Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd

Honshu Chemical - What WAS the Wrong Price Gets Wronger

Honshu Chemical (4115) - An Embarrassment of Riches

Quiddity Advisors

Event-Driven

In mid-November 2020, <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a> announced a transaction to take out minorities in jointly-held subsidiary <a href="https://www.smartkarma.com/entities/honshu-chemical-industry-co" target="_blank" data-smartkarma-citation="entities:9094:1" rel="noopener">Honshu Chemical Industry Co (4115 JP)</a>. The price was at a 43% premium to then-traded price and a 20-year high. It was also<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/873/original/Screenshot+2021-05-13+at+10.55.05+AM.png?1620874520" class="editor-image img-responsive" data-smartkarma-image-id="205873"></figure></section>At the time, in <a href="https://www.smartkarma.com/insights/honshu-chemical-4115-an-embarrassment-of-riches" target="_blank" data-smartkarma-citation="insights:45197" rel="noopener">Honshu Chemical (4115) - An Embarrassment of Riches</a> I said...<blockquote>The result is a governance embarrassment for the two major acquirers, and the target company itself. </blockquote>The two companies, which combined owned 54% of Honshu Chemical, had said <blockquote>the Target has a high potential for growth with its various high-technologies in domains of high-performance monomer[s] related to ICT, Mobility and Healthcare.</blockquote>Then they decided that the "fair" value of the company (the Tender Offer Price) was decided at a 1-year forward EV/EBITDA of 2.7x (where net receivables and inventory was another 1.5x EBITDA), and a 1-year ex-cash PER of 3.7x. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/993/original/trump+low+price.gif?1620903117" class="editor-image img-responsive" data-smartkarma-image-id="205993"></figure></section>Three months later the company revised up its forecasts for EBIT and Net Profit for the full year this year by 25% and 33% respectively in February. This company has minimal debt, huge net cash. If you were to pay out the net cash, this 'fuddy-duddy' cyclical trades at 7x earnings, less than book, with a 16% ROE, and near 50% EBITDAROE.And it "has a high potential for growth."The procedures were expected to be completed in May, and then the tender offer would start. The company reports tomorrow 14 May after the close. Since the announcement, the two parent companies' total share return has averaged +30%. Since the original announcement, Honshu Chemical earnings forecasts are up 33% a share. A basket of mostly Chinese peer pure plays has outperformed Shanghai Composite by 13% since the announcement. This was always bumpable. This remains highly bumpable. With apologies to some of my (non-fella) readers...<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/925/original/more+cowbell.gif?1620889670" class="editor-image img-responsive" data-smartkarma-image-id="205925"></figure></section>

In mid-November 2020, Mitsui &amp; Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) announced a transaction to take out minorities in jointly-held subsidiary Honshu Chemical Industry Co (4115 JP). The price was at a 43% premium to then-traded price and a 20-year high. It was alsoAt the time, in Honshu Chemical (4115) - An Embarrassment of Riches I said...The result is a governance embarrassment for the two major acquirers, and the target company itself. The two companies, which combined owned 54% of Honshu Chemical, had said the Target has a high potential for growth with its various high-technologies in domains of high-performance monomer[s] related to ICT, Mobility and Healthcare.Then they decided that the "fair" value of the company (the Tender Offer Price) was decided at a 1-year forward EV/EBITDA of 2.7x (where net receivables and inventory was another 1.5x EBITDA), and a 1-year ex-cash PER of 3.7x. Three months later the company revised up its forecasts for EBIT and Net Profit for the full year this year by 25% and 33% respectively in February. This company has minimal debt, huge net cash. If you were to pay out the net cash, this 'fuddy-duddy' cyclical trades at 7x earnings, less than book, with a 16% ROE, and near 50% EBITDAROE.And it "has a high potential for growth."The procedures were expected to be completed in May, and then the tender offer would start. The company reports tomorrow 14 May after the close. Since the announcement, the two parent companies' total share return has averaged +30%. Since the original announcement, Honshu Chemical earnings forecasts are up 33% a share. A basket of mostly Chinese peer pure plays has outperformed Shanghai Composite by 13% since the announcement. This was always bumpable. This remains highly bumpable. With apologies to some of my (non-fella) readers...

Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover