Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p><a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener"><strong>Hitachi Ltd (6501 JP)</strong></a> has, for over a decade, been restructuring itself - selling subsidiaries here and buying them in there. There are two remaining after the recent sale of <strong><a href="https://www.smartkarma.com/entities/hitachi-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:14457:1" rel="noopener">Hitachi Chemical (4217 JP)</a></strong>, de-consolidation of <strong><a href="https://www.smartkarma.com/entities/hitachi-capital-corp" target="_blank" data-smartkarma-citation="entities:14410:1" rel="noopener">Hitachi Capital (8586 JP)</a></strong>, and buy-in of <strong><a href="https://www.smartkarma.com/entities/hitachi-high-tech-corporation" target="_blank" data-smartkarma-citation="entities:7046:1" rel="noopener">Hitachi High-Tech (8036 JP)</a></strong>. </p><p>The earnings call in May occasioned another presentation - that of the <span>update on </span><a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a.html" target="_blank" rel="noopener">Progress of the Mid-Term Management Plan</a><span> (with a webcast and a </span><a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a/f_200529apre.pdf" target="_blank" rel="noopener">presentation deck</a><span>), where the CEO responded to a question thusly:</span></p><div><blockquote>
<p><strong>QUESTION: </strong> Next question is regarding the, against the backdrop of COVID-19, is this going to have an impact on the reorganisation of the listed subsidiaries?</p>
<p><strong>ANSWER BY CEO HIGASHIHARA:  </strong>Regarding the listed subsidiary answer. <strong>Hitachi Construction Machinery</strong> and <strong>Hitachi Metals</strong> remain. And what we are telling the top management is that, in the time frame of fiscal year 2021 to 2024, we have to make sure these companies are able to compete globally. They are now evaluating this. It is not just a matter of COVID-19. Mid- to long-term growth strategy will be emphasised so the reorganisation strategy for the listed subsidiaries will not be impacted by COVID-19.</p>
</blockquote></div><div>
<p>FY 2021 to FY 2024 is a three year window starting next April, with FY2021 ending in March 2022 and FY2024 ending in March 2025.</p>
<div>
<p>That was May 29, less than five months ago and the situation was discussed in <a href="https://www.smartkarma.com/insights/hitachi-s-capital-case-liquidating-land-policy-holdings-what-about-the-subs" target="_blank" data-smartkarma-citation="insights:39920" rel="noopener">Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs?</a>.</p>
<p>Friday saw an article out of the Nikkei suggesting <strong>Hitachi</strong> might sell half its stake in <strong><a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a></strong> ("HCM") to a third party, at a discount, and that it might start a sale process on <a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener"><strong>Hitachi Metals (5486 JP</strong>)</a> "this month."</p>
</div>
<div>
<p>It strikes me as unlikely <strong>Hitachi</strong> would <em>themselves</em> be throwing in the towel 5 months later before the start of the time frame in which top management of the two subsidiaries are supposed to be able to compete globally. All of this is likely getting done with the will and direction of the subsidiaries themselves. This strikes me as some kind of agreement with management of <strong>HCM</strong> that they would not be averse to receiving expert help from outside while remaining listed. </p>
<p>This changes things.</p>
<p><strong>Hitachi</strong> becomes a different animal. It becomes a <em>non-stub trade</em> (parent vs significant value of listed short-able subs) for the first time in a very long time. And the optics change quite a bit.</p>
</div>
</div>

Hitachi Ltd (6501 JP) has, for over a decade, been restructuring itself - selling subsidiaries here and buying them in there. There are two remaining after the recent sale of Hitachi Chemical (4217 JP), de-consolidation of Hitachi Capital (8586 JP), and buy-in of Hitachi High-Tech (8036 JP). The earnings call in May occasioned another presentation - that of the update on Progress of the Mid-Term Management Plan (with a webcast and a presentation deck), where the CEO responded to a question thusly:
QUESTION:  Next question is regarding the, against the backdrop of COVID-19, is this going to have an impact on the reorganisation of the listed subsidiaries?
ANSWER BY CEO HIGASHIHARA:  Regarding the listed subsidiary answer. Hitachi Construction Machinery and Hitachi Metals remain. And what we are telling the top management is that, in the time frame of fiscal year 2021 to 2024, we have to make sure these companies are able to compete globally. They are now evaluating this. It is not just a matter of COVID-19. Mid- to long-term growth strategy will be emphasised so the reorganisation strategy for the listed subsidiaries will not be impacted by COVID-19.

FY 2021 to FY 2024 is a three year window starting next April, with FY2021 ending in March 2022 and FY2024 ending in March 2025.

That was May 29, less than five months ago and the situation was discussed in Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs?.
Friday saw an article out of the Nikkei suggesting Hitachi might sell half its stake in Hitachi Construction Machinery (6305 JP) ("HCM") to a third party, at a discount, and that it might start a sale process on Hitachi Metals (5486 JP) "this month."


