Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The Nikkei Asia <a href="https://asia.nikkei.com/Business/Business-deals/1bn-bid-for-Tokyo-Dome-planned-by-developer-Mitsui-Fudosan" target="_blank" rel="noopener">reported</a> this morning (Japanese article link <a href="https://www.nikkei.com/article/DGXMZO66704090X21C20A1MM8000" target="_blank" rel="noopener">here</a>) that <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> intended to partner with someone to launch a Tender Offer to take private <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a>, spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at <a href="https://www.abettertokyodome.com/" target="_blank" rel="noopener">abettertokyodome.com</a>. There main presentation is linked <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">here</a>. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis <a href="https://www.businesswire.com/news/home/20201111005501/en/Oasis-Key-Messages-for-Tokyo-Dome-Shareholders-Regarding-the-EGM-on-December-17-2020" target="_blank" rel="noopener">responded</a> the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/563/original/Screenshot%202020-11-27%20at%2010.27.27%20AM.png?1606444069" class="editor-image img-responsive" data-smartkarma-image-id="174563"></figure></section>As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (<a href="https://www.mitsuifudosan.co.jp/corporate/ir/library/news/2020/pdf/news_201127.pdf" target="_blank" rel="noopener">Mitsui Fudosan</a>, <a href="https://contents.xj-storage.jp/xcontents/AS01950/1667e514/ffcc/4644/b6a6/6313ea0899ad/140120201127428865.pdf" target="_blank" rel="noopener">Tokyo Dome</a>) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate <a href="https://www.smartkarma.com/entities/yomiuri-land-co-ltd" target="_blank" data-smartkarma-citation="entities:12813:1" rel="noopener">Yomiuri Land (9671 JP)</a> private as discussed in <a href="https://www.smartkarma.com/insights/yomiuri-land-9671-takeover-probably-the-wrong-price-but-whaddya-gonna-do" target="_blank" data-smartkarma-citation="insights:45025" rel="noopener">Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?</a>. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a> shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

The Nikkei Asia reported this morning (Japanese article link here) that Mitsui Fudosan (8801 JP) intended to partner with someone to launch a Tender Offer to take private Tokyo Dome Corp (9681 JP), spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at abettertokyodome.com. There main presentation is linked here. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis responded the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (Mitsui Fudosan, Tokyo Dome) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate Yomiuri Land (9671 JP) private as discussed in Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of Japan Needs More Cowbell shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

Hitachi Construction Machinery / Event-Driven

With a relatively full slate of large value takeovers in Developed Asia in the past year - often by parents but also by buyout funds - and the availability of significant credit to finance such takeovers, this Smartkarma Original insight looks at what constitutes an attractive target for takeover, and seeks to construct a framework for screening and filtering companies for further study. 
The filtering is conducted across two basic measures which seek to answer two basic questions:
<ol>
<li>What might supply look like?</li>
<li>What might demand look like?</li>
</ol>
The first basic problem with creating such filters is that on the Supply side, using databases to determine whether a controlling shareholder wants to sell is almost a lost cause from the beginning. But the exercise throws up some interesting case studies, and it is important to understand why such screening could lead to interesting results. 
On the demand side, it is a difficult and complicated exercise because financial data moves around, shifting through time and relative price because competitors also shift in time and price. A clear example of a company which might have been "relatively" attractive vs peers a month ago might not be after the market ructions at the end of February 2020 when this was written. Prices were, of course, lower, which means that a good screening process is dynamic, both in relative and absolute measures. It is also somewhat difficult to create a one-size-fits-all screen for attractive targets because in certain countries, certain industries (telecom, airlines, social infrastructure, defence) are covered by foreign ownership limits, other industries (banks, brokers, insurers) rarely see leveraged buyouts, and takeovers in other industries (Chinese homebuilders) are, for lack of a better word, simply off the table at certain times.
In addition, there are lots of ways in which companies might present themselves as attractive targets. If someone controls a company, and wants to sell it cheaply, there are lots of potential buyers who will fall all over themselves to get in line to buy it. But companies can be attractive targets because of the potential for changing profit metrics and multiples through restructuring, asset reorganisation, industry reorganisation, or simply waiting for the cycle to change. 
Using valuation metrics with a cutoff line can be challenging because common multiples such as PER, PCFR, PBR, EV/EBITDA may ignore significant value available from longer-term securities holdings, non-operating real estate assets which are not managed in optimal fashion, etc. 
In short, screening can only go so far. But we try.
At the end, we take a brief look at 10 companies from Developed Asia which show up as a result of our screening efforts. The resulting list is dominated by Japanese companies because some of the companies which show up from other countries fit the "no-go" categories above (airlines, financial companies, defence technology subject to foreign ownership limits, Chinese homebuilders subject to skepticism, etc.). Some are also clearly Emerging Asia businesses with Developed Asia listings. Screening for Emerging Asia got a few companies which are high on anyone's target list, including one which saw an unsolicited takeover approach earlier this week (end-Feb 2020), and another which has been in acquisition mode for years. 
We find the thinking process and screening technology has thrown up some previously less-than-obvious candidates which deserve further work.

