Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<p>Yesterday the results of the investigation into Toshiba’s 2020 AGM involving inappropriate vote counting and pressure on shareholders came through in a 147-page report. The details were quite damning for METI and many of Toshiba’s board members and open up the potential for positive change at the company.</p>

Yesterday the results of the investigation into Toshiba’s 2020 AGM involving inappropriate vote counting and pressure on shareholders came through in a 147-page report. The details were quite damning for METI and many of Toshiba’s board members and open up the potential for positive change at the company.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>After the Extraordinary General Meeting of 18 March, 2021, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> announced that the measure to investigate the "status of the operations and property of the stock company" was passed in its original form. </p>
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<p>The resolution was designed to have a team of investigators investigate <em>"Any matters the Investigators deem necessary in relation to whether the Annual General Meeting of Shareholders for the 181st fiscal year of the Company held on July 31, 2020 was conducted in a fair and impartial manner (including the lawfulness and fairness of the resolutions thereat)"</em></p>
<p>There had been accusations of inappropriate count, inappropriate attempt to influence shareholders, etc. Different shareholders could accuse Toshiba of various matters in the public domain, but it would not be part of the official Toshiba record unless it was "official."</p>
<p>Today, that report dropped. Like a brick. </p>
<p>With regard to the exercise of shareholder proposal right, which was NOT supposed to be affected  by the change in the Forex Exchange Act, which was "not a law to exclude activists" and was meant to restrict shareholder rights solely on the basis of "acts that may damage national security or lead to the damage of national security."</p>
<blockquote>
<div>
<div>
<div>
<p>In this Investigation, it was suspected that Toshiba had improperly worked against Effissimo regarding the exercise of its shareholder proposal right. In other words, in this Investigation, the Investigators found materials that suggest that the interests of the Toshiba management and the Ministry of Economy, Trade and Industry (especially the Commerce and Information Policy Bureau) coincided. Toshiba management expected that the Revised FEA would enable them to take measures to counter activists, and METI stated that the disruption of Toshiba's management due to a proxy fight during the COVID-19 pandemic was a policy concern from the perspective of corporate management stability and employment maintenance. The two parties worked closely together to prevent Effissimo, which had raised compliance issues related to the TSC accounting fraud problem and hinted at the possibility of making a shareholder proposal, from exercising its shareholder proposal at the AGM, and then schemed to cause Effissimo to withdraw it.</p>
</div>
</div>
</div>
</blockquote>
<p>The investigation finds that Toshiba worked with METI's assistance and involvement to get Effissimo to withdraw its shareholder proposal for new directors. There appears to have been a very explicit "Good Cop, Bad Cop" negotiating method (described quite clearly on <a href="https://www.toshiba.co.jp/about/ir/en/news/20210610_1.pdf" target="_blank" rel="noopener">p114</a>) and a joint effort with regulators to find ways to trip up Effissimo to try to force them to withdraw their proposal. </p>
<p>The conclusion in that regard notes...</p>
<div>
<blockquote>
<p>As described above, the series of moves by Toshiba to have Effissimo's shareholder proposal withdrawn, so to speak in unison with the Commerce and Information Policy Bureau Route [sic], include acts suspected to be against laws, etc. throughout, can be evaluated as an attempt to unfairly restrict the exercise of the shareholder proposal right, at least for the purpose of deviating from the purpose of the Revised FEA....  and... it can be said that Toshiba's actions directly or indirectly had an undue influence on shareholders with the intention of effectively interfering with the exercise of shareholders' rights at this AGM. Therefore, we believe that this AGM was not fairly managed."</p>
</blockquote>
</div>
<p>That is but one example. This is going to cause problems at both the level of Toshiba and METI, possibly even the PM's office. </p>
<p>The conversations in the elevator this afternoon must be something.</p>
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</section>

After the Extraordinary General Meeting of 18 March, 2021, Toshiba Corp (6502 JP) announced that the measure to investigate the "status of the operations and property of the stock company" was passed in its original form. 



The resolution was designed to have a team of investigators investigate "Any matters the Investigators deem necessary in relation to whether the Annual General Meeting of Shareholders for the 181st fiscal year of the Company held on July 31, 2020 was conducted in a fair and impartial manner (including the lawfulness and fairness of the resolutions thereat)"
There had been accusations of inappropriate count, inappropriate attempt to influence shareholders, etc. Different shareholders could accuse Toshiba of various matters in the public domain, but it would not be part of the official Toshiba record unless it was "official."
Today, that report dropped. Like a brick. 
With regard to the exercise of shareholder proposal right, which was NOT supposed to be affected  by the change in the Forex Exchange Act, which was "not a law to exclude activists" and was meant to restrict shareholder rights solely on the basis of "acts that may damage national security or lead to the damage of national security."




