Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> Offering is likely to price today, the first day of its Pricing Period. 
Two weeks ago I wrote <a href="https://www.smartkarma.com/insights/japan-post-holdings-world-s-largest-cleanup-trade-announced-story-and-index-implications" target="_blank" data-smartkarma-citation="insights:58555" rel="noopener">Japan Post Holdings - World's Largest Cleanup Trade Announced - Story and Index Implications</a> and noted that this was likely to be the last equity offering that Japan Post Holdings would ever do. 
It was cheap, and it was a nice clean setup.
That part hasn't changed. Some other things have, and they merit attention.

The Japan Post Holdings (6178 JP) Offering is likely to price today, the first day of its Pricing Period. 
Two weeks ago I wrote Japan Post Holdings - World's Largest Cleanup Trade Announced - Story and Index Implications and noted that this was likely to be the last equity offering that Japan Post Holdings would ever do. 
It was cheap, and it was a nice clean setup.
That part hasn't changed. Some other things have, and they merit attention. 

Japan Post Holdings Offering - Buy Weakness, Then Buy More

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.

Equity Capital Markets

Japan Post Holdings / Equity Capital Markets

Japan Post Holdings’ listed subsidiary, Japan Post Insurance has suffered from a scandal involving improper sales practices and this has suppressed its multiple noticeably despite strong EPS growth. As sales activities start to normalise we believe the market is severely underestimating how small an improvement would be required here to drive very large increases in earnings.

Japan Post Holdings’ listed subsidiary, Japan Post Insurance has suffered from a scandal involving improper sales practices and this has suppressed its multiple noticeably despite strong EPS growth. As sales activities start to normalise we believe the market is severely underestimating how small an improvement would be required here to drive very large increases in earnings.

Japan Post – Insurance Business Is Sandbagging Guidance

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Capital Hole Develops In USA:The 1Q21 regulatory financial statement for Prudential plc’s (PRU.LN) [Prudential] Jackson National (Jackson) subsidiary shows that statutory equity has declined a surprising USD 1.9 bn (39.6%) to USD 2.9 bn on a linked quarter basis at 1Q21; and *Franchise Of The Future: Nevertheless, we see Prudential's exiting of its US business is a positive (albeit likely more costly now) as it will reduce the group's exposure to US macro and transition the group into a pure Asian play. We believe that PRU’s Asian franchise is impressive with a strong growth outlook.

*Capital Hole Develops In USA:The 1Q21 regulatory financial statement for Prudential plc’s (PRU.LN) [Prudential] Jackson National (Jackson) subsidiary shows that statutory equity has declined a surprising USD 1.9 bn (39.6%) to USD 2.9 bn on a linked quarter basis at 1Q21; and *Franchise Of The Future: Nevertheless, we see Prudential's exiting of its US business is a positive (albeit likely more costly now) as it will reduce the group's exposure to US macro and transition the group into a pure Asian play. We believe that PRU’s Asian franchise is impressive with a strong growth outlook.

<a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> has seen a flurry of profit-taking in the past two weeks since it dramatically repurchased 30% of its shares outstanding in an overnight trade.The shares now trade lower than they did the moment before the announcement. <a href="https://www.smartkarma.com/entities/dai-ichi-life-insurance" target="_blank" data-smartkarma-citation="entities:1109:1" rel="noopener">Dai Ichi Life Insurance (8750 JP)</a> is probably JPI's closest listed peer, and it is up 8.8% in the same period. I would say that the stock and its holders are conspiring against me but that is not how things work.Lots of discussion below the fold - index treatment, overhang, PBR accretion, and more.

Japan Post Insurance (7181 JP) has seen a flurry of profit-taking in the past two weeks since it dramatically repurchased 30% of its shares outstanding in an overnight trade.The shares now trade lower than they did the moment before the announcement. Dai Ichi Life Insurance (8750 JP) is probably JPI's closest listed peer, and it is up 8.8% in the same period. I would say that the stock and its holders are conspiring against me but that is not how things work.Lots of discussion below the fold - index treatment, overhang, PBR accretion, and more.