With a relatively full slate of large value takeovers in Developed Asia in the past year - often by parents but also by buyout funds - and the availability of significant credit to finance such takeovers, this Smartkarma Original insight looks at what constitutes an attractive target for takeover, and seeks to construct a framework for screening and filtering companies for further study. 
The filtering is conducted across two basic measures which seek to answer two basic questions:

What might supply look like?
What might demand look like?

The first basic problem with creating such filters is that on the Supply side, using databases to determine whether a controlling shareholder wants to sell is almost a lost cause from the beginning. But the exercise throws up some interesting case studies, and it is important to understand why such screening could lead to interesting results. 
On the demand side, it is a difficult and complicated exercise because financial data moves around, shifting through time and relative price because competitors also shift in time and price. A clear example of a company which might have been "relatively" attractive vs peers a month ago might not be after the market ructions at the end of February 2020 when this was written. Prices were, of course, lower, which means that a good screening process is dynamic, both in relative and absolute measures. It is also somewhat difficult to create a one-size-fits-all screen for attractive targets because in certain countries, certain industries (telecom, airlines, social infrastructure, defence) are covered by foreign ownership limits, other industries (banks, brokers, insurers) rarely see leveraged buyouts, and takeovers in other industries (Chinese homebuilders) are, for lack of a better word, simply off the table at certain times.
In addition, there are lots of ways in which companies might present themselves as attractive targets. If someone controls a company, and wants to sell it cheaply, there are lots of potential buyers who will fall all over themselves to get in line to buy it. But companies can be attractive targets because of the potential for changing profit metrics and multiples through restructuring, asset reorganisation, industry reorganisation, or simply waiting for the cycle to change. 
Using valuation metrics with a cutoff line can be challenging because common multiples such as PER, PCFR, PBR, EV/EBITDA may ignore significant value available from longer-term securities holdings, non-operating real estate assets which are not managed in optimal fashion, etc. 
In short, screening can only go so far. But we try.
At the end, we take a brief look at 10 companies from Developed Asia which show up as a result of our screening efforts. The resulting list is dominated by Japanese companies because some of the companies which show up from other countries fit the "no-go" categories above (airlines, financial companies, defence technology subject to foreign ownership limits, Chinese homebuilders subject to skepticism, etc.). Some are also clearly Emerging Asia businesses with Developed Asia listings. Screening for Emerging Asia got a few companies which are high on anyone's target list, including one which saw an unsolicited takeover approach earlier this week (end-Feb 2020), and another which has been in acquisition mode for years. 
We find the thinking process and screening technology has thrown up some previously less-than-obvious candidates which deserve further work.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Nomura Real Estate Master Fund / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/nomura-real-estate-master-fu" target="_blank" data-smartkarma-citation="entities:22930:1" rel="noopener">Nomura Real Estate Master Fund, (3462 JP)</a> (NMF) unveiled plans to raise up to JPY32.1 billion ($296 million) through a primary offering (95% of the offering) and third-party allotment. The pricing date is between 16 December to 18 December.<div class="content-highlight">The proceeds from the placement will be used to will partly fund the JPY41.0 billion ($373 million) acquisitions of nine properties. Overall, we would be tempted to participate in the placement at around a 5% discount to the last close price.</div>