In this Investigation, it was suspected that Toshiba had improperly worked against Effissimo regarding the exercise of its shareholder proposal right. In other words, in this Investigation, the Investigators found materials that suggest that the interests of the Toshiba management and the Ministry of Economy, Trade and Industry (especially the Commerce and Information Policy Bureau) coincided. Toshiba management expected that the Revised FEA would enable them to take measures to counter activists, and METI stated that the disruption of Toshiba's management due to a proxy fight during the COVID-19 pandemic was a policy concern from the perspective of corporate management stability and employment maintenance. The two parties worked closely together to prevent Effissimo, which had raised compliance issues related to the TSC accounting fraud problem and hinted at the possibility of making a shareholder proposal, from exercising its shareholder proposal at the AGM, and then schemed to cause Effissimo to withdraw it.




The investigation finds that Toshiba worked with METI's assistance and involvement to get Effissimo to withdraw its shareholder proposal for new directors. There appears to have been a very explicit "Good Cop, Bad Cop" negotiating method (described quite clearly on p114) and a joint effort with regulators to find ways to trip up Effissimo to try to force them to withdraw their proposal. 
The conclusion in that regard notes...


As described above, the series of moves by Toshiba to have Effissimo's shareholder proposal withdrawn, so to speak in unison with the Commerce and Information Policy Bureau Route [sic], include acts suspected to be against laws, etc. throughout, can be evaluated as an attempt to unfairly restrict the exercise of the shareholder proposal right, at least for the purpose of deviating from the purpose of the Revised FEA....  and... it can be said that Toshiba's actions directly or indirectly had an undue influence on shareholders with the intention of effectively interfering with the exercise of shareholders' rights at this AGM. Therefore, we believe that this AGM was not fairly managed."


That is but one example. This is going to cause problems at both the level of Toshiba and METI, possibly even the PM's office. 
The conversations in the elevator this afternoon must be something.




Toshiba's 2020 AGM Investigative Report Is Damning

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> announced results in mid-May along with a somewhat surprising plan to "return ¥150bn to shareholders", with method to be specified later - in early June. </p><p>It is now early June and this morning Toshiba has <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_1.pdf?_ga=2.28792570.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">announced</a> how it will allocate the ¥150 billion.</p><ul>
<li>Toshiba will pay a <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_2.pdf?_ga=2.28905850.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">¥50 billion dividend</a> (¥110/share) to shareholders of record on 30 June 2021. The company has updated its annual dividend forecast for the year to be ¥110/share, including a ¥40/share dividend for both first half and second half.</li>
<li>Toshiba will <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_1.pdf?_ga=2.28792570.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">buy back</a> up to 27mm shares spending up to ¥100 billion in a buyback using ToSTNeT-3 and open-market buybacks, with the program lasting until the end of calendar 2021.</li>
</ul><p>How to play this is a different story. More below.</p>

Toshiba Corp (6502 JP) announced results in mid-May along with a somewhat surprising plan to "return ¥150bn to shareholders", with method to be specified later - in early June. It is now early June and this morning Toshiba has announced how it will allocate the ¥150 billion.
Toshiba will pay a ¥50 billion dividend (¥110/share) to shareholders of record on 30 June 2021. The company has updated its annual dividend forecast for the year to be ¥110/share, including a ¥40/share dividend for both first half and second half.
Toshiba will buy back up to 27mm shares spending up to ¥100 billion in a buyback using ToSTNeT-3 and open-market buybacks, with the program lasting until the end of calendar 2021.
How to play this is a different story. More below.

Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive

David Blennerhassett


For the month of May, 11 new deals were discussed on Smartkarma with an overall announced deal size of ~US$7.3bn.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.







New Deals


Industry


Size (US$bn)


Type


Premium




Australia




APN Property Group (APD AU) 
Property
0.2
Scheme
50%


APN Prop (APD AU): Dexus' Done Deal



Boral Ltd (BLD AU) 
Construction
4.8
Off-market
Nil


Boral Ltd (BLD AU): Seven's Nil Premium



Japara Healthcare (JHC AU) 
Healthcare
0.2
Scheme
30%


Japara Healthcare (JHC AU): Here Comes The Calvary


 



Hong Kong




Chong Hing Bank (1111 HK) 
Banking
0.2
Scheme
51.2%



Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop
Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light



 



Japan




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
Bank
0.6
Merger



Aomori Bank &amp; Michinoku Bank Merger - Nothing To Write Home About Yet



EPS Holdings (4282 JP) 
Data/software
0.1
Tender Offer
35.5%


Another Too-Cheap MBO as Founder Takes Out EPS


 Locoguide (4497 JP) / Kufu (4399 JP)

Real estate
0.4
Merger



Locoguide (4497 JP) - Kufu (4399 JP): Merger Is a Done Deal



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
Trading
0.4
Merger



A Complex SmallCap Merger in Japan: Maruka (7594) And Furusato (8087)



Secom Joshinetsu (4342 JP) 
Security
0.3
Tender Offer
66.2%


Secom To Finally Buy Out Affiliate Secom Joshinetsu (4342)








Malaysia




Can-One Bhd (CAN MK) 
Manufacturing
0.1
MTO
15.8%


Can-One (CAN MK)? Yeoh Can Lah!



