Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

<ul>
<li>Today after the close, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> and <a href="https://www.smartkarma.com/entities/gree-inc" target="_blank" data-smartkarma-citation="entities:17135:1" rel="noopener">Gree Inc (3632 JP)</a> announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.</li>
<li>The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.</li>
<li>The problem is that too much of revenue isn't earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.</li>
</ul>


Today after the close, KDDI Corp (9433 JP) and Gree Inc (3632 JP) announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.
The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.
The problem is that too much of revenue isn't earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.


Gree (3632 JP) - Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out

Kokusai Electric  / Equity Capital Markets

<ul>
<li>Last autumn, <a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a> was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.</li>
<li>KKR's own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).</li>
<li>There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details. </li>
</ul>


Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
KKR's own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details. 


Kokusai Elec (6525) - The Much-Anticipated Lockup Expiry

Event-Driven

<ul>
<li>The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn. </li>
<li>There are four ADDs previously discussed: <a href="https://www.smartkarma.com/entities/sun-inc" target="_blank" data-smartkarma-citation="entities:36668:1" rel="noopener">Sun* (4053 JP)</a>, <a href="https://www.smartkarma.com/entities/appier-group-inc" target="_blank" data-smartkarma-citation="entities:32165:1" rel="noopener">Appier Group (4180 JP)</a>, <a href="https://www.smartkarma.com/entities/chubu-steel-plate-co-ltd" target="_blank" data-smartkarma-citation="entities:18535:1" rel="noopener">Chubu Steel Plate (5461 JP)</a>, and <a href="https://www.smartkarma.com/entities/chubu-steel-plate-co-ltd" target="_blank" data-smartkarma-citation="entities:18535:1" rel="noopener">Chubu Steel Plate (5461 JP)</a>. </li>
<li>There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with &gt;$10mm AND &gt;3 days ADV to sell.</li>
</ul>


The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn. 
There are four ADDs previously discussed: Sun* (4053 JP), Appier Group (4180 JP), Chubu Steel Plate (5461 JP), and Chubu Steel Plate (5461 JP). 
There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with &gt;$10mm AND &gt;3 days ADV to sell.


January TOPIX FFW Review - Some Big Sells

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dena-co-ltd" target="_blank" data-smartkarma-citation="entities:747:1" rel="noopener">DeNA (2432 JP)</a> announced in June a buyback programme to buy up to ¥15bn of stock over the next nine months. They are two-thirds the way through. </li>
<li>At current pace, they should finish by end-Jan or early Feb, then cancel 8mm shares, leading to a small TOPIX selldown <em>likely</em> in March or April. </li>
<li>The company remains cash and securities rich (net cash, after-tax value of securities, and equity affiliates are 100% of market cap). And growth lines will slowly claw their way positive.</li>
</ul>



DeNA (2432 JP) announced in June a buyback programme to buy up to ¥15bn of stock over the next nine months. They are two-thirds the way through. 
At current pace, they should finish by end-Jan or early Feb, then cancel 8mm shares, leading to a small TOPIX selldown likely in March or April. 
The company remains cash and securities rich (net cash, after-tax value of securities, and equity affiliates are 100% of market cap). And growth lines will slowly claw their way positive.


DeNA (2432) Buyback - Accretive on a Low Leverage Business Which Will Grow In Time

<ul>
<li>The January 2022 FFW rebalance is not very large - about US$225mm a side. </li>
<li>30% of the interest is in two names - <a href="https://www.smartkarma.com/entities/net-protections-holdings-inc" target="_blank" data-smartkarma-citation="entities:35162:1" rel="noopener">Net Protections (7383 JP)</a> as an add because of its recent IPO and <a href="https://www.smartkarma.com/entities/oracle-corp-japan" target="_blank" data-smartkarma-citation="entities:16787:1" rel="noopener">Oracle Corp Japan (4716 JP)</a> as a sell.</li>
<li>This event may get overshadowed by the TSE Market Structure revamp announced the same day.</li>
</ul>


The January 2022 FFW rebalance is not very large - about US$225mm a side. 
30% of the interest is in two names - Net Protections (7383 JP) as an add because of its recent IPO and Oracle Corp Japan (4716 JP) as a sell.
This event may get overshadowed by the TSE Market Structure revamp announced the same day.


TOPIX January 2022 FFW Rebalance - Much Nothing To Do

Japan

Gree, Inc. operates a Social Network Service, GREE for PC and mobile users. The website provides online communities and games to its members. The Company also sells advertising space through advertising agencies.

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Gree Inc (3632 JP)

Gree (3632 JP) - Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out

KDDI is selling their 8mm shares. Gree is cheap on a SOTP basis, but its investment account is not printing returns now. Buybacks tough because the...

Travis Lundy

Kokusai Elec (6525) - The Much-Anticipated Lockup Expiry

Kokusai Electric was ¥4310 the day after I wrote. Fell to ¥3700-3800 before re-attaining ¥4000+ today. STILL has an overhang issue. Given no...

Travis Lundy

January TOPIX FFW Review - Some Big Sells

The TOPIX January 2023 FFW trade was announced today. 57 down-weights, 11 FFW up-weights. The Phased Weight Reduction has its second leg. Total to...

Travis Lundy

DeNA (2432) Buyback - Accretive on a Low Leverage Business Which Will Grow In Time

DeNA (2432) is a nice pot of assets with a small business attached. It should be better. It appears to be on its way to getting better. It is very...

Travis Lundy

TOPIX January 2022 FFW Rebalance - Much Nothing To Do

The TSE FFW review for Jan 2022 sees 60 names with changes. Gree's share cancellation would have been big but the TSE offset it with a FFW change....

Travis Lundy

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