Nomura Real Estate Master Fund, (3462 JP) (NMF) unveiled plans to raise up to JPY32.1 billion ($296 million) through a primary offering (95% of the offering) and third-party allotment. The pricing date is between 16 December to 18 December.The proceeds from the placement will be used to will partly fund the JPY41.0 billion ($373 million) acquisitions of nine properties. Overall, we would be tempted to participate in the placement at around a 5% discount to the last close price.

Nomura Real Estate Master Fund Placement: Ok at a Discount

Those who have been steady observers of the capital structure of <a href="https://www.smartkarma.com/entities/623" target="_blank" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> have oft-wondered why <a href="https://www.smartkarma.com/entities/4221" target="_blank" data-smartkarma-citation="entities:4221:1">NTT Urban Development (8933 JP)</a> was left as a virtual 'orphan', left to conduct its business without quite as much input as one might have hoped, and since the GFC, a thorn in the side of owners who thought it should be done better, differently, by a different owner, with bigger ambitions. Today, NTT - which owns 67.3% of the real estate developer/leaser - <a href="http://www.ntt.co.jp/news2018/1810e/pdf/181015a.pdf" target="_blank">announced</a> (<a href="http://www.ntt.co.jp/news2018/1810/pdf/181015a.pdf" target="_blank">J</a>) that it wanted to buy in the 27.7% of NTT Urban that it did not own through a Tender Offer to start October 16th and run 30 business days through November 27th.The price offered is ¥1680/share, which is a 29.8% premium to today's close (28.6% vs Friday), a 31.6% premium to the 1-month average, and 39.2% and 39.8% to the 3-month and 6-month averages to Friday. It is also a 5-year high price and other than a single day May 13th 2013 (just before the first 'Abenomics bubble' burst a week later) - where the shares closed at ¥1688 - the Tender Offer Price is at 10-year high.The deal is subject to a 'two-step' process whereby after a tender offer, NTT will seek to squeeze out minorities. If NTT gets to 90%, there will be a share cash-out demand by NTT to NTT Urban, who will then oblige remaining minorities to sell their shares. If at the end of the tender, NTT owns more than two-thirds of the shares outstanding but less than 90%, NTT will call for Urban to hold an EGM to vote on a consolidation (reverse share split) of shares where odd lots get cashed out. The result of that would be that all minorities would also be cashed out, but it will take longer. The trick here is that NTT already owns more than two-thirds so this is a fait accompli. There is no minimum share tender required to make it successful, and strictly speaking, NTT needs no shares to squeeze out minorities from here.It's all over but the shouting. Even before it starts. <table class="table table-striped"><tbody>
<tr><td colspan="2"><h2> Schedule of Tender Offer </h2></td></tr>
<tr>
<td> Event </td>
<td>Date</td>
</tr>
<tr>
<td> Announcement Date </td>
<td>15-Oct-18</td>
</tr>
<tr>
<td> Start Date </td>
<td>16-Oct-18</td>
</tr>
<tr>
<td> Closing Date </td>
<td>27-Nov-18</td>
</tr>
<tr>
<td> Payment Date </td>
<td>4-Dec-18</td>
</tr>
<tr>
<td>Likely Squeeze Out if &gt;90%</td>
<td>early January 2019</td>
</tr>
</tbody></table>More below.

