Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The shares of <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> to be returned to shareholders after the Buyback Offer have been returned to shareholders as of this morning. Some appeared to have sold yesterday, some today, and some may not "get notice" of the return until tonight, which means they would sell tomorrow or later. Now we look ahead. Based on a pure price-vs-peers basis, the price today is about 3% below where it was compared to a mix of Chinese and global peers as of the day before the announcement. However, that does not include the 15% accretion to EPS from the buyback. That puts the stock a fair bit cheaper than its peer basket since the announcement 3+ months ago. And it has ALWAYS traded cheap on governance concerns (and one reason why showed up last month in a public spat between the spurned first son and the chairman, discussed in <a href="https://www.smartkarma.com/insights/wh-group-stock-plummets-as-ousted-son-drags-pigs-into-the-mud" target="_blank" data-smartkarma-citation="insights:56282" rel="noopener">WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud</a>. The question investors should ask themselves is.... if the family were ousted, would that be good for the share price? If the answer is yes, then the exposure here probably has some convexity given the shares trade at a multi-year low to Peers on an accretion-adjusted basis.

The shares of WH Group (288 HK) to be returned to shareholders after the Buyback Offer have been returned to shareholders as of this morning. Some appeared to have sold yesterday, some today, and some may not "get notice" of the return until tonight, which means they would sell tomorrow or later. Now we look ahead. Based on a pure price-vs-peers basis, the price today is about 3% below where it was compared to a mix of Chinese and global peers as of the day before the announcement. However, that does not include the 15% accretion to EPS from the buyback. That puts the stock a fair bit cheaper than its peer basket since the announcement 3+ months ago. And it has ALWAYS traded cheap on governance concerns (and one reason why showed up last month in a public spat between the spurned first son and the chairman, discussed in WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud. The question investors should ask themselves is.... if the family were ousted, would that be good for the share price? If the answer is yes, then the exposure here probably has some convexity given the shares trade at a multi-year low to Peers on an accretion-adjusted basis.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.  In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.  In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.

Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues

MSCI Emerging Markets Index / Technical Analysis

Our overall global outlook remains cautious and continued downward pressure on global equities remains our expectation. One bright spot is EM (more on this below), which continues to give us hope that global equities can bottom out.  We provide a technical appraisal of major markets and highlight actionable setups within the global Utilities and Staples Sectors.

Our overall global outlook remains cautious and continued downward pressure on global equities remains our expectation. One bright spot is EM (more on this below), which continues to give us hope that global equities can bottom out.  We provide a technical appraisal of major markets and highlight actionable setups within the global Utilities and Staples Sectors.

Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

Thematic (Sector/Industry)

We screened for names in Japan with a low PBR relative to its own history and also low relative to other names in the Sector. Large-cap names that made the list are  <a href="https://www.smartkarma.com/entities/154" target="_blank" data-smartkarma-citation="entities:154:1">Honda Motor Co Ltd (7267 JP)</a> with a 0.7x PBR, <a href="https://www.smartkarma.com/entities/961" target="_blank" data-smartkarma-citation="entities:961:1">Nippon Steel &amp; Sumitomo Metal Corp (5401 JP)</a> with a 0.6x PBR and <a href="https://www.smartkarma.com/entities/13613" target="_blank" data-smartkarma-citation="entities:13613:1">Mitsubishi Heavy Industries (7011 JP)</a> with a 0.7x PBR.<h2>Screen Criteria</h2><ol>
<li>Absolute PBR is less than 1.1x</li>
<li>Current PBR is currently 20% or more below the 5-year median PBR</li>
<li>Current PBR is 20% or more below the Sector Median</li>
</ol><h2>Screen</h2>…

We screened for names in Japan with a low PBR relative to its own history and also low relative to other names in the Sector. Large-cap names that made the list are  Honda Motor Co Ltd (7267 JP) with a 0.7x PBR, Nippon Steel &amp; Sumitomo Metal Corp (5401 JP) with a 0.6x PBR and Mitsubishi Heavy Industries (7011 JP) with a 0.7x PBR.Screen Criteria
Absolute PBR is less than 1.1x
Current PBR is currently 20% or more below the 5-year median PBR
Current PBR is 20% or more below the Sector Median
Screen…

Names with Low PBR Relative to History and Sector....

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

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.

Equity Bottom-Up

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/055/962/original/Toyota.PNG?1529972342" class="editor-image img-responsive" data-smartkarma-image-id="55962"></figure><div class="content-remarks">Source: Capital IQ and LSR Calculations</div>We find Toyota’s high cash yield attractive as markets head towards bear territory. Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.Source: Capital IQ and LSR CalculationsWe find Toyota’s high cash yield attractive as markets head towards bear territory. Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…

Toyota for Bears: How Attractive Are Income Yields?

Japan

NH Foods Ltd. produces and sells ham, sausage, and processed meat products. The Company also breeds and raises cattle through its subsidiary. NH Foods owns a professional baseball team, the Nippon Ham Fighters.

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Nh Foods Ltd (2282 JP)

WH Group Post-Tender Outlook

Buyback Offer shares are returned. Now we look forward. Of course, we did before in assuming participation rates. The stock is cheap on accretion...

Travis Lundy

Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist...

Vermilion Research

Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming

Our overall global outlook remains cautious and continued downward pressure on global equities remains our expectation. One bright spot is EM (more...

Vermilion Research

Names with Low PBR Relative to History and Sector....

We screened for names in Japan with a low PBR relative to its own history and also low relative to other names in the Sector. Large-cap names that...

Custom Products Group

Toyota for Bears: How Attractive Are Income Yields?

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing...

Supun Walpola

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