenges facing its publishing business, the company is partly shielded by its dominant Australian pay-television operations in Fox Sports and 50%-owned Foxtel, albeit the latter is also coming under increasing pressure from digital streaming alternatives to pay TV. Furthermore, then 62%-owned REA Group Ltd (REA AU)'s growth outlook remains robust in the online real estate classifieds space and the Move (acquired in November 2014) is making strong progress in the U.S. digital property advertising space. Lastly, management is actively looking to diversify the company's revenue base, armed with a strong net-debt-free balance sheet.Analyst: Brian Han

News Corporation Boasts the Tools to Rise Above a Sunset Industry

United States

News Corporation is a media and information services company. The Company's business is comprised of news and information, book publishing, digital real estate, and cable network programming services. News serves customers globally.

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News Corp (NWS AU)

StubWorld: News Corp/REA Group, Jafco/Nomura Research, Iljin Holdings/Iljin Electric, Sakata/SIIX

Looking at consensus numbers, the majority of forward growth is coming from REA, not the stub ops. From a NAV viewpoint, News Corp is trading rich....

David Blennerhassett

Screening the Silk Road: Small-Mid Cap High Risk Names to Avoid: Q4 2019

* Our Q3-2019 Small-Mid Cap High-Risk list of stocks ( Screening the Silkroad: Small-Mid Cap High-Risk Names to Avoid: Q3 2019 ) produced a market...

David Lepper

Nine's Premium Fades, But Pricing for Fairfax Remains Full

Nine Entertainment Co Holdings (NEC AU)'s shares sharply declined (-10.32% to A$2.26) shortly after the announced deal on the 26th July, touching...

David Blennerhassett

As Fairfax Media Steps Up Cost-Out, We Step Up FVE to AUD 0.70

We raise our fair value estimate for Fairfax Media Ltd (FXJ AU) by 8%, or AUD 0.05 per share, to AUD 0.70, following the no-moat rated group's...

Morningstar, Inc.

News Corporation Boasts the Tools to Rise Above a Sunset Industry

News Corp Class A (NWSA US) is operating in an industry undergoing unprecedented changes, with the traditional print-based publishing business...

Morningstar, Inc.

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