It strikes me as unlikely Hitachi would themselves be throwing in the towel 5 months later before the start of the time frame in which top management of the two subsidiaries are supposed to be able to compete globally. All of this is likely getting done with the will and direction of the subsidiaries themselves. This strikes me as some kind of agreement with management of HCM that they would not be averse to receiving expert help from outside while remaining listed. 
This changes things.
Hitachi becomes a different animal. It becomes a non-stub trade (parent vs significant value of listed short-able subs) for the first time in a very long time. And the optics change quite a bit.



President

Thomas Coughlin

Coughlin Associates

Equity Bottom-Up

<p style="text-align: start;">Seagate is seeing a tapering off of the nearline HDD buy to support cloud services during the Covid-19 pandemic.  However, sales of these HDDs and mass storage HDDs for video and related big data applications will be continued drivers for sales into calendar 2021.  The company said that 63% of their HDD revenue in C3Q 2020 was from mass capacity HDDs, including nearline HDDs.  The company also expects some consumer rebound for HDDs in 2021.  In the long run, the conversion to majority mass capacity HDDs will raise ASPs and by 2024-2025 start to increase total HDD unit shipments, further driving revenue and profitability.</p>

Seagate is seeing a tapering off of the nearline HDD buy to support cloud services during the Covid-19 pandemic.  However, sales of these HDDs and mass storage HDDs for video and related big data applications will be continued drivers for sales into calendar 2021.  The company said that 63% of their HDD revenue in C3Q 2020 was from mass capacity HDDs, including nearline HDDs.  The company also expects some consumer rebound for HDDs in 2021.  In the long run, the conversion to majority mass capacity HDDs will raise ASPs and by 2024-2025 start to increase total HDD unit shipments, further driving revenue and profitability.

Seagate:  Long Term Opportunities with Mass Storage HDDs

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/sun-hung-kai-properties-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:111:1">Sun Hung Kai Properties (16 HK)</a> and <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:45:1">China Construction Bank H (939 HK)</a> while there was big short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" rel="noopener" data-smartkarma-citation="entities:28434:1">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" rel="noopener" data-smartkarma-citation="entities:14231:1">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:24409:1">Xiaomi Corp (1810 HK)</a>. Shorts jumped on Financials, Communication Services and Real Estate and covered position in Information Technology, Consumer Discretionary and Consumer Staples.</p></div><div><p>Japan saw an increase in shorts on <a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" rel="noopener" data-smartkarma-citation="entities:5718:1">Shiseido Company (4911 JP)</a>, <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12926:1">Kubota Corp (6326 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-real-estate-investment" target="_blank" rel="noopener" data-smartkarma-citation="entities:16867:1">Japan Real Estate Investment (8952 JP)</a> and a reduction is shorts on <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> and <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" rel="noopener" data-smartkarma-citation="entities:1496:1">Showa Denko K.K. (4004 JP)</a>. Sectorally, shorts increased in Real Estate, Industrials and Consumer Staples and shorts were covered in Communication Services.</p></div><div><p>Shorts in Korea increased led by Technology Hardware and Consumer Durables.</p></div><div><p>Shorts rose in Taiwan led by Semiconductors, Technology Hardware, and Materials while shorts covered small size in Capital Goods and Banks.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Tencent Holdings (700 HK), Sun Hung Kai Properties (16 HK) and China Construction Bank H (939 HK) while there was big short covering on Alibaba Group (9988 HK), Semiconductor Manufacturing (981 HK) and Xiaomi Corp (1810 HK). Shorts jumped on Financials, Communication Services and Real Estate and covered position in Information Technology, Consumer Discretionary and Consumer Staples.Japan saw an increase in shorts on Shiseido Company (4911 JP), Kubota Corp (6326 JP), Japan Real Estate Investment (8952 JP) and a reduction is shorts on Softbank Corp (9434 JP) and Showa Denko K.K. (4004 JP). Sectorally, shorts increased in Real Estate, Industrials and Consumer Staples and shorts were covered in Communication Services.Shorts in Korea increased led by Technology Hardware and Consumer Durables.Shorts rose in Taiwan led by Semiconductors, Technology Hardware, and Materials while shorts covered small size in Capital Goods and Banks.

Asia Short Interest Weekly - HK Financials and Property, Japan Real Estate, Korea Tech, Taiwan Semis

