Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

Nomura Research Institute / Equity Bottom-Up

<p>On 21 June 2021, <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> announced (<a href="https://ir.nri.com/jp/ir/news/auto_20210621452515/pdfFile.pdf" target="_blank" rel="noopener">link</a>) a buyback program of up to 20,000,000 shares (3.30% of shares out) spending up to ¥60 billion, with the program running from 22 June 2021 to 30 December 2021, with possible buying on market and on ToSTNeT-3, but excluding dates in the 10 days around the day after the quarterly results announcements. </p><p>The company ALSO announced a ToSTNeT-3 buyback tomorrow morning for up to 16,925,200 shares at today's closing price of ¥3,545/share. </p><p>That 16.925mm shares at that price = ¥59,999,834,000 so one can assume that if the ToSTNeT-3 buyback is completed to the full extent, that will mean the buyback program will be done tomorrow before the market opens.</p><p>The announcement suggested that <a href="https://www.smartkarma.com/entities/nomura-holdings-inc" target="_blank" data-smartkarma-citation="entities:742:1" rel="noopener">Nomura Holdings (8604 JP)</a> intended to sell as many as 14.105 million shares in the buyback leaving 2.815mm shares for other holders if they want to sell Monday's close. </p><p>But I remind readers that a) short selling is allowed, and b) it is entirely <em>pro rata</em> (with some niggling little procedural exceptions) so if people stepped in to sell, they would probably get a decent portion of their offer sold at that price. </p><p>More below the fold. </p>

On 21 June 2021, Nomura Research Institute Ltd (4307 JP) announced (link) a buyback program of up to 20,000,000 shares (3.30% of shares out) spending up to ¥60 billion, with the program running from 22 June 2021 to 30 December 2021, with possible buying on market and on ToSTNeT-3, but excluding dates in the 10 days around the day after the quarterly results announcements. The company ALSO announced a ToSTNeT-3 buyback tomorrow morning for up to 16,925,200 shares at today's closing price of ¥3,545/share. That 16.925mm shares at that price = ¥59,999,834,000 so one can assume that if the ToSTNeT-3 buyback is completed to the full extent, that will mean the buyback program will be done tomorrow before the market opens.The announcement suggested that Nomura Holdings (8604 JP) intended to sell as many as 14.105 million shares in the buyback leaving 2.815mm shares for other holders if they want to sell Monday's close. But I remind readers that a) short selling is allowed, and b) it is entirely pro rata (with some niggling little procedural exceptions) so if people stepped in to sell, they would probably get a decent portion of their offer sold at that price. More below the fold. 

Nomura Research Institute ToSTNeT-3 Buyback

David Blennerhassett

Event-Driven

<div>
<p>This week in StubWorld ...</p>
</div>
<div>
<div class="content-highlight">
<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>
</div>
</div>
<div>
<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>
</div>
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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>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


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

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

<div>
<p>In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.</p>
</div>
<div>
<div>
<div class="content-highlight">
<p><strong>What's Original?</strong></p>
<ul style="list-style-type: disc;">
<li>We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.</li>
<li>Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.</li>
<li>For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. </li>
</ul>
</div>
</div>
</div>
<div>
<h3>Insight Flow</h3>
</div>
<div>
<ul style="list-style-type: disc;">
<li>Live Dashboard</li>
<li> Methodology
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Universe</li>
<li>Back Test Results
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Model Results
<ul style="list-style-type: circle;">
<li>Summary Statistics</li>
<li>Companies with High Probability of Buyback Raise</li>
<li>Companies with High Probability of Buyback Cut</li>
</ul>
</li>
<li>Buyback Timing</li>
<li>Model Risks &amp; Limitations</li>
<li>Conclusion</li>
</ul>
</div>


In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.




What's Original?

We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.
Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.
For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. 





Insight Flow



Live Dashboard
 Methodology

Buyback Raise Model
Buyback Cut Model


Universe
Back Test Results

Buyback Raise Model
Buyback Cut Model


Model Results

Summary Statistics
Companies with High Probability of Buyback Raise
Companies with High Probability of Buyback Cut


Buyback Timing
Model Risks &amp; Limitations
Conclusion



Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>Our best and worst pair from Wednesday's 54 results and 32 forecasts/revisions announcements is <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a> and <a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a>.  A second pairing would be the OverBought <a href="https://www.smartkarma.com/entities/nomura-research-institute-ltd" target="_blank" data-smartkarma-citation="entities:18129:1" rel="noopener">Nomura Research Institute (4307 JP),</a> and <a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">CyberAgent (4751 JP)</a>. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/949/original/2021-01-28_05-41-00.png?1611780073" class="editor-image img-responsive" data-smartkarma-image-id="184949"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/950/original/2021-01-28_05-41-43.png?1611780117" class="editor-image img-responsive" data-smartkarma-image-id="184950"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/951/original/2021-01-28_05-43-57.png?1611780262" class="editor-image img-responsive" data-smartkarma-image-id="184951"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/952/original/2021-01-28_05-44-48.png?1611780302" class="editor-image img-responsive" data-smartkarma-image-id="184952"></figure></section>
</div><div class="content-caption">  Source for all charts &amp; tables: Japan Analytics</div>

• BEST &amp; WORST •
Our best and worst pair from Wednesday's 54 results and 32 forecasts/revisions announcements is Fanuc (6954 JP) and Shin Etsu Chemical (4063 JP).  A second pairing would be the OverBought Nomura Research Institute (4307 JP), and CyberAgent (4751 JP). 

  Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​​​​​​27 Fanuc, Shin-Etsu....

<p>On Friday after the close, the TSE belatedly released its annual TSE Free Float Weight adjustments for stocks with fiscal year ends in March. Normally this comes out in October, and is executed at the end of October, but for the 2020 Free Float Weight Rebalance, as per an announcement made by the TSE on 22 June 2020, special measures were taken in light of the covid-19 pandemic, and the rebalance was delayed by 3 months. </p>
<p>There are no major surprises that I see. Some buybacks from the market have led to slightly lower FFW coefficients. Some secondary offerings have led to increases in FFW coefficients. As discussed in <a href="https://www.smartkarma.com/insights/japan-post-insurance-update-three-reasons-to-buy-any-overhang-slightly-higher" target="_blank" data-smartkarma-citation="insights:46862" rel="noopener">Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher</a> on Friday, one of the big names to the buy side is indeed <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a>.</p>
<p>For more on the rebalance, read on.</p>
<p><em>[A spreadsheet of all names and impacts is attached at the bottom of the insight]</em></p>

On Friday after the close, the TSE belatedly released its annual TSE Free Float Weight adjustments for stocks with fiscal year ends in March. Normally this comes out in October, and is executed at the end of October, but for the 2020 Free Float Weight Rebalance, as per an announcement made by the TSE on 22 June 2020, special measures were taken in light of the covid-19 pandemic, and the rebalance was delayed by 3 months. 
There are no major surprises that I see. Some buybacks from the market have led to slightly lower FFW coefficients. Some secondary offerings have led to increases in FFW coefficients. As discussed in Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher on Friday, one of the big names to the buy side is indeed Japan Post Insurance (7181 JP).
For more on the rebalance, read on.
[A spreadsheet of all names and impacts is attached at the bottom of the insight]

The Delayed TOPIX FFW Rebalance: $32bn To Trade

Japan

Nomura Research Institute, Ltd. provides information technology, research, consulting, and analyzing for business strategy decision-making.  The Company also provides application software for system operation services.

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Nomura Research Institute (4307 JP)

Nomura Research Institute ToSTNeT-3 Buyback

NRI is one of the higher-multiple (forward consensus EV/EBIT or EV/EBITDA) Japanese IT service companies. There is a PRE-OPEN ToSTNeT-3 buyback...

Travis Lundy

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

Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

A predictive quantitative model for Asian companies to help determine which companies are likely to raise/cut buybacks in future.

Ankit Agrawal, CFA

🇯🇵 JAPAN • Results & Revisions 01/27 Fanuc, Shin-Etsu....

Our best and worst pair from Wednesday's 54 results and 32 forecasts/revisions announcements is Fanuc (6954 JP) and Shin Etsu Chemical (4063 JP).

Campbell Gunn

The Delayed TOPIX FFW Rebalance: $32bn To Trade

The Big Annual TOPIX FFW Rebalance of October 2020 was delayed until January. The results were not terribly surprising. Nevertheless, it is a big...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

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Nomura Research Institute ToSTNeT-3 Buyback

NRI is one of the higher-multiple (forward consensus EV/EBIT or EV/EBITDA) Japanese IT service companies. There is a *PRE-OPEN* ToSTNeT-3 buyback...

Travis Lundy

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

Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

A predictive quantitative model for Asian companies to help determine which companies are likely to raise/cut buybacks in future.

Ankit Agrawal, CFA

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​​​​​​27 Fanuc, Shin-Etsu....

Our best and worst pair from Wednesday's 54 results and 32 forecasts/revisions announcements is Fanuc (6954 JP) and Shin Etsu Chemical (4063 JP).

Campbell Gunn

The Delayed TOPIX FFW Rebalance: $32bn To Trade

The Big Annual TOPIX FFW Rebalance of October 2020 was delayed until January. The results were not terribly surprising. Nevertheless, it is a big...

Travis Lundy

NRI is one of the higher-multiple (forward consensus EV/EBIT or EV/EBITDA) Japanese IT service companies. There is a PRE-OPEN ToSTNeT-3 buyback...

🇯🇵 JAPAN • Results & Revisions 01/27 Fanuc, Shin-Etsu....