Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Hitachi Construction Machinery / Event-Driven

<ul>
<li>On Thursday we saw news of a Hitachi sale of half its stake in HCM. Friday the stock traded down hard. Friday night saw news that underwhelmed further. </li>
<li>The deal is big, but it is basically a deal to get Hitachi out as parent. There is no Capital Alliance and there is no Strategic Alliance yet. </li>
<li>There simply is not much there, there yet. And the stock is less liquid than it looks, and that won't get better any time soon.</li>
</ul>


On Thursday we saw news of a Hitachi sale of half its stake in HCM. Friday the stock traded down hard. Friday night saw news that underwhelmed further. 
The deal is big, but it is basically a deal to get Hitachi out as parent. There is no Capital Alliance and there is no Strategic Alliance yet. 
There simply is not much there, there yet. And the stock is less liquid than it looks, and that won't get better any time soon.


Hitachi Construction Machinery Deal To Change "Parent" - There's Not Much There There

<ul>
<li>An NHK report today post-close said <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> would sell "about half" its stake in sub <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> to Itochu and Japan Industrial Partners.</li>
<li>That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.</li>
<li>The big question is What Next? and What Impact for shareholders? That's a tough couple of questions. </li>
</ul>


An NHK report today post-close said Hitachi Ltd (6501 JP) would sell "about half" its stake in sub Hitachi Construction Machinery (6305 JP) to Itochu and Japan Industrial Partners.
That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.
The big question is What Next? and What Impact for shareholders? That's a tough couple of questions. 


Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

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.

<ul>
<li>NHK reports that Hitachi will be selling roughly half of its 51% stake in HCM to Itochu and Japan Industrial Partners. </li>
<li>HCM has outperformed Komatsu over the last year and it is possible that some investors were expecting a buyout. </li>
<li>If so, and if there is a negative reaction to this news we would be looking to buy.</li>
</ul>


NHK reports that Hitachi will be selling roughly half of its 51% stake in HCM to Itochu and Japan Industrial Partners. 
HCM has outperformed Komatsu over the last year and it is possible that some investors were expecting a buyout. 
If so, and if there is a negative reaction to this news we would be looking to buy.


HCM – Hitachi Partial Stake Sale to Itochu

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

In my previous articles, "Parent-Subsidiary Listing and ENEOS Holdings, Toho Titanium, Hitachi Construction Machinery Update" and "Parent-Subsidiary Listing Dissolution and ROIC," I discussed the options for Hitachi Construction Machinery (6305), a subsidiary of Hitachi, Ltd. (6501) for dissolving the parent-subsidiary listing, including making the company a wholly owned subsidiary, selling shares, and going private. I attended Hitachi Construction Machinery's analyst meeting on Tuesday, October 26 and small meeting on Friday, October 29, as well as Hitachi, Ltd.'s analyst meeting on Wednesday, October 27, and would like to update my views on this matter.

In my previous articles, "Parent-Subsidiary Listing and ENEOS Holdings, Toho Titanium, Hitachi Construction Machinery Update" and "Parent-Subsidiary Listing Dissolution and ROIC," I discussed the options for Hitachi Construction Machinery (6305), a subsidiary of Hitachi, Ltd. (6501) for dissolving the parent-subsidiary listing, including making the company a wholly owned subsidiary, selling shares, and going private. I attended Hitachi Construction Machinery's analyst meeting on Tuesday, October 26 and small meeting on Friday, October 29, as well as Hitachi, Ltd.'s analyst meeting on Wednesday, October 27, and would like to update my views on this matter.

Japan's Governance: Parent-Subsidiary Listing and Hitachi Construction Machinery (6305): Update

Equity Bottom-Up

Hitachi Construction Machinery / Equity Bottom-Up

HCM 2QFY21 results were strong with ¥246bn in revenue (+7.6% QoQ, +28.7% YoY) and OP of ¥26bn (OPM of 10.7% compared to 3.2% and 5.2% respectively in 2QFY21 and 1QFY22). FY guidance was revised up to revenue of ¥920bn (+4.5% vs. previous guidance) and OP of ¥62bn (+19.4% but implying an OPM of 8% in 2HFY22).

HCM 2QFY21 results were strong with ¥246bn in revenue (+7.6% QoQ, +28.7% YoY) and OP of ¥26bn (OPM of 10.7% compared to 3.2% and 5.2% respectively in 2QFY21 and 1QFY22). FY guidance was revised up to revenue of ¥920bn (+4.5% vs. previous guidance) and OP of ¥62bn (+19.4% but implying an OPM of 8% in 2HFY22).

HCM – Could Retest All-Time Highs Given Time But…

Japan

Hitachi Construction Machinery Co., Ltd. develops, manufactures, sells, and repairs construction machinery. The Company's products include hydraulic excavators, crawler cranes, wheel loaders, shield machines, and bulldozers. Hitachi Construction Machinery, a subsidiary of Hitachi, Ltd., markets its products worldwide through sales offices overseas.

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Hitachi Construction Machinery (6305 JP)

Hitachi Construction Machinery Deal To Change "Parent" - There's Not Much There There

The Hitachi deal to sell a 26% stake in Hitachi Construction Machinery to Itochu and Japan Industrial Partners is deceptive. It is just a trade...

Travis Lundy

Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

NHK had an article out post-close saying Hitachi would sell "About half" it's stake in Hitachi Construction Machinery to Itochu and JIP. It will be...

Travis Lundy

HCM – Hitachi Partial Stake Sale to Itochu

NHK reports that Hitachi will be selling roughly half of its 51% stake in HCM to Itochu and Japan Industrial Partners. If there is a negative...

Mio Kato

Japan's Governance: Parent-Subsidiary Listing and Hitachi Construction Machinery (6305): Update

I participated in the analyst and small business meetings of Hitachi Construction Machinery and Hitachi last week, and would like to update you on...

Metrical Inc

HCM – Could Retest All-Time Highs Given Time But…

HCM 2Q results reassured with margins rebounding and the stock is up 6.8% with guidance for 2H still looking far too conservative, but there is the...

Mio Kato

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