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

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

FamilyMart Tender Offer - Winnie and HunnyPot Redux

Quiddity Advisors

Event-Driven

<p>Friday after the close, it was announced that SMFL MIRAI Investment Partners, an entity wholly-owned by Sumitomo Mitsui Finance &amp; Leasing Company (as sub of <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a>) had determined to launch a Tender Offer to acquire common stock in <a href="https://www.smartkarma.com/entities/kenedix-inc" target="_blank" data-smartkarma-citation="entities:11321:1" rel="noopener">Kenedix Inc (4321 JP)</a>.</p><p>It would appear that someone knew this before the open as the shares opened strong and continued strong all day, rising nearly 10%. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/079/original/Screenshot%202020-11-22%20at%2010.36.21%20AM.png?1606012603" class="editor-image img-responsive" data-smartkarma-image-id="173079"></figure></section><p></p><p>This has not, as of this writing, been properly explained. We'll see an explanation is forthcoming.</p><div class="content-highlight">
<p>The bid is not terribly impressive.</p>
<p>It is a three-year high, but it matches that high, and does not exceed it.</p>
<p>The Bid Enterprise Value at ¥196bn is not that high a multiple against forward OP historically speaking, and the Bid Price vs Forward Book Value and Bid EV vs AUM are not terribly impressive either. </p>
</div><section class="figure"><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/083/original/Screenshot%202020-11-22%20at%2010.56.32%20AM.png?1606013805" class="editor-image img-responsive" data-smartkarma-image-id="173083"></figure></section><p>Of course, the lead investor ARA Asset Management is not selling. They are joining the bid. </p>
<p><strong>This bid does not look optimal. </strong></p>
<div>
<hr>
<p>I am reminded of the last words (the last line below) of Mr. Partridge ("Old Turkey") in Edwin Lefèvre's <em>Reminiscences of a Stock Operator</em> after he had purchased the stock on the urging of a tipster, and the tipster proposed he sell the shares on a bounce, hoping for a "reaction" on which to buy them... </p>
</div>
<div><blockquote>
<p>"I couldn’t think of selling that stock.” </p>
<p>“You couldn’t?” asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers. “Why not?” And Elmer drew nearer.</p>
<p>“Why, this is a bull market!” The old fellow said it as though he had given a long and detailed explanation.</p>
<p>“That’s all right,” said Elmer, looking angry because of his disappointment. “I know this is a bull market as well as you do. But you’d better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself.”</p>
<p>“My dear boy,” said old Partridge, in great distress “my dear boy, if I sold that stock now I’d lose my position; and then where would I be?”</p>
</blockquote></div>
<p>It may be questionable whether Commercial Real Estate is really in a bull market given the exigencies presented by the corporate and consumer reaction to COVID-19, but investors who purport to be long-term investors interested in fundamentals need to look at Tender Offers and Takeover Bids and think a bit more like Mr. Partridge. </p>
<p>Just because a Tender Offer is presented at a premium does not mean that accepting it is a good idea. Management, owners, and "strategic" corporate buyers often think that they should be allowed to take over a company from its shareholders simply because they want to do so. They think the price THEY choose must therefore be the right one. Interestingly, the funds they manage would choose to put a property on the market at a yield at which other funds have demonstrated buying interest, or they would choose to auction the property. </p>
<p>That did not happen here. </p>
<div><p>As I suggested in <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a>...</p></div>
<div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/084/original/image?1606014973" class="editor-image img-responsive" data-smartkarma-image-id="173084"></figure></div>
<div><div>
<p>Independent shareholders need to speak up. If you do not, you tacitly approve being abused this time AND next time.</p>
<p>As always, much more below the fold.</p>
</div></div>
<p></p></section><p></p></section>

Friday after the close, it was announced that SMFL MIRAI Investment Partners, an entity wholly-owned by Sumitomo Mitsui Finance &amp; Leasing Company (as sub of Sumitomo Mitsui Financial Group (8316 JP)) had determined to launch a Tender Offer to acquire common stock in Kenedix Inc (4321 JP).It would appear that someone knew this before the open as the shares opened strong and continued strong all day, rising nearly 10%. This has not, as of this writing, been properly explained. We'll see an explanation is forthcoming.
The bid is not terribly impressive.
It is a three-year high, but it matches that high, and does not exceed it.
The Bid Enterprise Value at ¥196bn is not that high a multiple against forward OP historically speaking, and the Bid Price vs Forward Book Value and Bid EV vs AUM are not terribly impressive either. 
Of course, the lead investor ARA Asset Management is not selling. They are joining the bid. 
This bid does not look optimal. 


I am reminded of the last words (the last line below) of Mr. Partridge ("Old Turkey") in Edwin Lefèvre's Reminiscences of a Stock Operator after he had purchased the stock on the urging of a tipster, and the tipster proposed he sell the shares on a bounce, hoping for a "reaction" on which to buy them... 


"I couldn’t think of selling that stock.” 
“You couldn’t?” asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers. “Why not?” And Elmer drew nearer.
“Why, this is a bull market!” The old fellow said it as though he had given a long and detailed explanation.
“That’s all right,” said Elmer, looking angry because of his disappointment. “I know this is a bull market as well as you do. But you’d better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself.”
“My dear boy,” said old Partridge, in great distress “my dear boy, if I sold that stock now I’d lose my position; and then where would I be?”

It may be questionable whether Commercial Real Estate is really in a bull market given the exigencies presented by the corporate and consumer reaction to COVID-19, but investors who purport to be long-term investors interested in fundamentals need to look at Tender Offers and Takeover Bids and think a bit more like Mr. Partridge. 
Just because a Tender Offer is presented at a premium does not mean that accepting it is a good idea. Management, owners, and "strategic" corporate buyers often think that they should be allowed to take over a company from its shareholders simply because they want to do so. They think the price THEY choose must therefore be the right one. Interestingly, the funds they manage would choose to put a property on the market at a yield at which other funds have demonstrated buying interest, or they would choose to auction the property. 
That did not happen here. 
As I suggested in Japan Needs More Cowbell...


Independent shareholders need to speak up. If you do not, you tacitly approve being abused this time AND next time.
As always, much more below the fold.



Sumitomo Mitsui Financial Group (8316 JP)

ケネディクスへの買収提案は奇妙に不満足なものだった