Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

Capital Asset Planning Inc / Event-Driven

<p>Today after market close, smallcap systems integrations company <a href="https://www.smartkarma.com/entities/capital-asset-planning-inc" target="_blank" data-smartkarma-citation="entities:31090:1" rel="noopener">Capital Asset Planning (3965 JP)</a> announced (<a href="https://contents.xj-storage.jp/xcontents/AS90835/e934ec6a/92a9/4cf2/8dd1/6d53df959c14/140120201216435641.pdf" target="_blank" rel="noopener">J-only</a>) they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 23rd December 2020. </p><p>TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. </p><section class="figure"></section><section class="figure">CAP is a boutique system integrator specialising in services and software to the businesses catering to the financial retail market mainly focusing on actuarial life insurance, investment trusts, asset management, and tax affairs.</section><section class="figure">                     </section><section class="figure"></section><section class="figure"></section><section class="figure"></section><section class="figure"></section><p>In this insight, we take a look at the Index Inclusion Parameters and the Fundamentals of the company to evaluate the upside potential of the TOPIX Inclusion Event. </p>

Today after market close, smallcap systems integrations company Capital Asset Planning (3965 JP) announced (J-only) they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 23rd December 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. CAP is a boutique system integrator specialising in services and software to the businesses catering to the financial retail market mainly focusing on actuarial life insurance, investment trusts, asset management, and tax affairs.                     In this insight, we take a look at the Index Inclusion Parameters and the Fundamentals of the company to evaluate the upside potential of the TOPIX Inclusion Event. 

TOPIX Inclusion (3965 JP): Capital Asset Planning, Inc.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<p>About ten weeks ago, <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> wrote about the likelihood that <a href="https://www.smartkarma.com/entities/sre-holdings-corp" target="_blank" data-smartkarma-citation="entities:29672:1" rel="noopener">SRE Holdings Corp (2980 JP)</a> would move to the TSE's First Section in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-event-trade-2980-jp-sre-holdings" target="_blank" data-smartkarma-citation="insights:43530" rel="noopener">TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings</a> which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. </p><p>Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up" target="_blank" data-smartkarma-citation="insights:40509" rel="noopener">TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up</a> and <a href="https://www.smartkarma.com/insights/historical-topix-inclusions-what-flavor-performs-best" target="_blank" data-smartkarma-citation="insights:39523" rel="noopener">Historical TOPIX Inclusions:  What Flavor Performs Best?</a>). His more recent work developed since the TSE1 Listing Rules changed last month is available in <a href="https://www.smartkarma.com/insights/topix-inclusions-new-regulations-who-is-ready-2-0" target="_blank" data-smartkarma-citation="insights:45783" rel="noopener">TOPIX Inclusions:  New Regulations! Who Is READY? 2.0</a>.</p><p>Indeed, SRE was his top pick:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/178/339/original/Screenshot%202020-12-14%20at%207.14.20%20PM.png?1607944479" class="editor-image img-responsive" data-smartkarma-image-id="178339"></figure></section><p>Today after market close, SRE announced (<a href="https://ssl4.eir-parts.net/doc/2980/tdnet/1912909/00.pdf" target="_blank" rel="noopener">J-only</a>) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. </p><p>They also announced a small offering which can be ignored.</p><p>In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. </p>

About ten weeks ago, Janaghan Jeyakumar, CFA wrote about the likelihood that SRE Holdings Corp (2980 JP) would move to the TSE's First Section in TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up and Historical TOPIX Inclusions:  What Flavor Performs Best?). His more recent work developed since the TSE1 Listing Rules changed last month is available in TOPIX Inclusions:  New Regulations! Who Is READY? 2.0.Indeed, SRE was his top pick:Today after market close, SRE announced (J-only) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. They also announced a small offering which can be ignored.In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. 

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

<p>TSE2-listed software company <a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> has been a closely-watched TOPIX Inclusion Candidate in recent months. </p><p>Having retained this stock in Quiddity's Pre-events watchlist for around 3 months, in October 2020, I took a bullish view on <a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> as I discussed in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up-october-2020-two-stocks-to-buy" target="_blank" data-smartkarma-citation="insights:43984" rel="noopener">TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy</a> despite pointing out some warnings on possible overheating against peers. Disappointingly, the stock declined sharply in the following few weeks. </p><p>In late-November, after adjusting for the impact of their pre-event equity offerings, I picked  <a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> to be one of our eight picks in <a href="https://www.smartkarma.com/insights/topix-inclusions-new-regulations-who-is-ready-2-0" target="_blank" data-smartkarma-citation="insights:45783" rel="noopener">TOPIX Inclusions:  New Regulations! Who Is READY? 2.0</a> where I discussed a screening process to identify stocks with high likelihood of TSE1 promotion as shown in the extract below. </p><blockquote><ul style="list-style-type: circle;"><li>
<strong>Other Pick 3: <a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> : </strong>This case was previously covered in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up-october-2020-two-stocks-to-buy" target="_blank" data-smartkarma-citation="insights:43984" rel="noopener">TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy</a>. According to this analysis, their shareholder count and free float percentage are not high enough to meet OLD requirements but after adjusting for their recent tachiaigai bunbai offering, I am confident they should be fine. <strong>Waiting period ends on 15th December 2020.  </strong>
</li></ul></blockquote><p>Today after market close, <a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> announced (<a href="https://ssl4.eir-parts.net/doc/4481/tdnet/1911877/00.pdf" target="_blank" rel="noopener">J-only</a>) they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 16th December 2020 - the first trading day after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. </p><p><a href="https://www.smartkarma.com/entities/base-co-ltd" target="_blank" data-smartkarma-citation="entities:29159:1" rel="noopener">Base Co Ltd (4481 JP)</a> engages in outsourced software development services in Japan. The company hires recent graduates and mid-career software engineers and deploys them to provide various systems integration services for clients including system development, ERP solutions, ICT solutions, and operation/maintenance services. They mainly focus on system development for the financial industry (i.e. securities companies), manufacturing industry, and logistics industry. </p><p>In this insight, we take a look at the Index Inclusion Parameters and the Fundamentals of the company to evaluate the upside potential of the TOPIX Inclusion Event. </p>

