Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Kerry Logistics, Sanken Electric, Vocus Comms, Toa Oil, ThaiBev, Sharp

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

Unimat Retirement Community / Equity Bottom-Up

Given the succession of TOBs for Elderly Care companies in Japan we have put together an analysis of the valuations based on peer valuations paying attention to growth track records and future growth prospects. Growth has been consistent in the sector, but peers can broadly be separated into moderate growth names and high growth names. Below we examine the moderate growth names, Unimat, Tsukui, Benesse, Gakken, Saint-Care and Care Twentyone.

Given the succession of TOBs for Elderly Care companies in Japan we have put together an analysis of the valuations based on peer valuations paying attention to growth track records and future growth prospects. Growth has been consistent in the sector, but peers can broadly be separated into moderate growth names and high growth names. Below we examine the moderate growth names, Unimat, Tsukui, Benesse, Gakken, Saint-Care and Care Twentyone.

Elderly Care TOB Valuations – The Moderate Growth Names

Travis Lundy

On 8 February 2021, in announcing <a href="https://ssl4.eir-parts.net/doc/2398/ir_material_for_fiscal_ym10/94981/00.pdf" target="_blank" rel="noopener">Q3 earnings</a>, <a href="https://www.smartkarma.com/entities/tsukui-corp" target="_blank" data-smartkarma-citation="entities:13727:1" rel="noopener">Tsukui Corp (2398 JP)</a> also announced that an entity called MBPK Life LLC - formed by MBK Partners.
The Tender Offer is struck at ¥924/share, which is well below the highs reached two years ago. 
<section class="figure">
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/187/741/original/Screenshot+2021-02-09+at+9.57.56+PM.png?1612879091" class="editor-image img-responsive" data-smartkarma-image-id="187741"></figure>
</section>
This has been structured by MBK and the #1 shareholder so that the #1 shareholder Tsukui Kikaku does not tender at ¥924/share, but instead sells shares back to the company after the deal is complete, doing so at ¥753/share. This is presented as an effort to maximize the profits of the ordinary shareholders, but there is tax planning going on in the background. 
The average weighted Adjusted EV is a few turns lower than the headline EV Tender Offer Price to minorities, but that means the buyer probably has room for manoeuvre if pushed. This is not as egregiously bad as some other recent MBOs and take-privates in the space. 
Some of it depends on the nature of the assets. Is it an asset play or a service play. Strangely enough, the service plays seem to get a higher multiple. 
</section>
More below the fold.

On 8 February 2021, in announcing Q3 earnings, Tsukui Corp (2398 JP) also announced that an entity called MBPK Life LLC - formed by MBK Partners.
The Tender Offer is struck at ¥924/share, which is well below the highs reached two years ago. 




This has been structured by MBK and the #1 shareholder so that the #1 shareholder Tsukui Kikaku does not tender at ¥924/share, but instead sells shares back to the company after the deal is complete, doing so at ¥753/share. This is presented as an effort to maximize the profits of the ordinary shareholders, but there is tax planning going on in the background. 
The average weighted Adjusted EV is a few turns lower than the headline EV Tender Offer Price to minorities, but that means the buyer probably has room for manoeuvre if pushed. This is not as egregiously bad as some other recent MBOs and take-privates in the space. 
Some of it depends on the nature of the assets. Is it an asset play or a service play. Strangely enough, the service plays seem to get a higher multiple. 

More below the fold. 

Tsukui Holdings (2398) - Another CHEAP Japan Nursing Care Take-Private Deal

Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Unimat Retirement Community / Event-Driven

After the close on 9th February 2021, Japanese nursing care provider <a href="https://www.smartkarma.com/entities/unimat-retirement-community" target="_blank" data-smartkarma-citation="entities:1359:1" rel="noopener">Unimat Retirement Community (9707 JP)</a> announced (J-only) they have received a Management Buy-out Offer from Unimat Life Co., Ltd. The Deal will be structured as a Tender Offer. The Offer Price is ¥1,400/share in cash and the Tender Offer Period will be open from 10th February 2021 to 25th March 2021. UNIMAT Retirement Community specializes in the nursing care and retirement community businesses in Japan. They mainly provide services such as home-based general nursing care, specialized day care services, housing for the elderly, meal delivery services and life planning services. In this insight, we take a look at the fairness of the Offer and the likelihood of Deal completion.