Those who have been steady observers of the capital structure of NTT (Nippon Telegraph &amp; Telephone) (9432 JP) have oft-wondered why NTT Urban Development (8933 JP) was left as a virtual 'orphan', left to conduct its business without quite as much input as one might have hoped, and since the GFC, a thorn in the side of owners who thought it should be done better, differently, by a different owner, with bigger ambitions. Today, NTT - which owns 67.3% of the real estate developer/leaser - announced (J) that it wanted to buy in the 27.7% of NTT Urban that it did not own through a Tender Offer to start October 16th and run 30 business days through November 27th.The price offered is ¥1680/share, which is a 29.8% premium to today's close (28.6% vs Friday), a 31.6% premium to the 1-month average, and 39.2% and 39.8% to the 3-month and 6-month averages to Friday. It is also a 5-year high price and other than a single day May 13th 2013 (just before the first 'Abenomics bubble' burst a week later) - where the shares closed at ¥1688 - the Tender Offer Price is at 10-year high.The deal is subject to a 'two-step' process whereby after a tender offer, NTT will seek to squeeze out minorities. If NTT gets to 90%, there will be a share cash-out demand by NTT to NTT Urban, who will then oblige remaining minorities to sell their shares. If at the end of the tender, NTT owns more than two-thirds of the shares outstanding but less than 90%, NTT will call for Urban to hold an EGM to vote on a consolidation (reverse share split) of shares where odd lots get cashed out. The result of that would be that all minorities would also be cashed out, but it will take longer. The trick here is that NTT already owns more than two-thirds so this is a fait accompli. There is no minimum share tender required to make it successful, and strictly speaking, NTT needs no shares to squeeze out minorities from here.It's all over but the shouting. Even before it starts. 
 Schedule of Tender Offer 

 Event 
Date


 Announcement Date 
15-Oct-18


 Start Date 
16-Oct-18


 Closing Date 
27-Nov-18


 Payment Date 
4-Dec-18


Likely Squeeze Out if &gt;90%
early January 2019

More below.

NTT (9432 JP) Buyout of NTT Urban (8933 JP). FINALLY.

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<a href="https://www.smartkarma.com/entities/26073" target="_blank" data-smartkarma-citation="entities:26073:1">Katitas Co Ltd (8919 JP)</a> is looking to sell about US$308m worth of existing shares in its upcoming IPO. Selling shareholders are Advantage Partners, SMS AIV, JAPAN Ireland Investment Partners, Forty Three Investment Partnership, and AP Cayman Partners.In this insight, we will explore Japan's pre-owned home industry and how Katitas developed its niche, the company's past performance, and the impact of its recent acquisition. As usual, we will also run the IPO through our ECM framework.

Katitas Co Ltd (8919 JP) is looking to sell about US$308m worth of existing shares in its upcoming IPO. Selling shareholders are Advantage Partners, SMS AIV, JAPAN Ireland Investment Partners, Forty Three Investment Partnership, and AP Cayman Partners.In this insight, we will explore Japan's pre-owned home industry and how Katitas developed its niche, the company's past performance, and the impact of its recent acquisition. As usual, we will also run the IPO through our ECM framework.

Katitas IPO Review - No Discount for Reselling the Reseller of Pre-Owned Homes

Japan

Nomura Real Estate Holdings, Inc. sells and leases condominiums, residential houses, and office buildings.  The Company also manages REITs, real estate development, and consulting services.

Price Gauge
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Nomura Real Estate (3231 JP)

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

It appears Mitsui Fudosan and Yomiuri Land will be bidding for Tokyo Dome in order to fend off the activism of 9.7% holder Oasis. That's a pity....

Travis Lundy

A Potential Asian LBO Screening System

With a relatively full slate of large value takeovers in Developed Asia in the past year - often by parents but also by buyout funds - and the...

Travis Lundy

Nomura Real Estate Master Fund Placement: Ok at a Discount

Nomura Real Estate Master Fund, (3462 JP) (NMF) unveiled plans to raise up to JPY32.1 billion ($296 million) through a primary offering (95% of the...

Arun George

NTT (9432 JP) Buyout of NTT Urban (8933 JP). FINALLY.

Those who have been steady observers of the capital structure of NTT (Nippon Telegraph & Telephone) (9432 JP) have oft-wondered why NTT Urban...

Travis Lundy

Katitas IPO Review - No Discount for Reselling the Reseller of Pre-Owned Homes

Katitas Co Ltd (8919 JP) is looking to sell about US$308m worth of existing shares in its upcoming IPO. Selling shareholders are Advantage...

Zhen Zhou, Toh

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52-week Range

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