Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>Tailwinds are turning to headwinds for the Japanese Trading companies.</li>
<li>Risks rising in the short term due to JPY strength, weakening commodity prices and the upcoming US recession.</li>
<li>Massive outperformance over the last two years, most recently due to multiple expansion</li>
</ul>


Tailwinds are turning to headwinds for the Japanese Trading companies.
Risks rising in the short term due to JPY strength, weakening commodity prices and the upcoming US recession.
Massive outperformance over the last two years, most recently due to multiple expansion


Risks Ahead for Japanese Trading Companies. Marubeni, Mitsui, Sumitomo, Mitsubishi

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a> yesterday announced earnings, forecast for FY23, higher dividend guidance, and a buyback. The headline number is 6% of shares and ¥300bn (which is nearer 4% now).</li>
<li>¥200bn of that ¥300bn is actually FY2022 "Additional Return" tacked onto a ¥100bn buyback for this year (FY23).  </li>
<li>As is often the case, <strong>Shareholder Structure Matters</strong>. Because Berkshire Hathaway owns a large chunk of stock (7.4% according to interviews), that carves out a fair chunk not for sale.</li>
</ul>



Mitsubishi Corp (8058 JP) yesterday announced earnings, forecast for FY23, higher dividend guidance, and a buyback. The headline number is 6% of shares and ¥300bn (which is nearer 4% now).
¥200bn of that ¥300bn is actually FY2022 "Additional Return" tacked onto a ¥100bn buyback for this year (FY23).  
As is often the case, Shareholder Structure Matters. Because Berkshire Hathaway owns a large chunk of stock (7.4% according to interviews), that carves out a fair chunk not for sale.


MitCorp (8058 JP) Earnings and Buyback - Shareholder Structure Matters

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

Pan Pacific International Holdings / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings (7532 JP)'</a> Don Quijote stores rebounded strongly from Covid, despite the lack of inbound tourists, reflecting the hard work done to update stores and merchandise.</li>
<li>This innovation continues and Don Quijote stores recently even began offering several new private brand cosmetics ranges and new electronics, including a new small footprint freezer. </li>
<li>The company expects 15% of domestic sales from private brands alone but rising to 25% in the near term, with significant upside for operating profits.</li>
</ul>



Pan Pacific International Holdings (7532 JP)' Don Quijote stores rebounded strongly from Covid, despite the lack of inbound tourists, reflecting the hard work done to update stores and merchandise.
This innovation continues and Don Quijote stores recently even began offering several new private brand cosmetics ranges and new electronics, including a new small footprint freezer. 
The company expects 15% of domestic sales from private brands alone but rising to 25% in the near term, with significant upside for operating profits.


More Profit for Donki as It Expands Private Label, Even Freezers

<ul>
<li>Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn - 20% of mkt cap.</li>
<li>On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency - the last "earning asset" except for the 55% stake in Khan Bank. </li>
<li>This lifts shadow book value even higher... Deep value with a catalyst. BUT... in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a... <em>pawnshop?</em>
</li>
</ul>


Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn - 20% of mkt cap.
On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency - the last "earning asset" except for the 55% stake in Khan Bank. 
This lifts shadow book value even higher... Deep value with a catalyst. BUT... in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a... pawnshop?



HS Holdings (8699 JP) - Huge Q1, Even Better Q2 Ahead, The 2nd To Last Asset Sale... And a Pawnshop?

Equity Capital Markets

<ul>
<li>Today after the close, <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> announced that <a href="https://www.smartkarma.com/entities/ms-ad-insurance-group-holdings" target="_blank" data-smartkarma-citation="entities:631:1" rel="noopener">MS&amp;AD Insurance (8725 JP)</a> and <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a> would sell 14.9mm shares in an offering.</li>
<li>This will get priced today or tomorrow, sold to institutional investors. This is ¥107bn, 4 days of ADV and 1% of shares out. It is not dilutive. </li>
<li>Mitsui &amp; Co has a buyback program with ¥123bn left til end-Sep, when presumably it will reload. Looks easy today, but measuring Mitsui &amp; Co vs Peers is less flattering.</li>
</ul>


Today after the close, Mitsui &amp; Co Ltd (8031 JP) announced that MS&amp;AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) would sell 14.9mm shares in an offering.
This will get priced today or tomorrow, sold to institutional investors. This is ¥107bn, 4 days of ADV and 1% of shares out. It is not dilutive. 
Mitsui &amp; Co has a buyback program with ¥123bn left til end-Sep, when presumably it will reload. Looks easy today, but measuring Mitsui &amp; Co vs Peers is less flattering.


Mitsui & Co (8031) - ¥100bn Overnight Equity Offering

Japan

ITOCHU Corporation is a general trading firm handling textiles, wood, machinery, metals, food, chemicals, construction materials, commodities, and energy related products such as oil and gas. The Company operates around the world. Itochu diversifies by operating in satellite communication and data communication businesses.

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Itochu Corp (8001 JP)

Risks Ahead for Japanese Trading Companies. Marubeni, Mitsui, Sumitomo, Mitsubishi

The investment thesis is starting to work as the reasoning behind the trade is playing out as the Japanese Yen strengthens.

Rikki Malik

MitCorp (8058 JP) Earnings and Buyback - Shareholder Structure Matters

MitCorp announced good earnings, a lower FY23 forecast (expected as commodity-related over-profitability falls back), and a large buyback. It is...

Travis Lundy

More Profit for Donki as It Expands Private Label, Even Freezers

Pan Pacific's Don Quijote chain managed to improve same-store sales in the past year despite previously relying on inbound tourists for 10% of...

Michael Causton

HS Holdings (8699 JP) - Huge Q1, Even Better Q2 Ahead, The 2nd To Last Asset Sale... And a Pawnshop?

HS Holdings (8699) reports great Q1, even better incoming Q2 (mostly known already), and sells the last remaining financial asset. All good. THEN...

Travis Lundy

Mitsui & Co (8031) - ¥100bn Overnight Equity Offering

MSAD Insurance, SMBC are selling 1.0% of TSO of Mitsui & Co (8031). Small deal at US$670mm and 3.7d of ADV on popular name. There's a buyback to...

Travis Lundy

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