IHH Healthcare (IHH MK) 
Healthcare
N/A
N/A
N/A


IHH Healthcare (IHH MK): More Medicine For Mitsui?


Source: Smartkarma Insights






The above does not include BetMakers Technology Group (BET AU) lobbing a non-binding offer of A$4bn (A$1bn cash, $3bn scrip into BET) for Tabcorp Ltd (TAH AU)'s wagering and media division, and Apollo's prior tilt - Tabcorp (TAH AU): Apollo Shows Its Hand.

Nor does the table include the rumoured merger between  Angang Steel Co Ltd (H) (347 HK) and Bengang Steel (000761 CH) - Amalgamated Steel: Merging Angang &amp; Bengang As, Bs, and Hs.



The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 




Summary of News in May of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)






Australia


Comments (with links to announcements &amp; insights)




3P Learning (3PL AU) 

No May update




Bingo Industries (BIN AU) 

1-May: Capital Group announced it has sold its entire 9.7% stake in Bingo Industries (BIN AU).




Crown Resorts (CWN AU) 

10-May: Crown Resorts: Blackstone &amp; Star Place Their Bets
17-May: Crown Says Blackstone's Bid Is Light. Undecided On Star
20-May: Crown Resorts Ltd: Blackstone Offer Rejected, Star Offer May Still Not Reflect True Forward Value




Galaxy Resources (GXY AU) 

No May update




Link Administration Holdings (LNK AU) 

27-May: Link Group (LNK AU): KKR Opens The Bidding For PEXA
31-May: Link Admin (LNK AU) Goes IPO Route For PEXA Afterall




Mainstream Group Holdings Ltd (MAI AU) 

2-May: Mainstream (MAI AU): More-Than-Double in Less than 2 Months After Apex Bump
6-May: Mainstream (MAI AU): Bidding War Continues as SS&amp;C Overbids for the 4th Time
14-May: Mainstream (MAI AU): +120% in ~2 Months but Bidding War Continues....




McPherson's Ltd (MCP AU) 

No May update




Mortgage Choice (MOC AU) 

26-Mau FIRB gives its approval



Primewest Group Ltd (PWG AU)

14-May: Target's Statement and Bidder's Statements were published. Primewest Group Ltd (PWG AU)'s Board has unanimously recommended shareholders to accept the Offer. 




Think Childcare (TNK AU) 

12-May: Think Childcare (TNK AU) has agreed to extend the Exclusivity Period with Busy Bees to 31st May 2021 (vs. original deadline of 14th May). This is still a non-binding deal with an expected completion date to be in 1Q CY22. 




Vitalharvest Freehold Trust (VTH AU) 

1-May: And so it goes - MAFM bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.26.
7-May: MAFM exercises a call option and acquires 16.2% of Vitalharvest Freehold Trust (VTH AU).
28-May Roc bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.29/share.  And says it will overbid any MAFM counter! 




Vocus Communications (VOC AU) 

10-May: Vocus Comms (VOC AU): MIRA/Aware's Done Deal
19-May: Vocus Comms (VOC AU): MIRA/​Aware’s Scheme Doc Despatched. EGM On 22 June










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Digital Telecom (6188 HK) 

1-May: Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair
20-May: Beijing Digital Telecom (6188 HK)'s MGO is now unconditional in all respects. 




China Machinery Engineering (1829 HK) 

28-May: China Machinery Engineering (1829 HK): Movement In The Works?




China Traditional Chinese Medicine (570 HK) 

7-May: In its monthly update regarding a potential Offer, China Traditional Chinese Medicine (570 HK) says there is no update.




China Youzan Limited (8083 HK) 

10-May: China Youzan (8083 HK): Reality Check As Shares Rollover




Kerry Logistics Network (636 HK) 

4-May: Kerry Logistics Network (636 HK) will hold an EGM on the 26 May for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. 
26-May: At its SGM, Kerry Logistics Network (636 HK) shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.




New Century REIT (1275 HK) 

No May update




Rivera Holdings (281 HK) 

No April update




Sichuan Languang Justbon Service Group (2606 HK) 

3-May: Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months










India


Comments (with links to insights)




Mphasis Ltd (MPHL IN) 

4-May: The Detailed Public Statement on Mphasis Ltd (MPHL IN) has been released. The Open Offer is scheduled tentatively to run from 18 June to 1 July, which means it is running Very Tight and the option is worth a bit less than I expected. But that just means there is more gamma. One could get big at the high Rs 1600s area. 




