Last Week in Event SPACE: Japan Post Ins, Straits Trad., Invesco Office, Chong Hing, Toshiba, JD.com

Japan Post Insurance (7181 JP) (Mkt Cap: $8.4bn; Liquidity: $25mn)

On the 16 May, Japan Post Insurance announced a buyback of up to 162,906,300 shares (29.0%) spending up to ¥439.8bn. This was done in a ToSTNeT-3 transaction this past Monday. Japan Post Holdings announced they would sell a similar number of shares into the buy order, and would sell an additional 400,000 shares held in a trust. By so doing, the percentage of Japan Post Insurance voting rights held by Japan Post Holdings would drop to 49.90%. Despite the signalling by the JPH last November which was quickly followed in December by the release/leak of a plan to buy back JPI shares to get JPH below 50%, and the substantial shift in interest rates lifting EEV, JPI hasn't performed that well since December. But that period was probably the time to buy.

• The dividend is up to ¥90/share, or 4.1% as per the previous Friday's close. Over time, the Panel on Postal Privatization has urged JPH to sell down to nothing. As long as JPI shares are this inexpensive (say below 0.4-0.5x) on a Price/EEV basis), expect the JPI to be willing to buy back more shares over time. That is a lot of accretion as long as the shares are substantially lower than say 0.70x Price/EEV (where, depending on the RoEV and the recent contribution of economic variance, a buffer starts to be warranted).
• If you have been long and waiting for this to get out, expect a bounce. Travis Lundy would not sell too soon. In the short-term, the shares should bounce because I half think people were not really expecting it to get done - that December's leak was an ill-fated trial balloon. ¥2660-2930/share would be an estimate of like-for-like Price/EEV for JPI as of 16 December prior to the newsleak, not considering the lifting of restrictions and getting out of the penalty box.
• If you are not long, consider this the trigger to think about why not. This is not a big market cap. There is much less float than you think there is. But this has both rebound growth, and new product new limits growth ahead of it. It pays a decent dividend. This is now a long-term prospect as a desirable asset. Business growth. Accretion. Undervaluation.

(link to Travis' insight: Japan Post Insurance - It's ON! Buyback, Huge Accretion, Restrictions Lifted. What's Not To Like?)

Yue Xiu (the investment arm of the Guangzhou municipal government) has made an Offer, by way of a Scheme, for Chong Hing shares not owned, at HK$20.80/share, a 51.2% premium to last close, and a 97% premium to the day preceding the last trading day. The Cancellation Price, which is a 10.1% discount to the NAV, will NOT be increased. Standard Scheme conditions apply. Chong Hing is Hong Kong-incorporated, therefore there is no headcount test.

• A final dividend of HK$0.23/share was declared at Chong Hing's final results on the 4 March, and approved by shareholders the EGM on the 14 May. That dividend will be added to the Cancellation Price and will be paid on 8 June 2021 to shareholders whose names appear on the register as at the close of business on 31 May 2020. So the effective Cancellation Price is HK$21.03/share if you own on 31 May (if you purchase for record date after 31 May, consideration is HK$20.80/share).
• Chong Hing's one, three, five & ten-year average P/B is 0.37x, 0.48x, 0.55x, & 0.79x. On that basis, ~0.9x appears reasonable. However, taking over a bank at below book, not just with respect to precedent transactions, appears too cheap. As an aside, Chong Hing's total equity as at December 2021 was HK$27.9bn according to its FY20 annual report - page 86, which gives a book value of HK$28.72/share. However, the announcement mentions the NAV for Chong Hing of HK$23.14/share as at 31 December excludes equity instruments, without providing more granularity.

• I think this is being done too cheaply. However, no other suitor will emerge. Ultimately, this is where long-suffering shareholders cash out. Play the arb. Assuming payment mid-late September, pay up to HK$20.40/share.

Invesco Office J Reit (3298 JP)(Mkt Cap: $1.bn; Liquidity: $9mn)

(link to Travis' insight: Invesco Office's Beige Knight (Deemed Dirty Gray By Markets) Suddenly Looks Brighter and Whiter)

Straits Trading (STRTR SP) (Mkt Cap: $0.8bn; Liquidity: $1mn)

(link to my insight: Straits Trading: ARA's Pre-IPO Funding From SMBC)

KDDI Corp (9433 JP) announced in-line results, decent forecasts, yet another dividend hike (20 consecutive years of dividend hikes), and in something of a surprise, a big buyback. The buyback of ¥150bn is non-negligible. This is five years in a row that KDDI has bought back shares and because neither NTT (Nippon Telegraph & Telephone) (9432 JP) nor Softbank Corp (9434 JP) announced buybacks, this puts KDDI on the front foot relatively speaking regarding flows. The forecast and the buyback are both bullish. The combination of this should allow for upward drift on the shares near-term. Be long KDDI vs Softbank Corp. Be long NTT. Buy dips on KDDI vs Softbank Corp. Link to Travis': KDDI Results and Yet Another Buyback.

On the 10 May, Blackstone increased its non-binding proposal for Crown Resorts (CWN AU) by 4% to $12.35. Shortly after, Crown's domestic rival Star Entertainment Grp (SGR AU)lobbed an unsolicited, non-binding, and indicative proposal, by way of a Scheme, either via the issuance of 2.68 new Star shares for every Crown share, or a possible cash alternative of A$12.50/share, subject to clawback. In Crown Resorts: Blackstone & Star Place Their Bets, I concluded both Offers were light. Crown now agrees that Blackstone's Offer undervalued the company. But that it required more information from Star before finalising its view on the cash/scrip Offer. Based on the pushback to Blackstone's Offer, it is difficult to see the board recommending Star's A$0.15/share premium. Link to my insight: Crown Says Blackstone's Bid Is Light. Undecided On Star.