Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.</li>
<li>If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.</li>
<li>I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.</li>
</ul>


Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.
If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.
I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.


Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> has announced two buyback programs this year of ¥50bn each. <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a> announced one in May for ¥30bn. </li>
<li>The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.</li>
<li>Buyback impact-related trade timing has worked for Canon. Ricoh's buyback ends imminently. There may be a trade to do here.</li>
</ul>



Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn. 
The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
Buyback impact-related trade timing has worked for Canon. Ricoh's buyback ends imminently. There may be a trade to do here.


Canon Buyback Done, Ricoh's Done Shortly, Back To Your Regularly Scheduled Program

<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>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first "second buyback within a single year" since 2014.</li>
<li>History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.</li>
<li>Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical "quality premium."</li>
</ul>



Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first "second buyback within a single year" since 2014.
History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical "quality premium."


<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn. </li>
<li>The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies. </li>
<li>There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade. </li>
</ul>



Canon Inc (7751 JP) has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn. 
The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies. 
There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade. 


Looking at Canon Buyback Dynamics History - Patterns Vs Peers Gives Execution Hints

Japan

RICOH COMPANY, LTD. manufactures and markets office automation equipment, electronic devices, and photographic instruments.  The Company's diverse product line includes facsimiles, image scanners, printers, digital cameras, and personal computers, as well as a full range of analog, digital, and color copiers. Ricoh operates with a network of sales offices and tie-ups worldwide.

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Ricoh Company Ltd (7752 JP)

Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

Bidders are approaching 2nd Round deadlines, and news/comments are starting to seep out. Expect more. I expect a decision at/after H1 results. If...

Travis Lundy

Canon Buyback Done, Ricoh's Done Shortly, Back To Your Regularly Scheduled Program

Canon's buyback ended at end-August. Ricoh's ends shortly. The post-buyback selling 'shadow' on Canon should be finished shortly. Ricoh will simply...

Travis Lundy

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

Canon (7751) - Buyback Progress Update

Canon recently set a 2nd ¥50bn buyback for 2022. Canon Buybacks historically take 15-20 days. This is on track for 15-18. Usually Canon lags peers...

Travis Lundy

Looking at Canon Buyback Dynamics History - Patterns Vs Peers Gives Execution Hints

Canon has done 6 buybacks in the last 15 years. They all have particular terms and patterns in common and that can help guide execution.

Travis Lundy

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