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

SmallCap Joban Kaihatsu Founder Tries a Free MBO

The Amended FamilyMart Document Is A MUST READ For Investor-Stewards

Quiddity Advisors

Event-Driven

In late November 2020, the Chairman and a senior executive of <a href="https://www.smartkarma.com/entities/joban-kaihatsu-co-ltd" target="_blank" data-smartkarma-citation="entities:14588:1" rel="noopener">Joban Kaihatsu (1782 JP)</a>  - a smallcap regional construction company with lots of government contracts - announced a Tender Offer to buy out the company. This happens all the time. While it happens less often - though still with disturbing regularity - the more disturbing part of this is that he essentially tried to do it for free. As discussed in <a href="https://www.smartkarma.com/insights/smallcap-joban-kaihatsu-founder-tries-a-free-mbo" target="_blank" data-smartkarma-citation="insights:45515" rel="noopener">SmallCap Joban Kaihatsu Founder Tries a Free MBO</a>, the Tender Offer Price of ¥7,800/share was less than the value of the net cash + securities positions as of end-September 2020 (the most recent accounting period pre-Tender Offer). The value of net cash + securities was ¥8,933/share. Tangible Book Value per share was ¥12,233/share. The "management forecast" on which the "fair value" DCF was built was for higher revenues in the years ahead compared to years past, but also a reduction in profitability of 70%, which would continue for seven years. Even then, the average EBITDA (very little actual depreciation or amortization) for the next seven years was about US$8mm a year (so much lower FCF effectively hides future expensing of capital goods) and so.. obviously... the DCF of that EBITDA was worth... less than zero. Shareholders weren't having it. Shares started trading above terms, and haven't traded lower than terms since they started trading in the auction market (after two days of limit up (and the second day was above terms too)).<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/185/original/Screenshot+2021-01-23+at+11.45.31+AM.png?1611373555" class="editor-image img-responsive" data-smartkarma-image-id="184185"></figure></section>Now we have new news. Just before the close yesterday, the bidder raised its bid to ¥9,000/share, and extended the Tender Offer another 11 days to 9 February (they extended it in December from 28 Dec to 25 Jan). I think the answer here is still going to be... we'll see.<div class="content-remarks">[yes, the title is a semi-oblique reference to a large owner of the shares who has purchased its stake since the Tender Offer was launched, but I have no understanding of their intentions.]</div>

In late November 2020, the Chairman and a senior executive of Joban Kaihatsu (1782 JP)  - a smallcap regional construction company with lots of government contracts - announced a Tender Offer to buy out the company. This happens all the time. While it happens less often - though still with disturbing regularity - the more disturbing part of this is that he essentially tried to do it for free. As discussed in SmallCap Joban Kaihatsu Founder Tries a Free MBO, the Tender Offer Price of ¥7,800/share was less than the value of the net cash + securities positions as of end-September 2020 (the most recent accounting period pre-Tender Offer). The value of net cash + securities was ¥8,933/share. Tangible Book Value per share was ¥12,233/share. The "management forecast" on which the "fair value" DCF was built was for higher revenues in the years ahead compared to years past, but also a reduction in profitability of 70%, which would continue for seven years. Even then, the average EBITDA (very little actual depreciation or amortization) for the next seven years was about US$8mm a year (so much lower FCF effectively hides future expensing of capital goods) and so.. obviously... the DCF of that EBITDA was worth... less than zero. Shareholders weren't having it. Shares started trading above terms, and haven't traded lower than terms since they started trading in the auction market (after two days of limit up (and the second day was above terms too)).Now we have new news. Just before the close yesterday, the bidder raised its bid to ¥9,000/share, and extended the Tender Offer another 11 days to 9 February (they extended it in December from 28 Dec to 25 Jan). I think the answer here is still going to be... we'll see.[yes, the title is a semi-oblique reference to a large owner of the shares who has purchased its stake since the Tender Offer was launched, but I have no understanding of their intentions.]

Joban Kaihatsu MBO Price Bumped, Tender Extended: Still Not Rolling In Clover