Vedanta Ltd (VEDL IN) 

4-May: Vedanta Now Caught Up With Peers - A Different Skew Ahead










Japan


Comments (with links to announcements &amp; insights)




BeNEXT Group (2154 JP) 
No May update



Cocokara Fine (3098 JP) 
No May update



Fuji Kosan Company (5009 JP) 
17-May:  Fuji Kosan Company (5009 JP) has responded to Aslead Strategic Value Fund's Tender Offer with its initial Target Opinion Statement which is "Opinion Withheld." This is because Fuji Kosan hasn't actually done anything yet - two weeks in. They have sent questions to Aslead, and Aslead has five business days to respond. This is slow-walking it. This tender offer is likely to be extended because of that.



Hitachi Metals (5486 JP) 

5-May: Hitachi Metals - Should I Stay or Should I Go Now?




Honshu Chemical Industry (4115 JP) 

13-May: Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover
16-May:: Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd




Invesco Office J Reit (3298 JP) 

6-May:  Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight
11-May:  Starwood Bumps Terms, Lowers Threshold on Invesco Office
13-May:  Invesco Office's Terrible, Horrible, No Good Very Bad Day... Changes Things
20-May:  Invesco Office's Beige Knight (Deemed Dirty Gray By Markets) Suddenly Looks Brighter and Whiter
23-May:  Starwood Responds to Invesco Office's White Knight Proposal
24-May: Starwood has extended their Tender Offer on Invesco Office J Reit (3298 JP) from the 24th of May to 15th of June after the close of the 24th. They did not raise the price. This is basically the equivalent of Starwood calling Invesco's bluff. They can extend again if they want but they are going to make Invesco come out. They can change price later if they think it necessary.



Japan Asia (3751 JP)
No May update



Sawada Holdings (8699 JP) 

9-May:  Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now
23-May: Sawada Is A Different Stock Now
31-May:  Be Careful of Expectations on Sawada (8699)




Toshiba Corp (6502 JP) 

14-May: Toshiba – Shareholder Returns Trump Weak Guidance
17-May: Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming











New Zealand


Comments 




Tilt Renewables Ltd (TLT NZ) 

No May update











Singapore


Comments (with links to announcements)




Procurri Corporation (PROC SP) 

3-May: The Partial Offer has not become unconditional in all respects on the Closing Date and has therefore lapsed










Thailand


Comments




Intouch Holdings (INTUCH TB) 

No May update




Vinythai Public Co (VNT TB) 

No May update






Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Seagate Technology Holdings PL / Equity Bottom-Up

<p>For the past 17 years the HDD market has suffered erosion from SSDs.  Through consolidation only two important HDD makers survive: Seagate and WDC.  WDC embraced SSDs, while Seagate has ignored them.  The results of these two strategies, and the ultimate end game, is quite clear.</p>

For the past 17 years the HDD market has suffered erosion from SSDs.  Through consolidation only two important HDD makers survive: Seagate and WDC.  WDC embraced SSDs, while Seagate has ignored them.  The results of these two strategies, and the ultimate end game, is quite clear.

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

Toshiba's 2020 AGM Investigative Report Is Damning

The Investigative Report resulting from the mid-March EGM with regard to votecount and pressure tactics around the 2020 AGM is out. It is a doozy....

Travis Lundy

Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive

Toshiba announces their Shareholder Return Allocation. One-third to a special div, two-thirds to buybacks. The buybacks may take place early, but...

Travis Lundy

(Mostly) Asia M&A: May 2021 Roundup

The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals).

David Blennerhassett

Does Seagate Even HAVE a Direction?

Is Seagate a good investment? Given the decline of the HDD market, and the rise of SSDs, the company's position is far weaker than that of its...

Jim Handy

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52-week Range

Market Cap (USDm)

P/E

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Toshiba – Hands in the Cookie Jar

The details of Toshiba's investigative report were quite damning for METI and many of Toshiba’s board members and open up the potential for...

Mio Kato

Toshiba's 2020 AGM Investigative Report Is Damning

The Investigative Report resulting from the mid-March EGM with regard to votecount and pressure tactics around the 2020 AGM is out. It is a doozy....

Travis Lundy

Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive

Toshiba announces their Shareholder Return Allocation. One-third to a special div, two-thirds to buybacks. The buybacks may take place early, but...

Travis Lundy

(Mostly) Asia M&A: May 2021 Roundup

The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals).

David Blennerhassett

Does Seagate Even HAVE a Direction?

Is Seagate a good investment? Given the decline of the HDD market, and the rise of SSDs, the company's position is far weaker than that of its...

Jim Handy