Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Japanese and Asian equity long/short strategies

Uzabase

Specialising in Japanese and Asian equity long/short strategies with a focus on rigorous, but targeted quantitative analysis to temper evaluations of company strategy, potential and vision. At Uzabase, our team of analysts provides coverage of industry dynamics with a local Asian flavour on Speeda, our financial information platform. Going forward we are aiming to channel our focus toward thematic research on emerging industries and company research.

Thematic (Sector/Industry)

<p>This week <a href="https://www.smartkarma.com/profiles/612" target="_blank" data-smartkarma-citation="accounts:612">Prasenjit K. Basu</a> incites discussion into the policies of the Trump administration centring on recent developments on the Korean Peninsula. <a href="https://www.smartkarma.com/profiles/25" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> continues the dispute-related theme as <a href="https://www.smartkarma.com/entities/109" target="_blank" data-smartkarma-citation="entities:109:1">Idemitsu Kosan Co Ltd (5019 JP)</a> struggles to merge with <a href="https://www.smartkarma.com/entities/108" target="_blank" data-smartkarma-citation="entities:108:1">Showa Shell Sekiyu Kk (5002 JP)</a> against the wishes of its founding family. <a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> examines holdco restructuring in Korea, writing on <a href="https://www.smartkarma.com/entities/7615" target="_blank" data-smartkarma-citation="entities:7615:1">Orion Holdings Corp (001800 KS)</a> and <a href="https://www.smartkarma.com/entities/395" target="_blank" data-smartkarma-citation="entities:395:1">SK Telecom (017670 KS)</a>. <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> looks at 3 Korean IPOs including an OLED play to put the cherry on top of his dive into LG Display's OLED production capacity. <a href="https://www.smartkarma.com/profiles/988" target="_blank" data-smartkarma-citation="accounts:988">Noriaki Hirakata, CFA</a> looks at the impact of a deteriorating US market on Subaru and <a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a> looks at ANA's LCC market and business-class strategy as well as the impact on Hirata of recent OLED and EV developments.</p><p></p><div class="content-highlight"><h2>KOREA</h2></div><h2>Escalating N. Korea Tensions as Trump Destabilises Allies</h2><p><a href="https://www.smartkarma.com/profiles/612" target="_blank" data-smartkarma-citation="accounts:612">Prasenjit K. Basu</a> examines Trump's handling of the North Korea situation in <a href="https://www.smartkarma.com/insights/trump-s-thundering-tweets-take-korea-to-the-brink-of-war" target="_blank" data-smartkarma-citation="insights:11910">Trump’s Thundering Tweets Take Korea to the Brink of War</a> generating lively discussion in the comments section. Prasenjit notes that Trump has till now taken a more aggressive approach with allies such as Germany, France, the UK, Korea and Japan than with Russia and China. While he continued that approach in publically pressing South Korea's president Moon on auto trade, he has recently toughened his stance on China by announcing largely symbolic penalties on a Chinese bank and an arms sale to Taiwan. With Kim Jong-Un continuing to call Trump's bluffs and General Vincent Brooks, US commander in South Korea, announcing that the US and South Korea were prepared for war, conditions are tense with South Korea and Japan perhaps having the most to lose. The comments focused on previous US sanctions against North Korea, China's tolerance of North Korean refugees and potential pivot towards Russia on this issue and the risks of regime change in North Korea.</p><h2>Douglas Takes a Break From his Taste Test Tours to Review Holding Company Structures</h2><p><a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> provides us with great detail on the potential restructuring of SK Telecom, SK Hynix and SK Holdings structures in <a href="https://www.smartkarma.com/insights/mechanics-scenario-analysis-of-sk-telecom-s-transformation-into-a-holdco-merger" target="_blank" data-smartkarma-citation="insights:11840">Mechanics &amp; Scenario Analysis of SK Telecom’s Transformation into a Holdco + Merger</a>. He provides us with a scenario for creating a more simplified 2-tier holding structure, rather than the current 3-tiers and examines the potential use of treasury shares to tender additional shares of SK Telecom and SK Hynix bringing SK Holdings stake in each of the companies up to 30%. Douglas feels that the restructuring is likely to involve SK Telecom being split into two companies - SK Telecom and SK Telecom Holdings, following which, SK Holdings would be merged with SK Telecom Holdings to form the holding company of the SK group.</p><p>Meanwhile in <a href="https://www.smartkarma.com/insights/orion-corp-valuation-analysis-post-company-split" target="_blank" data-smartkarma-citation="insights:11873">Orion Corp - Valuation Analysis Post Company Split</a>, Douglas examines the breakup of Orion into <a href="https://www.smartkarma.com/entities/24221" target="_blank" data-smartkarma-citation="entities:24221:1">Orion Corp (271560 KS)</a> and <a href="https://www.smartkarma.com/entities/7615" target="_blank" data-smartkarma-citation="entities:7615:1">Orion Holdings Corp (001800 KS)</a> with Orion Corp retaining the main food business while retains the former treasury stock of Orion Corp, its investment in Showbox and is freed of most debt to remain with KRW129bn in net cash. Douglas' valuation work generates implied valuations of KRW104,000 for Orion Corp and KRW45,000 for Orion Holdings. </p><h2>Lineage M Racks Up Users Early But Suffers Fallback - Not to Worry Says Sanghyun</h2><p><a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> (<a href="https://www.smartkarma.com/insights/thin-slicing-on-ncsoft-lineage-m-s-first-12-days-sales" target="_blank" data-smartkarma-citation="insights:11850">Thin-Slicing on NCsoft Lineage M’s First 12 Days Sales</a>) and <a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> (<a href="https://www.smartkarma.com/insights/lineage-m-opening-of-the-items-trading-exchange" target="_blank" data-smartkarma-citation="insights:11892">Lineage M - Opening of the Items Trading Exchange</a>) examine the initial results for Lineage M as it outperforms L2R with KRW100bn in sales in 12 days to L2Rs 14 days. Sanghyun notes that there has been a faster than expected fall in DAU and MOU following this burst which has triggered domestic and foreign selling and shorting. He says, however, that due to Lineage M's hardcore target audience, it is strictly the user numbers which should drive revenue and he expects revenue to continue to be strong. Douglas chimes in noting that NCsoft announced a trading exchange for Lineage M  which is restricted to over 18s and this should support the stock and perhaps shake out shorts. Both contributors remain positive on <a href="https://www.smartkarma.com/entities/5169" target="_blank" data-smartkarma-citation="entities:5169:1">NCsoft Corp (036570 KS)</a> though Douglas is less bullish due to the run up in price.</p><h2>Making Sense of LG Display's Mobile Phone OLED Investments</h2><p>Sanghyun provides a detailed breakdown of LG Display's OLED production capacity in <a href="https://www.smartkarma.com/insights/setting-straight-apple-google-investment-stories-for-lg-display-s-flexible-oled" target="_blank" data-smartkarma-citation="insights:11852">Setting Straight Apple &amp; Google Investment Stories for LG Display’s Flexible OLED</a> . Breaking down production lines and the facilities they are a part of, Sanghyun points out that Google's decision to fund LG Display is for their E5 phase 2 line to double capacity based on Sunik System's vapor deposition equipment while Apple, insisting on the use of Canon Tokki's equipment has agreed to fund the doubling of capacity on the E6 phase 2 line. Detail lovers should refer the note for some great breakdowns and backstory.</p><h2>Celltrion, Lotte Chemical Titan, HIMS and KB Financial Headline Korea IPOs and Placements</h2><ul class=""><li>Sanghyun examines Celltrion Healthcare in <a href="https://www.smartkarma.com/insights/celltrion-healthcare-ipo-part-3-what-local-institutions-seem-to-have-in-mind" target="_blank" data-smartkarma-citation="insights:11837"><strong>Celltrion Healthcare</strong> IPO Part 3 - What Local Institutions Seem to Have in Mind</a>. The currently favourable environment for biopharma could allow Seo to IPO Celltrion Healthcare at a high price since Korea's local institutions are thinking that the combined market caps of Celltrion Inc and Celltrion Healthcare should be roughly the same as that of <a href="https://www.smartkarma.com/entities/22932" target="_blank" data-smartkarma-citation="entities:22932:1">Samsung Biologics Co., Ltd (207940 KS)</a>. Thanks to Samsung BioLogics' soaring price, Celltrion Healthcare can now realistically aim at KRW5.2tril, which is close to the upper end of the indicative price band. That high market value can then be used to merge Celltrion Healthcare (which he owns 44.12% of currently) and Celltrion Inc (in which his stake is only the 19.71% held by Celltrion Holdings which is itself 98.36% owned by Seo) and garner a higher overall stake for Seo.</li><li>Sanghyun notes in <a href="https://www.smartkarma.com/insights/lotte-chemical-titan-ipo-bookbuilding-results-assessment" target="_blank" data-smartkarma-citation="insights:11912"><strong>Lotte Chemical Titan</strong> IPO - Bookbuilding Results &amp; Assessment</a> that the company faced weaker than expected demand, pricing at MYR6.5 and having the offering size reduced by 21.7%. The lack of a lock-up for the 18.4% of the IPO held by cornerstone investors, and the offer to buyback IPO shares subscribed by retailers and non-cornerstone Bumiputera investors are further negatives beyond the supply-demand balance concerns for polyethylene. Sanghyun notes that while he is still not very enthusiastic about the IPO there are some positives such as lower supply growth in the 2H, potentially weaker naptha prices, the buyback offer cushioning against price falls and the potential for Korean institutions to participate in block deals one year after the IPO.</li><li>To complete the IPO trifecta for the week, Sanghyun's <a href="https://www.smartkarma.com/insights/hims-ipo-summary-another-solid-oled-stock-ipo" target="_blank" data-smartkarma-citation="insights:11886"><strong>HIMS</strong> IPO Summary - Another Solid OLED Stock IPO</a> comes to the conclusion that while HIMS as an OLED pureplay riding Korea's super OLED wave is attractive, he prefers V-One Tech for its margins which are about twice as high. Nevertheless, he notes that institutions are excited for the IPO and that at 8x PER (a discount to the 13x PER that V-One Tech is likely to fetch) HIMS could price at the upper end of its indicative pricing.</li><li><a href="https://www.smartkarma.com/profiles/673" target="_blank" data-smartkarma-citation="accounts:673">Toh Zhen Zhou</a> looks at KB Financial in <a href="https://www.smartkarma.com/insights/kb-financial-placement-an-expected-sale-in-a-favorable-macro-environment" target="_blank" data-smartkarma-citation="insights:11921">KB Financial Placement - An Expected Sale in a Favorable Macro Environment</a> and is positive on the deal for its strong price/earnings momentum and track record. He expects the rising rate environment to benefit net interest income, boosting ROE and ROA to reverse their declining trend. He does however note that the 1.8-2.9% placement discount may be insufficent when examining the one-week performance on deals by Hana Financial (0.46% discount) and Shinhan Financial (2.96% discount).</li></ul><p></p><div class="content-highlight"><h2>JAPAN</h2></div><h2>Idemitsu vs. Founding Family</h2><p><a href="https://www.smartkarma.com/profiles/25" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> continues his coverage of <a href="https://www.smartkarma.com/entities/109" target="_blank" data-smartkarma-citation="entities:109:1">Idemitsu Kosan Co Ltd (5019 JP)</a> 's tussle with its founding family over a merger with <a href="https://www.smartkarma.com/entities/108" target="_blank" data-smartkarma-citation="entities:108:1">Showa Shell Sekiyu Kk (5002 JP)</a> in <a href="https://www.smartkarma.com/insights/idemitsu-if-it-s-war-they-want" target="_blank" data-smartkarma-citation="insights:11851">IDEMITSU - If It’s War They Want...</a> and the tongue twisting <a href="https://www.smartkarma.com/insights/is-idemitsu-issuance-injunction-intromittence-irrecusable" target="_blank" data-smartkarma-citation="insights:11896">Is Idemitsu Issuance Injunction Intromittence Irrecusable?</a> which starts with <em>(Indeed, my indign iotacism is incult). </em>I had to look up Iotacism, which is apparently "the process by which a number of vowels and diphthongs in Ancient Greek converged in pronunciation so they all now sound like iota ([i]) in Modern Greek. After looking up diphthongs which referenced digraphs, monophthongs and phonemes, I valiantly decided never to bother trying to understand Travis' writing ever again.</p><p>Travis' analysis, however, focused on Idemitsu management's overwhelming support from shareholders (100:1 for, excluding the founding family) and subsequent decision to issue 48m shares, representing 30% dilution and not coincidentally reducing the founding family's stake below the 33.4% negative control threshold. The family countered by filing for an injunction on the grounds that the issuance method was "extremely unfair" and sought to entrench management. The issuance (JPY138.5bn at prices on the date of Travis' note) is described as being made for various investments (JPY52.22bn) and the repayment of short-term debt (of which there is JPY159bn).