TSE2-listed software company Base Co Ltd (4481 JP) has been a closely-watched TOPIX Inclusion Candidate in recent months. Having retained this stock in Quiddity's Pre-events watchlist for around 3 months, in October 2020, I took a bullish view on Base Co Ltd (4481 JP) as I discussed in TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy despite pointing out some warnings on possible overheating against peers. Disappointingly, the stock declined sharply in the following few weeks. In late-November, after adjusting for the impact of their pre-event equity offerings, I picked  Base Co Ltd (4481 JP) to be one of our eight picks in TOPIX Inclusions:  New Regulations! Who Is READY? 2.0 where I discussed a screening process to identify stocks with high likelihood of TSE1 promotion as shown in the extract below. 
Other Pick 3: Base Co Ltd (4481 JP) : This case was previously covered in TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy. According to this analysis, their shareholder count and free float percentage are not high enough to meet OLD requirements but after adjusting for their recent tachiaigai bunbai offering, I am confident they should be fine. Waiting period ends on 15th December 2020.  
Today after market close, Base Co Ltd (4481 JP) announced (J-only) they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 16th December 2020 - the first trading day after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. Base Co Ltd (4481 JP) engages in outsourced software development services in Japan. The company hires recent graduates and mid-career software engineers and deploys them to provide various systems integration services for clients including system development, ERP solutions, ICT solutions, and operation/maintenance services. They mainly focus on system development for the financial industry (i.e. securities companies), manufacturing industry, and logistics industry. In this insight, we take a look at the Index Inclusion Parameters and the Fundamentals of the company to evaluate the upside potential of the TOPIX Inclusion Event. 

Quantitative Analysis

<div>
<p>When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. </p>
</div>
<div>
<p>In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. </p>
</div>


When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 


In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 


<p>There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  </p><p>Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of <a href="https://www.smartkarma.com/insights/topix-inclusion-4931-jp-shinnihonseiyaku" target="_blank" data-smartkarma-citation="insights:45660" rel="noopener">TOPIX Inclusion (4931 JP): Shinnihonseiyaku</a> where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. </p><p>However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. </p><p>In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. </p><hr><div class="content-remarks"><p>This insight is an update to <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-who-is-ready" target="_blank" data-smartkarma-citation="insights:41091" rel="noopener">TOPIX Inclusion Pre-Events: Who Is Ready?</a>. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. </p></div>

There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of TOPIX Inclusion (4931 JP): Shinnihonseiyaku where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. This insight is an update to TOPIX Inclusion Pre-Events: Who Is Ready?. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. 

TOPIX Inclusions:  New Regulations! Who Is READY? 2.0

Japan

Base Co., Ltd. offers inforamtion technology services. The Company provides computer programming, system integration, solution development, software development, and other services. Base provides its services throughout Japan.

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Base Co Ltd (4481 JP)

TOPIX Inclusion (3965 JP): Capital Asset Planning, Inc.

This is a smallcap TOPIX inclusion which should not have much pre-positioning in it, and should have significant impact in terms of ADV to buy....

Janaghan Jeyakumar, CFA

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

SRE (2980) is going into TOPIX. Credit Janaghan Jeyakumar for the call. This is a GREEN inclusion - about 10 days of ADV and the company is a...

Travis Lundy

TOPIX Inclusion (4481 JP): Base Co Ltd

Base (4481) was in my recent presentation of top picks for near-term TOPIX inclusion. They announced today. This one is BLUE, which is decent...

Janaghan Jeyakumar, CFA

TOPIX Inclusion Trade Summary: Nov 2020

November review of pre-events, live events, and post-events in the TOPIX Inclusion trade universe. There are a dozen pre-event recommendations...

Janaghan Jeyakumar, CFA

TOPIX Inclusions: New Regulations! Who Is READY? 2.0

The TSE has new Listing Rules and Criteria for TSE1 listing and promotion. That means new analysis on what pre-event trades. One TOP PICK to trade...

Janaghan Jeyakumar, CFA

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