IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>JIP, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>'s preferred bidder, is reported to be under pressure from co-investors to cut its offer price. Securing financing continues to be troublesome.  </li>
<li>An offer valuing Toshiba less than JPY2.2 trillion would face pushback from the special committee, let alone shareholders. There are no signs of a JIC/Bain coming to the rescue. </li>
<li>While the Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With short-term newsflow likely to be incrementally negative, remain on the sidelines.</li>
</ul>


JIP, Toshiba Corp (6502 JP)'s preferred bidder, is reported to be under pressure from co-investors to cut its offer price. Securing financing continues to be troublesome.  
An offer valuing Toshiba less than JPY2.2 trillion would face pushback from the special committee, let alone shareholders. There are no signs of a JIC/Bain coming to the rescue. 
While the Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With short-term newsflow likely to be incrementally negative, remain on the sidelines.


Toshiba (6502 JP): JIP's Privatisation Bid Is Floundering

<ul>
<li>The <a href="https://asia.nikkei.com/Spotlight/Toshiba-in-turmoil/Toshiba-buyout-Japanese-fund-submits-15bn-proposal" target="_blank" rel="noopener">Nikkei Asia</a> reports that JIP has submitted a formal proposal to privatise <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> for about JPY2.2 trillion (US$15 billion) based on “<em>Toshiba's current share price.</em>” </li>
<li>JIP’s offer is below expectations of around a JPY6,000 bid which is likely driven by the inability to secure sufficient debt financing. JIP remains in negotiations with banks. </li>
<li>While there is a risk that JIP will be unable to improve its offer to secure Board approval, the downside is low as Toshiba/peers' current price ratio is attractive. </li>
</ul>


The Nikkei Asia reports that JIP has submitted a formal proposal to privatise Toshiba Corp (6502 JP) for about JPY2.2 trillion (US$15 billion) based on “Toshiba's current share price.” 
JIP’s offer is below expectations of around a JPY6,000 bid which is likely driven by the inability to secure sufficient debt financing. JIP remains in negotiations with banks. 
While there is a risk that JIP will be unable to improve its offer to secure Board approval, the downside is low as Toshiba/peers' current price ratio is attractive. 


Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>As a follow-on to <a href="https://www.smartkarma.com/insights/topix-october-2022-rebal-big-names-with-big-flows" target="_blank" data-smartkarma-citation="insights:81835" rel="noopener">TOPIX October 2022 Rebal - BIG Names with BIG Flows</a> which discussed ¥2.1trln a side flows overall, this insight analyses and proposes intra-sector baskets.</li>
<li>In general, the sector-neutral BUYs vs SELLs baskets of all names where Index Shares change by 10% or more have seen BUYs sharply outperform SELLs in the past three weeks.</li>
<li>Look for pre-positioning unwinds so trading BUY vs SELL baskets which have bucked the trend, banks and chemicals - might be worthwhile. Otherwise, pick your spots. Use the flow.</li>
</ul>


As a follow-on to TOPIX October 2022 Rebal - BIG Names with BIG Flows which discussed ¥2.1trln a side flows overall, this insight analyses and proposes intra-sector baskets.
In general, the sector-neutral BUYs vs SELLs baskets of all names where Index Shares change by 10% or more have seen BUYs sharply outperform SELLs in the past three weeks.
Look for pre-positioning unwinds so trading BUY vs SELL baskets which have bucked the trend, banks and chemicals - might be worthwhile. Otherwise, pick your spots. Use the flow.


TOPIX October 2022 Rebal - Buy/Sell Baskets (May the Flow Be Ever In Your Favour)

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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.

Equity Bottom-Up

<ul>
<li>Diversified across sectors and regions, Hitachi Ltd. is a proxy for the global economy going into recession.</li>
<li>Restructuring nearly complete, but little margin expansion so far. DX revenues growing rapidly, but more profit supporter than driver. </li>
<li>Weak 1Q and worsening economic situation casts doubt on FY Mar-23 guidance.</li>
</ul>


Diversified across sectors and regions, Hitachi Ltd. is a proxy for the global economy going into recession.
Restructuring nearly complete, but little margin expansion so far. DX revenues growing rapidly, but more profit supporter than driver. 
Weak 1Q and worsening economic situation casts doubt on FY Mar-23 guidance.


Hitachi Ltd. (6501 JP): Downside Risk in Recession

<ul>
<li>The TSE announced its first large FFW rebalance under new rules and Market Segmentation. ~1,000 names see FFW drop 5% or more. 100+ rise 5+%. Reverse funding trades are significant.</li>
<li>Top BUY flow: Toyota, Olympus, Daiichi Sankyo, Tokio Marine, JP Holdings with an average of 4.0 days' ADV to buy. Softbank/9984, MitCorp, Hitachi, Suzuki, Marubeni average 4.8 days to SELL.</li>
<li>493 names start their phased weight reduction out of TOPIX because they do not meet the hurdle for minimum trading value. <em>And... Shinsei is the most impressive SELL name.</em>
</li>
</ul>


The TSE announced its first large FFW rebalance under new rules and Market Segmentation. ~1,000 names see FFW drop 5% or more. 100+ rise 5+%. Reverse funding trades are significant.
Top BUY flow: Toyota, Olympus, Daiichi Sankyo, Tokio Marine, JP Holdings with an average of 4.0 days' ADV to buy. Softbank/9984, MitCorp, Hitachi, Suzuki, Marubeni average 4.8 days to SELL.
493 names start their phased weight reduction out of TOPIX because they do not meet the hurdle for minimum trading value. And... Shinsei is the most impressive SELL name.



TOPIX October 2022 Rebal - BIG Names with BIG Flows

Japan

Hitachi, Ltd. manufactures communications and electronic equipment, heavy electrical and industrial machinery, and consumer electronics.  The Company's diverse product line ranges from nuclear power systems to kitchen appliances. Hitachi also operates subsidiaries in the wire and cable, metal, and chemical industries.

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Hitachi Ltd (6501 JP)

Toshiba (6502 JP): JIP's Privatisation Bid Is Floundering

While Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With newsflow...

Arun George

Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer

While there is a risk that JIP will be unable to improve its offer to secure Board approval, the downside is low as Toshiba/peers' current price...

Arun George

TOPIX October 2022 Rebal - Buy/Sell Baskets (May the Flow Be Ever In Your Favour)

This companion piece to the first October 2022 FFW Rebalance piece shows both large (>¥5bn) and small (¥1-5bn) intra-sector flows. Using the flows...

Travis Lundy