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

<p>What a surprise. Lotte Chemical, once pursuing Hitachi Chemical, is now owning a 4.46% stake in Showa Denko, which beat Lotte in the Hitachi Chemical race.</p><hr><p><em>Below is Lotte Chemical's regulatory filing for the 1Q quarterly report. Here, it says that it owns a 4.46% stake.</em></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/135/049/original/1.png?1590116665" class="editor-image img-responsive" data-smartkarma-image-id="135049"></figure><div class="content-caption">(Source: <a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20200515001484" target="_blank" rel="noopener">DART</a>)</div><hr><h2>How exactly did Lotte do it?</h2><p>Lotte disclosed in the same regulatory filing that it had begun to buy Showa Denko shares on March 13. In March, it had amassed a total of 3.8M shares (2.54%) for ₩88.4bil. Then in April, it had bought other 2.87M shares (1.92%) for ₩73.3bil, bringing up the total to 6.67M shares (4.46%).</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/135/051/original/2.png?1590116991" class="editor-image img-responsive" data-smartkarma-image-id="135051"></figure><h2>Block deals or bought directly in the market?</h2><p>There have been no official words on how Lotte had obtained these shares. But the local street speculates that Lotte had purchased the shares in the market. Below is the latest news report that quotes one industry source saying that Lotte had acquired the shares directly in the market in small quantities from March to April this year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/135/056/original/4.png?1590117494" class="editor-image img-responsive" data-smartkarma-image-id="135056"></figure><div class="content-caption">(Source: <a href="https://view.asiae.co.kr/article/2020052209375771677" target="_blank" rel="noopener">The Asia Business Daily</a> - May 22, 2020)</div>

What a surprise. Lotte Chemical, once pursuing Hitachi Chemical, is now owning a 4.46% stake in Showa Denko, which beat Lotte in the Hitachi Chemical race.Below is Lotte Chemical's regulatory filing for the 1Q quarterly report. Here, it says that it owns a 4.46% stake.(Source: DART)How exactly did Lotte do it?Lotte disclosed in the same regulatory filing that it had begun to buy Showa Denko shares on March 13. In March, it had amassed a total of 3.8M shares (2.54%) for ₩88.4bil. Then in April, it had bought other 2.87M shares (1.92%) for ₩73.3bil, bringing up the total to 6.67M shares (4.46%).Block deals or bought directly in the market?There have been no official words on how Lotte had obtained these shares. But the local street speculates that Lotte had purchased the shares in the market. Below is the latest news report that quotes one industry source saying that Lotte had acquired the shares directly in the market in small quantities from March to April this year.(Source: The Asia Business Daily - May 22, 2020)

Lotte Chemical Is Buying Showa Denko Shares in Market: Now Holds 4.46%

<p>Two weeks ago saw <a href="https://www.smartkarma.com/entities/hitachi-high-technologies-co" target="_blank" data-smartkarma-citation="entities:7046:1" rel="noopener">Hitachi High Technologies Co (8036 JP)</a> become the largest squeezeout in Japan (that I can find or recall) at ¥103.3bn. </p><p>Today saw the results of the <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K K (4004 JP)</a> Tender Offer for <a href="https://www.smartkarma.com/entities/hitachi-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:14457:1" rel="noopener">Hitachi Chemical (4217 JP)</a> announced, with Showa Denko obtaining 182,412,507 shares or 87.61% of shares outstanding. </p><p>That would mean a residual outstanding position of ¥118.6bn worth of shares, making it the new largest squeezeout.</p><p>But the detail noted there makes the practice and timing of the selldown by passive funds different than Hitachi High Tech's.</p>

Two weeks ago saw Hitachi High Technologies Co (8036 JP) become the largest squeezeout in Japan (that I can find or recall) at ¥103.3bn. Today saw the results of the Showa Denko K K (4004 JP) Tender Offer for Hitachi Chemical (4217 JP) announced, with Showa Denko obtaining 182,412,507 shares or 87.61% of shares outstanding. That would mean a residual outstanding position of ¥118.6bn worth of shares, making it the new largest squeezeout.But the detail noted there makes the practice and timing of the selldown by passive funds different than Hitachi High Tech's.

Hitachi Chem (4217); Tender Complete, NEW Largest Japan Squeezeout Ever?

Japan

Resonac Holdings Corporation manufactures and distributes chemical products. The Company produces synthetic resins, petrochemical products, inorganics, and other related products. Resonac Holdings also produces ceramics, metals, carbon, electronic materials, and other products.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Resonac Holdings (4004 JP)

The Right Trade May Be Hitachi

Hitachi is getting to the end of its Core vs Non-Core restructuring campaign. Two remaining subs have newsflow, and earnings announcements shortly....

Travis Lundy

Seagate: Long Term Opportunities with Mass Storage HDDs

Seagate Technology quarterly results show 63% of revenue from Mass Capacity HDDs and long term mass capacity HDD growth, demonstrating medium and...

Thomas Coughlin

Asia Short Interest Weekly - HK Financials and Property, Japan Real Estate, Korea Tech, Taiwan Semis

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong...

Brian Freitas

Lotte Chemical Is Buying Showa Denko Shares in Market: Now Holds 4.46%

What a surprise. Lotte Chemical, once pursuing Hitachi Chemical, is now owning a 4.46% stake in Showa Denko, which beat Lotte in the Hitachi...

Sanghyun Park

Hitachi Chem (4217); Tender Complete, NEW Largest Japan Squeezeout Ever?

Two weeks ago saw Hitachi High Technologies Co (8036 JP) become the largest squeezeout in Japan (that I can find or recall) at ¥103.3bn. Today saw...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)