Japan Post Insurance - A Surprising Selloff But Still A Buy

In mid-December 2020, there were news reports which suddenly circulated suggesting <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> was planning to buy ¥300bn of its own shares, with the goal of making sure that <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a>'s ownership dropped below 50%.This was discussed that day in <a href="https://www.smartkarma.com/insights/huge-japan-post-insurance-buyback-mooted-decks-cleared-time-to-buy" target="_blank" data-smartkarma-citation="insights:46429" rel="noopener">Huge Japan Post Insurance Buyback Mooted - Decks Cleared. Time To Buy</a> and re-upped three weeks later in <a href="https://www.smartkarma.com/insights/japan-post-insurance-update-three-reasons-to-buy-any-overhang-slightly-higher" target="_blank" data-smartkarma-citation="insights:46862" rel="noopener">Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher</a> just before the TOPIX FFW announcement. Things have been quiet since then, but the Company has steadily made progress ticking off the matters which were part of the company's corrective action plan after the sales scandal of 2019-2020. Getting these things finalised effectively "proves" that the company is ready to be let loose of its parent company, but importantly, the corrective action plan was couched in terms that basically said the only good way forward was to have a better and more comprehensive product suite, which would require being free of the burdens of the "Approval System."<div class="content-remarks">
In November of 2020, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> ("JPH") CEO Masuda publicly described a JPH plan to lower its stake in <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> ("JPI") and <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> ("JPB") to below 50% in the five year period to 2025.
In late April 2021, the government Panel on Postal Service Privatization (<a href="https://www.yuseimineika.go.jp/iinkai.html" target="_blank" rel="noopener">link</a>) submitted a report (Japanese only (<a href="https://www.yuseimineika.go.jp/iinkai/dai230/230_iken.pdf" target="_blank" rel="noopener">link1</a>, <a href="https://www.yuseimineika.go.jp/iinkai/dai230/230_iken_gaiyo.pdf" target="_blank" rel="noopener">link2</a>)) to Prime Minister Suga which urged <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> to lower its equity stakes in its two financial units - <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> and <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> to or below 50 pct between fiscal 2021 and fiscal 2025. It also asked the JPH to make a plan to sell ALL of its shares in the subsidiaries.
</div><h2>The NEW News</h2>Today, with full-year earnings, Japan Post Insurance announced a buyback of up to 162,906,300 shares (29.0%) spending up to ¥439.8bn. This will be done in a ToSTNeT-3 transaction Monday morning. Japan Post Holdings announced they would sell a similar number of shares into the buy order, and would sell an additional 400,000 shares held in a trust. By so doing, the percentage of Japan Post Insurance voting rights held by Japan Post Holdings would drop to 49.90%. That's it. A HUGELY accretive buyback leads to a huge business opportunity for a hugely undervalued life insurer (about to become substantially more undervalued on Price/EEV terms) which has been handcuffed for its whole existence. What more do you want?

In mid-December 2020, there were news reports which suddenly circulated suggesting Japan Post Insurance (7181 JP) was planning to buy ¥300bn of its own shares, with the goal of making sure that Japan Post Holdings (6178 JP)'s ownership dropped below 50%.This was discussed that day in Huge Japan Post Insurance Buyback Mooted - Decks Cleared. Time To Buy and re-upped three weeks later in Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher just before the TOPIX FFW announcement. Things have been quiet since then, but the Company has steadily made progress ticking off the matters which were part of the company's corrective action plan after the sales scandal of 2019-2020. Getting these things finalised effectively "proves" that the company is ready to be let loose of its parent company, but importantly, the corrective action plan was couched in terms that basically said the only good way forward was to have a better and more comprehensive product suite, which would require being free of the burdens of the "Approval System."
In November of 2020, Japan Post Holdings (6178 JP) ("JPH") CEO Masuda publicly described a JPH plan to lower its stake in Japan Post Insurance (7181 JP) ("JPI") and Japan Post Bank (7182 JP) ("JPB") to below 50% in the five year period to 2025.
In late April 2021, the government Panel on Postal Service Privatization (link) submitted a report (Japanese only (link1, link2)) to Prime Minister Suga which urged Japan Post Holdings (6178 JP) to lower its equity stakes in its two financial units - Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP) to or below 50 pct between fiscal 2021 and fiscal 2025. It also asked the JPH to make a plan to sell ALL of its shares in the subsidiaries.
The NEW NewsToday, with full-year earnings, Japan Post Insurance announced a buyback of up to 162,906,300 shares (29.0%) spending up to ¥439.8bn. This will be done in a ToSTNeT-3 transaction Monday morning. Japan Post Holdings announced they would sell a similar number of shares into the buy order, and would sell an additional 400,000 shares held in a trust. By so doing, the percentage of Japan Post Insurance voting rights held by Japan Post Holdings would drop to 49.90%. That's it. A HUGELY accretive buyback leads to a huge business opportunity for a hugely undervalued life insurer (about to become substantially more undervalued on Price/EEV terms) which has been handcuffed for its whole existence. What more do you want?

Japan Post Insurance - It's ON! Buyback, Huge Accretion, Restrictions Lifted. What's Not To Like?

Japan

The Dai-ichi Life Insurance Company Ltd. underwrites and sells life, health and annuity insurance to groups and individuals. The Company offers a wide variety of insurance products to suit different needs, ranging from children's school tuition to emergency funds for the elderly.

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Dai Ichi Life Insurance (8750 JP)

Japan Post Holdings Offering - Buy Weakness, Then Buy More

JPH (6178 JP) will price today. At 7x PER and 5.7% div yield, the Offering sells itself, but better, there is 15% of ADV to buy back every day for...

Travis Lundy

Japan Post – Insurance Business Is Sandbagging Guidance

As Japan Post Insurance's sales activities start to normalise we believe the market is underestimating how small an improvement would be required...

Mio Kato

Prudential Plc - Jackson Cracks

PRUDENTIAL: The 1Q21 regulatory financial statement for the Jackson National subsidiary exhibits that statutory equity declined a surprising USD...

Thomas J. Monaco

Japan Post Insurance - A Surprising Selloff But Still A Buy

Japan Post Insurance has bought back 29% of its shares and EPS, book value, and EEV accretion is immense, but the shares have underperformed rival...

Travis Lundy

Japan Post Insurance - It's ON! Buyback, Huge Accretion, Restrictions Lifted. What's Not To Like?

Japan Post Insurance has announced a 29% buyback, the JPH selldown, the imminent end to Postal Privatization Act restrictions. And it can get some...

Travis Lundy

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