</p><p>He notes that if the injunction is not granted, the family could use its present holdings as collateral to borrow about JPY50bn to purchase 15.4-16.2m shares and maintain their negative control/current stake. He feels that there is some possibility of an injunction being granted based on the interpretation of whether a minority control shareholder has an inherent right to not be diluted, but overall is of the view that the rights of majority shareholders could take precedence and that Idemitsu's debt levels mean it would be difficult to show that the share issuance is unnecessary.</p><h2>Deteriorating US Auto Market and a Scary Subaru Chart</h2><p><a href="https://www.smartkarma.com/profiles/988" target="_blank" data-smartkarma-citation="accounts:988">Noriaki Hirakata, CFA</a> looks at the worsening conditions in the US auto market in <a href="https://www.smartkarma.com/insights/june-us-automotive-sales-mid-16-million-saar-pushed-inventory-days-up-again" target="_blank" data-smartkarma-citation="insights:11871">June US Automotive Sales: Mid 16 Million SAAR Pushed Inventory Days up Again</a> as a falling SAAR pushed inventory days for most Japanese automakers into the 60-80 range. In particular he highlights Subaru's skyrocketing inventory (please refer the insight for the chart on "Units Inventory of SUBARU in the US"). Overall Japanese and European manufacturers sold reasonably well to be up YoY, while the US big 3 were done about 5% each and Korean manufacturers really struggled to end down 15%. Incentives rose with most manufacturers up double digits YoY and about USD400-600 in absolute terms. Hyundai (+USD900), and Chrysler (flat) stood out, while Nori highlighted Subaru's 51.4% YoY jump as the largest excluding luxury brands.</p><h2>Passing of Funai Founder Raises Expectations of a Sale - Is a Positive EV Possible?</h2><p><a href="https://www.smartkarma.com/insights/funai-electric-6839-jp-founder-passing-invites-questions-on-future-control" target="_blank" data-smartkarma-citation="insights:11900">Funai Electric (6839 JP) - Founder Passing Invites Questions on Future Control</a> is Travis' look at the possibility of the company being acquired following the passing of its founder, Tetsuro Funai. With the company being a perennial lossmaker and the founding family accounting for over 50% of non-treasury shares, the apparent lack of management involvement by surviving family raises the spectre of a sale. Travis notes that even at JPY1,200, 14% higher, the stock would be around 1x EV/EBITDA on his back of the envelope estimates. He does not expect an immediate sale but the stock is moving, up 15% on heavy volume since 4 Jul. </p><h2>ANA Holdings Peachy Strategy is Mostly Business</h2><p><a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a> approves of ANA's strategy as their Feb acquisition of Peach Aviation allows the company to dominate Japan's LCC market with over 50% share and two of the only successful and profitable brands (Vanilla is the other). In <a href="https://www.smartkarma.com/insights/ana-holdings-a-bright-spot-among-asian-full-service-carriers" target="_blank" data-smartkarma-citation="insights:11887">ANA Holdings a Bright Spot Among Asian Full Service Carriers</a> he notes that Peach's position in Osaka makes it subject to less competition than carriers operating out of Narita and its exposure to tourism, especially from Taiwan and Korea is a plus. Meanwhile, ANA's strategy of targeting business class travelers with a higher proportion of business class seats than rivals and focus on secondary routes to cities such as Dusseldorf and Vancouver where competition is less intense appears to be paying off. With the Tokyo Olympics on the horizon, slot expansion at Haneda and Narita should continue to be a tailwind for the company.</p><h2><strong>Hirata Could Benefit From Apple Switch to All OLED and European Luxury Autos Going All EV</strong></h2><p><a href="https://www.smartkarma.com/insights/hirata-19-drop-on-tesla-struggles-is-a-buying-opportunity-tsla-hedge-on-oled-and-eur-luxury-evs" target="_blank" data-smartkarma-citation="insights:11943">Hirata: 19% Drop on Tesla Struggles Is a Buying Opportunity/TSLA Hedge on OLED and EUR Luxury EVs</a> is <a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a>'s take on the opportunity presented by this small company with exposure to two of the hottest themes around. Following its secondary offering, trading volume in the stock has soared and the recent selloff of Tesla has created a buying opportunity. While Tesla's Model3 is a key growth driver, with newsflow on luxury brands such as Volvo making aggressive pushes into the EV market, its efforts to secure European customers could pay off. Similarly, if Apple moves to all OLED screens and Chinese rivals follow, that represents another major opportunity for the company.</p>

This week Prasenjit K. Basu incites discussion into the policies of the Trump administration centring on recent developments on the Korean Peninsula. Travis Lundy continues the dispute-related theme as Idemitsu Kosan Co Ltd (5019 JP) struggles to merge with Showa Shell Sekiyu Kk (5002 JP) against the wishes of its founding family. Douglas Kim examines holdco restructuring in Korea, writing on Orion Holdings Corp (001800 KS) and SK Telecom (017670 KS). Sanghyun Park looks at 3 Korean IPOs including an OLED play to put the cherry on top of his dive into LG Display's OLED production capacity. Noriaki Hirakata, CFA looks at the impact of a deteriorating US market on Subaru and Mio Kato, CFA looks at ANA's LCC market and business-class strategy as well as the impact on Hirata of recent OLED and EV developments.KOREAEscalating N. Korea Tensions as Trump Destabilises AlliesPrasenjit K. Basu examines Trump's handling of the North Korea situation in Trump’s Thundering Tweets Take Korea to the Brink of War generating lively discussion in the comments section. Prasenjit notes that Trump has till now taken a more aggressive approach with allies such as Germany, France, the UK, Korea and Japan than with Russia and China. While he continued that approach in publically pressing South Korea's president Moon on auto trade, he has recently toughened his stance on China by announcing largely symbolic penalties on a Chinese bank and an arms sale to Taiwan. With Kim Jong-Un continuing to call Trump's bluffs and General Vincent Brooks, US commander in South Korea, announcing that the US and South Korea were prepared for war, conditions are tense with South Korea and Japan perhaps having the most to lose. The comments focused on previous US sanctions against North Korea, China's tolerance of North Korean refugees and potential pivot towards Russia on this issue and the risks of regime change in North Korea.Douglas Takes a Break From his Taste Test Tours to Review Holding Company StructuresDouglas Kim provides us with great detail on the potential restructuring of SK Telecom, SK Hynix and SK Holdings structures in Mechanics &amp; Scenario Analysis of SK Telecom’s Transformation into a Holdco + Merger. He provides us with a scenario for creating a more simplified 2-tier holding structure, rather than the current 3-tiers and examines the potential use of treasury shares to tender additional shares of SK Telecom and SK Hynix bringing SK Holdings stake in each of the companies up to 30%. Douglas feels that the restructuring is likely to involve SK Telecom being split into two companies - SK Telecom and SK Telecom Holdings, following which, SK Holdings would be merged with SK Telecom Holdings to form the holding company of the SK group.Meanwhile in Orion Corp - Valuation Analysis Post Company Split, Douglas examines the breakup of Orion into Orion Corp (271560 KS) and Orion Holdings Corp (001800 KS) with Orion Corp retaining the main food business while retains the former treasury stock of Orion Corp, its investment in Showbox and is freed of most debt to remain with KRW129bn in net cash. Douglas' valuation work generates implied valuations of KRW104,000 for Orion Corp and KRW45,000 for Orion Holdings. Lineage M Racks Up Users Early But Suffers Fallback - Not to Worry Says SanghyunSanghyun Park (Thin-Slicing on NCsoft Lineage M’s First 12 Days Sales) and Douglas Kim (Lineage M - Opening of the Items Trading Exchange) examine the initial results for Lineage M as it outperforms L2R with KRW100bn in sales in 12 days to L2Rs 14 days. Sanghyun notes that there has been a faster than expected fall in DAU and MOU following this burst which has triggered domestic and foreign selling and shorting. He says, however, that due to Lineage M's hardcore target audience, it is strictly the user numbers which should drive revenue and he expects revenue to continue to be strong. Douglas chimes in noting that NCsoft announced a trading exchange for Lineage M  which is restricted to over 18s and this should support the stock and perhaps shake out shorts. Both contributors remain positive on NCsoft Corp (036570 KS) though Douglas is less bullish due to the run up in price.Making Sense