Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Silchester has written letters to four Japanese regional banks where they hold large stakes asking for higher dividends and payout ratios. It has proposed a special div AGM agenda item.</li>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-iwate-ltd" target="_blank" data-smartkarma-citation="entities:6171:1" rel="noopener">Bank Of Iwate (8345 JP)</a> is nearly 40% held by cross-holders and government-affiliated entities, and Real World Float is less than 50%. Winning at the AGM is tough.</li>
<li>The collection of banks is mixed. But this one is cheap. Cheap as chips. Or cheaper.</li>
</ul>


Silchester has written letters to four Japanese regional banks where they hold large stakes asking for higher dividends and payout ratios. It has proposed a special div AGM agenda item.

Bank Of Iwate (8345 JP) is nearly 40% held by cross-holders and government-affiliated entities, and Real World Float is less than 50%. Winning at the AGM is tough.
The collection of banks is mixed. But this one is cheap. Cheap as chips. Or cheaper.


JAPAN ACTIVISM: Silchester Goes After Bk of Iwate - Cheaper Than Chips

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Wisdomtree Japan Hedged Eq / Technical Analysis

<p>Market dynamics continue to send mixed signals, but the bottom line is that not one MSCI ACWI Sector is breaking down, and important price support levels are holding in the US, Europe, and Japan. Additionally, the MSCI ACWI, ACWI ex-US, and EAFE indexes all remain above critical support levels. Until supports start to break we cannot be bearish. It is also worth noting that various indicators could be making a turn for the better, including early signs of interest rates bottoming in the US and Germany, a potential false breakdown in crude oil, and high yield spreads leveling-out.</p>

Market dynamics continue to send mixed signals, but the bottom line is that not one MSCI ACWI Sector is breaking down, and important price support levels are holding in the US, Europe, and Japan. Additionally, the MSCI ACWI, ACWI ex-US, and EAFE indexes all remain above critical support levels. Until supports start to break we cannot be bearish. It is also worth noting that various indicators could be making a turn for the better, including early signs of interest rates bottoming in the US and Germany, a potential false breakdown in crude oil, and high yield spreads leveling-out.

Critical Supports Holding in the US, Europe, & Japan; Buying Health Care, Utilities, Materials, Tech

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.

Thematic (Sector/Industry)

<p>There are signs of movement in Japan in order to try and hit its 2050 carbon neutrality goal. The clearest sign was the recent restart of an old nuclear reactor and nuclear power is likely to be a key contributor towards this goal, however, in addition to solar, onshore and offshore wind and geothermal, on a timeline that long, hydrogen may actually be the key play here.</p>

There are signs of movement in Japan in order to try and hit its 2050 carbon neutrality goal. The clearest sign was the recent restart of an old nuclear reactor and nuclear power is likely to be a key contributor towards this goal, however, in addition to solar, onshore and offshore wind and geothermal, on a timeline that long, hydrogen may actually be the key play here.

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

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/082/original/2020-11-30_05-30-46.png?1606681863" class="editor-image img-responsive" data-smartkarma-image-id="175082"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics </div><p><strong>FOUR QUADRANTS</strong> - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p><ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS </strong>- Companies with low Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS</strong> - Companies with high Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUNDS</strong> - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong> - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul><p>In the two Contrarian quadrants and especially for Contrarian Sells, companies can remain outliers for extended periods; however profitable Contrarian Sells in the last year have been <a href="https://www.smartkarma.com/entities/taiyo-nippon-sanso-corp" target="_blank" data-smartkarma-citation="entities:15756:1" rel="noopener">Nippon Sanso (4091 JP)</a> and <a href="https://www.smartkarma.com/entities/sekisui-house-ltd" target="_blank" data-smartkarma-citation="entities:4508:1" rel="noopener">Sekisui House (1928 JP)</a>. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/185/original/2020-11-26_08-13-23.png?1606346017" class="editor-image img-responsive" data-smartkarma-image-id="174185"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/187/original/2020-11-26_08-18-21.png?1606346313" class="editor-image img-responsive" data-smartkarma-image-id="174187"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN SELLS</a></strong>- In the<strong> DETAIL</strong> below, we shall review the current 'crop' of Contrarian Sells for potential opportunities. Subsequent Insights in this mini-series will look at the Turnarounds and Ex-Growth quadrants before concluding with one '2021 High Conviction' recommendation. The first Insight in the Series can be found here - <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">Contrarian Buys</a>.</p>

Source for all charts &amp; tables: Japan Analytics FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants and especially for Contrarian Sells, companies can remain outliers for extended periods; however profitable Contrarian Sells in the last year have been Nippon Sanso (4091 JP) and Sekisui House (1928 JP). CONTRARIAN SELLS- In the DETAIL below, we shall review the current 'crop' of Contrarian Sells for potential opportunities. Subsequent Insights in this mini-series will look at the Turnarounds and Ex-Growth quadrants before concluding with one '2021 High Conviction' recommendation. The first Insight in the Series can be found here - Contrarian Buys.

🇯🇵 JAPAN • Four Quadrants - Contrarian Sells

Japan

Nippon Sanso Holdings produces various kinds of industrial gases including oxygen, argon, and nitrogen.  The Company also manufactures frozen foods and thermos.

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Nippon Sanso Holdings (4091 JP)

JAPAN ACTIVISM: Silchester Goes After Bk of Iwate - Cheaper Than Chips

Bank of Iwate is the smallest (so far) of Silchester Int'l Investors' regional bank AGM proposal letters. It owns 11%. This one is tough too, but...

Travis Lundy

Critical Supports Holding in the US, Europe, & Japan; Buying Health Care, Utilities, Materials, Tech

Various indicators are making a turn for the better, including early signs of interest rates bottoming in the US and Germany, a false breakdown in...

Vermilion Research

Japan Hydrogen Plays

As interest continues to build in Japan's hydrogen economy plans it is still difficult to identify attractive thematic plays on the idea... except...

Mio Kato

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 • Four Quadrants - Contrarian Sells

CONTRARIAN SELLS - In the DETAIL below, we shall review the current 'crop' of Contrarian Sells for potential opportunities.

Campbell Gunn

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