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.

<ul>
<li>Bank of Kyoto (8369 JP) has been the poster child for "deep value" Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap. </li>
<li>Every year, twice a year (end of May and early December) Bank of Kyoto (8369 JP) releases a document for a meeting with analysts and press called Information Meeting.</li>
<li>This year's is a <em>little</em> different in that it proposes sales of 10% of its equity portfolio. It's "small" but worth thinking about. </li>
</ul>


Bank of Kyoto (8369 JP) has been the poster child for "deep value" Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap. 
Every year, twice a year (end of May and early December) Bank of Kyoto (8369 JP) releases a document for a meeting with analysts and press called Information Meeting.
This year's is a little different in that it proposes sales of 10% of its equity portfolio. It's "small" but worth thinking about. 


Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<ul>
<li>Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa. </li>
<li>In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality. </li>
<li>At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.</li>
</ul>


Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa. 
In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality. 
At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.


Omron – Better IAS Results Conceal Healthcare Segment Underperformance

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<ul>
<li>
<a href="https://www.smartkarma.com/entities/giant-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:9014:1" rel="noopener">Giant Manufacturing (9921 TT)</a> , one of Shimano's top customers, is reportedly having a production issue and can only sort it out by the end of this year. </li>
<li>
<a href="https://www.smartkarma.com/entities/shimano-inc" target="_blank" data-smartkarma-citation="entities:3777:1" rel="noopener">Shimano Inc (7309 JP)</a> is no longer Japan-centric but a global company with customers all over the world. </li>
<li>Low valuation gives an illusion that it is cheap historically but expects a bumpy road ahead.</li>
</ul>



Giant Manufacturing (9921 TT) , one of Shimano's top customers, is reportedly having a production issue and can only sort it out by the end of this year. 

Shimano Inc (7309 JP) is no longer Japan-centric but a global company with customers all over the world. 
Low valuation gives an illusion that it is cheap historically but expects a bumpy road ahead.


Japan

OMRON Corporation manufactures electronic components, equipment and systems used for factory automation. The Company provides products and services in a variety of fields including industrial automation, electronic components, automotive electronics, social systems such as ticket gate machines and traffic control, and healthcare.

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Omron Corp (6645 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

Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)

Bk of Kyoto holds an "Information Meeting" twice a year. May's comes two weeks after earnings. This one holds a surprise with a new plan to reduce...

Travis Lundy

Omron – Better IAS Results Conceal Healthcare Segment Underperformance

Omron results were slightly weak and guidance underwhelmed. FA sector results are increasingly pointing to weakness and elevated multiples create...

Mio Kato

Shimano (7309): Bumpy

China lockdown also impacts Shimano negatively. When PE has dropped more than the share price it is followed by a sideways movement of the share...

Henry Soediarko

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