of LG Display's Mobile Phone OLED InvestmentsSanghyun provides a detailed breakdown of LG Display's OLED production capacity in Setting Straight Apple &amp; Google Investment Stories for LG Display’s Flexible OLED . Breaking down production lines and the facilities they are a part of, Sanghyun points out that Google's decision to fund LG Display is for their E5 phase 2 line to double capacity based on Sunik System's vapor deposition equipment while Apple, insisting on the use of Canon Tokki's equipment has agreed to fund the doubling of capacity on the E6 phase 2 line. Detail lovers should refer the note for some great breakdowns and backstory.Celltrion, Lotte Chemical Titan, HIMS and KB Financial Headline Korea IPOs and PlacementsSanghyun examines Celltrion Healthcare in Celltrion Healthcare IPO Part 3 - What Local Institutions Seem to Have in Mind. The currently favourable environment for biopharma could allow Seo to IPO Celltrion Healthcare at a high price since Korea's local institutions are thinking that the combined market caps of Celltrion Inc and Celltrion Healthcare should be roughly the same as that of Samsung Biologics Co., Ltd (207940 KS). Thanks to Samsung BioLogics' soaring price, Celltrion Healthcare can now realistically aim at KRW5.2tril, which is close to the upper end of the indicative price band. That high market value can then be used to merge Celltrion Healthcare (which he owns 44.12% of currently) and Celltrion Inc (in which his stake is only the 19.71% held by Celltrion Holdings which is itself 98.36% owned by Seo) and garner a higher overall stake for Seo.Sanghyun notes in Lotte Chemical Titan IPO - Bookbuilding Results &amp; Assessment that the company faced weaker than expected demand, pricing at MYR6.5 and having the offering size reduced by 21.7%. The lack of a lock-up for the 18.4% of the IPO held by cornerstone investors, and the offer to buyback IPO shares subscribed by retailers and non-cornerstone Bumiputera investors are further negatives beyond the supply-demand balance concerns for polyethylene. Sanghyun notes that while he is still not very enthusiastic about the IPO there are some positives such as lower supply growth in the 2H, potentially weaker naptha prices, the buyback offer cushioning against price falls and the potential for Korean institutions to participate in block deals one year after the IPO.To complete the IPO trifecta for the week, Sanghyun's HIMS IPO Summary - Another Solid OLED Stock IPO comes to the conclusion that while HIMS as an OLED pureplay riding Korea's super OLED wave is attractive, he prefers V-One Tech for its margins which are about twice as high. Nevertheless, he notes that institutions are excited for the IPO and that at 8x PER (a discount to the 13x PER that V-One Tech is likely to fetch) HIMS could price at the upper end of its indicative pricing.Toh Zhen Zhou looks at KB Financial in KB Financial Placement - An Expected Sale in a Favorable Macro Environment and is positive on the deal for its strong price/earnings momentum and track record. He expects the rising rate environment to benefit net interest income, boosting ROE and ROA to reverse their declining trend. He does however note that the 1.8-2.9% placement discount may be insufficent when examining the one-week performance on deals by Hana Financial (0.46% discount) and Shinhan Financial (2.96% discount).JAPANIdemitsu vs. Founding FamilyTravis Lundy continues his coverage of Idemitsu Kosan Co Ltd (5019 JP) 's tussle with its founding family over a merger with Showa Shell Sekiyu Kk (5002 JP) in IDEMITSU - If It’s War They Want... and the tongue twisting Is Idemitsu Issuance Injunction Intromittence Irrecusable? which starts with (Indeed, my indign iotacism is incult). I had to look up Iotacism, which is apparently "the process by which a number of vowels and diphthongs in Ancient Greek converged in pronunciation so they all now sound like iota ([i]) in Modern Greek. After looking up diphthongs which referenced digraphs, monophthongs and phonemes, I valiantly decided never to bother trying to understand Travis' writing ever again.Travis' analysis, however, focused on Idemitsu management's overwhelming support from shareholders (100:1 for, excluding the founding family) and subsequent decision to issue 48m shares, representing 30% dilution and not coincidentally reducing the founding family's stake below the 33.4% negative control threshold. The family countered by filing for an injunction on the grounds that the issuance method was "extremely unfair" and sought to entrench management. The issuance (JPY138.5bn at prices on the date of Travis' note) is described as being made for various investments (JPY52.22bn) and the repayment of short-term debt (of which there is JPY159bn).He notes that if the injunction is not granted, the family could use its present holdings as collateral to borrow about JPY50bn to purchase 15.4-16.2m shares and maintain their negative control/current stake. He feels that there is some possibility of an injunction being granted based on the interpretation of whether a minority control shareholder has an inherent right to not be diluted, but overall is of the view that the rights of majority shareholders could take precedence and that Idemitsu's debt levels mean it would be difficult to show that the share issuance is unnecessary.Deteriorating US Auto Market and a Scary Subaru ChartNoriaki Hirakata, CFA looks at the worsening conditions in the US auto market in June US Automotive Sales: Mid 16 Million SAAR Pushed Inventory Days up Again as a falling SAAR pushed inventory days for most Japanese automakers into the 60-80 range. In particular he highlights Subaru's skyrocketing inventory (please refer the insight for the chart on "Units Inventory of SUBARU in the US"). Overall Japanese and European manufacturers sold reasonably well to be up YoY, while the US big 3 were done about 5% each and Korean manufacturers really struggled to end down 15%. Incentives rose with most manufacturers up double digits YoY and about USD400-600 in absolute terms. Hyundai (+USD900), and Chrysler (flat) stood out, while Nori highlighted Subaru's 51.4% YoY jump as the largest excluding luxury brands.Passing of Funai Founder Raises Expectations of a Sale - Is a Positive EV Possible?Funai Electric (6839 JP) - Founder Passing Invites Questions on Future Control is Travis' look at the possibility of the company being acquired following the passing of its founder, Tetsuro Funai. With the company being a perennial lossmaker and the founding family accounting for over 50% of non-treasury shares, the apparent lack of management involvement by surviving family raises the spectre of a sale. Travis notes that even at JPY1,200, 14% higher, the stock would be around 1x EV/EBITDA on his back of the envelope estimates. He does not expect an immediate sale but the stock is moving, up 15% on heavy volume since 4 Jul. ANA Holdings Peachy Strategy is Mostly BusinessMio Kato, CFA approves of ANA's strategy as their Feb acquisition of Peach Aviation allows the company to dominate Japan's LCC market with over 50% share and two of the only successful and profitable brands (Vanilla is the other). In ANA Holdings a Bright Spot Among Asian Full Service Carriers he notes that Peach's position in Osaka makes it subject to less competition than carriers operating out of Narita and its exposure to tourism, especially from Taiwan and Korea is a plus. Meanwhile, ANA's strategy of targeting business class travelers with a higher proportion of business class seats than rivals and focus on secondary routes to cities such as Dusseldorf and Vancouver where competition is less intense appears to be paying off. With the Tokyo Olympics on the horizon, slot expansion at Haneda and Narita should continue to be a tailwind for the company.Hirata Could Benefit From Apple Switch to All OLED and European Luxury Autos Going All EVHirata: 19% Drop on Tesla Struggles Is a Buying Opportunity/TSLA Hedge on OLED and EUR Luxury EVs is Mio Kato, CFA's take on the opportunity presented by this small company with exposure to two of the hottest themes around. Following its secondary offering, trading volume in the stock has soared and the recent selloff of Tesla has created a buying opportunity. While Tesla's Model3 is a key growth driver, with newsflow on luxury brands such as Volvo making aggressive pushes into the EV market, its efforts to secure European customers could pay off. Similarly, if Apple moves to all OLED screens and Chinese rivals follow, that represents another major opportunity for the company.

The Week That Was in NorthAsia@Smartkarma: N. Korea Escalation, Idemitsu Feud and Korea Holdcos

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Orion Corp. manufactures and distributes snacks and beverages. The Company also engages in movie production and investments.

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The Week That Was in NorthAsia@Smartkarma: N. Korea Escalation, Idemitsu Feud and Korea Holdcos

This week Prasenjit K. Basu incites discussion into the policies of the Trump administration centring on recent developments on the Korean...

Mio Kato