After the close on 9th February 2021, Japanese nursing care provider Unimat Retirement Community (9707 JP) announced (J-only) they have received a Management Buy-out Offer from Unimat Life Co., Ltd. The Deal will be structured as a Tender Offer. The Offer Price is ¥1,400/share in cash and the Tender Offer Period will be open from 10th February 2021 to 25th March 2021. UNIMAT Retirement Community specializes in the nursing care and retirement community businesses in Japan. They mainly provide services such as home-based general nursing care, specialized day care services, housing for the elderly, meal delivery services and life planning services. In this insight, we take a look at the fairness of the Offer and the likelihood of Deal completion. 

MBO for Unimat (9707 JP): Deserves a Bump!

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/814/original/naakt-jpg.png?1583659197" class="editor-image img-responsive" data-smartkarma-image-id="121814"></figure>Source  • <a href="https://hollandbesthotels.wordpress.com/" target="_blank" rel="noopener">https://hollandbesthotels.wordpress.com/</a>
</div><blockquote><a href="http://www.berkshirehathaway.com/2001ar/2001letter.html" target="_blank" aria-describedby="external-disclaimer" rel="noopener">“You only find out who is swimming naked when the tide goes out. “</a>- Warren Buffett</blockquote>WHO'S SWIMMING NAKED? - This is the first part of three Insights that will in the spirit of Buffett's famous quip, attempt to highlight those Japanese companies that at the greatest risk from the 2020 Covid-19 recession. We will focus on three factors - the Audit Score, the Altman Z-Score and Cumulative Cash Flows - that individually, and in combination, can highlight those companies most at risk.<hr><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/877/original/2020-03-09_07-18-54.png?1583705968" class="editor-image img-responsive" data-smartkarma-image-id="121877"></figure><div class="content-caption">Source • Japan Analytics</div>PART 1: AUDIT SCORE - This factor is 'hiding in plain sight'. Since 2003, the Auditors' Opinion has been available in a format that allows 'parsing' into a database format and the creation of an 'Audit Score'. Although often a coincident rather than a leading indicator, by cumulating the score from year to year, patterns can emerge that highlight unfolding risks as in the case of <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" data-smartkarma-citation="entities:8244:1" rel="noopener">Leopalace21 Corp (8848 JP)</a> above.


Source  • https://hollandbesthotels.wordpress.com/
“You only find out who is swimming naked when the tide goes out. “- Warren BuffettWHO'S SWIMMING NAKED? - This is the first part of three Insights that will in the spirit of Buffett's famous quip, attempt to highlight those Japanese companies that at the greatest risk from the 2020 Covid-19 recession. We will focus on three factors - the Audit Score, the Altman Z-Score and Cumulative Cash Flows - that individually, and in combination, can highlight those companies most at risk.Source • Japan AnalyticsPART 1: AUDIT SCORE - This factor is 'hiding in plain sight'. Since 2003, the Auditors' Opinion has been available in a format that allows 'parsing' into a database format and the creation of an 'Audit Score'. Although often a coincident rather than a leading indicator, by cumulating the score from year to year, patterns can emerge that highlight unfolding risks as in the case of Leopalace21 Corp (8848 JP) above.   

🇯🇵 JAPAN • Who's Swimming Naked? > Part 1: Audit Score

Japan

Unimat Retirement Community Co., Ltd. mainly provides nursing care services to elderly. The company also operate real estate business along with sales of private brand products and publications for senior citizens.

Unimat Retirement Community (9707 JP)

Last Week in Event SPACE: Kerry Logistics, Sanken Electric, Vocus Comms, Toa Oil, ThaiBev, Sharp

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Elderly Care TOB Valuations – The Moderate Growth Names

We examine the fairness of pricing for TOBs on Unimat Retirement Community and Tsukui Holdings, comparing them to peers in the space.

Mio Kato

Tsukui Holdings (2398) - Another CHEAP Japan Nursing Care Take-Private Deal

Tsukui Hldgs is another cheap-ish nursing care take-private. These cases are where opportunistic PE Funds buy from catalyst-driven sellers. It's...

Travis Lundy

MBO for Unimat (9707 JP): Deserves a Bump!

Another Japanese nursing care Takeover at the wrong price. Large shareholders have a big stake so it will be difficult to block, but not...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Who's Swimming Naked? > Part 1: Audit Score

“You only find out who is swimming naked when the tide goes out. “- Warren BuffettWHO'S SWIMMING NAKED? - This is the first part of three Insights...

Campbell Gunn