Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<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... pawnshop?
</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?

<ul>
<li>The saga that has been the Sawada now <a href="https://www.smartkarma.com/entities/hs-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">HS Holdings (8699 JP)</a> effective control change and change in Mongolian Banking Law has been interesting but the end game is clear.</li>
<li>Last week, the Mongolian parliament extended the listing deadline for the top 5 Mongolian banks from June 2022 to June 2023. The IPO has been pushed back. Which is good.</li>
<li>The stock is not what people think it is, and the implied PBR and PER of Khan Bank exposure on a cash-adjusted basis is VERY low. </li>
</ul>


The saga that has been the Sawada now HS Holdings (8699 JP) effective control change and change in Mongolian Banking Law has been interesting but the end game is clear.
Last week, the Mongolian parliament extended the listing deadline for the top 5 Mongolian banks from June 2022 to June 2023. The IPO has been pushed back. Which is good.
The stock is not what people think it is, and the implied PBR and PER of Khan Bank exposure on a cash-adjusted basis is VERY low. 


HS Holdings (8699 JP): Khan Bank IPO Delayed but Path Clear

<ul>
<li>Sawada/<a href="https://www.smartkarma.com/entities/hs-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">HS Holdings (8699 JP)</a> yesterday announced it would receive a large dividend from its namesake brokerage business, and then announced it would sell it to its own 2nd largest shareholder. </li>
<li>Then HS Holdings said it would buy back up to 23% of its shares out this morning in a ToSTNeT-3 transaction. </li>
<li>The sale of what was its second most important remaining asset is good. Buying back shares below book is normally good. </li>
</ul>


Sawada/HS Holdings (8699 JP) yesterday announced it would receive a large dividend from its namesake brokerage business, and then announced it would sell it to its own 2nd largest shareholder. 
Then HS Holdings said it would buy back up to 23% of its shares out this morning in a ToSTNeT-3 transaction. 
The sale of what was its second most important remaining asset is good. Buying back shares below book is normally good. 


Sawada/HS Holdings (8699) - A Quite Salutary Development.. And We Wait...

In early July, after not quite 16 months of not getting approval from the Central Bank of Mongolia to purchase more than 50% of <a href="https://www.smartkarma.com/entities/sawada-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">Sawada Holdings (8699 JP)</a> from existing shareholders, in part due to a lack of appropriate preparation and adequate advice, and in part due to a change in the law regarding Mongolian banks which affected the regime by which shareholding is structured on significant Mongolian banks - of which Sawada's subsidiary Khan Bank LLC is the most significant, would be buyer Upsilon Investment Partners walked away from its Tender Offer. This was discussed in <a href="https://www.smartkarma.com/insights/sawada-8699-upsilon-to-end-its-tender-and-khan-bank-applies-to-list" target="_blank" data-smartkarma-citation="insights:53957" rel="noopener">Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List</a>.The rule changes earlier in 2021 required that any significant shareholder in Sawada who had increased their stake above 20%* after the 2010 Banking Law amendment were required to sell down after obtaining permission to do so, and subsequently required Khan Bank to come up with a plan to list itself, and to see its stake reduced below 20%* by mid 2022. <div class="content-remarks">* Absolutely coincidentally (I believe), Upsilon is the 20th letter in the greek alphabet. </div>This caused considerable upheaval in the share price as the second largest investor sold down their stake from the high 20%s level to near zero in just a few months. The rule change early in the year caused a sharp drop. The 16th of March saw the release of a <a href="http://www.sawada-holdings.co.jp/wp/wp-content/uploads/2021/03/shdpress20210316.pdf" target="_blank" rel="noopener">statement</a> by Sawada detailing the Mongolian Central Bank's demands. After the major shareholder received permission to sell their stake down further. They sold, and the volume spike on a price drop then subsequent bounce saw the transfer of roughly 25% of the shares out and 50% of the float from one shareholder to others. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/019/original/Screenshot+2021-10-01+at+7.37.37+PM.png?1633088272" class="editor-image img-responsive" data-smartkarma-image-id="233019"></figure></section>Despite warnings that shareholdings above 5% might trigger a requirement to get permission, <a href="https://www.smartkarma.com/entities/j-trust-co-ltd" target="_blank" data-smartkarma-citation="entities:20246:1" rel="noopener">J Trust Co Ltd (8508 JP)</a> bought a large portion of shares sold in the market, reaching a stake of 14.39% as of mid-June. On July 2, Upsilon asked investors not to tender. On 17 July, the tender offer completed, without Upsilon getting to the minimum stake required under the conditions. At the end of July, Khan Bank reported excellent H1 results, and in mid-August, Sawada Holdings <a href="http://www.sawada-holdings.co.jp/wp/wp-content/uploads/2021/08/shdpress20210817.pdf" target="_blank" rel="noopener">reported</a> that Khan Bank had submitted its Listing Plan to regulators. The play, as it stood until Friday October 1st, was that investors in Sawada at say ¥950-1050/share were long a stock with a 60% stake in a Mongolian bank which where the stake would need to be sold down within 9 months, plus a hodgepodge of other interests. On October 1 2021, that changed somewhat.Upsilon has just bought ~33% of Sawada.

In early July, after not quite 16 months of not getting approval from the Central Bank of Mongolia to purchase more than 50% of Sawada Holdings (8699 JP) from existing shareholders, in part due to a lack of appropriate preparation and adequate advice, and in part due to a change in the law regarding Mongolian banks which affected the regime by which shareholding is structured on significant Mongolian banks - of which Sawada's subsidiary Khan Bank LLC is the most significant, would be buyer Upsilon Investment Partners walked away from its Tender Offer. This was discussed in Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List.The rule changes earlier in 2021 required that any significant shareholder in Sawada who had increased their stake above 20%* after the 2010 Banking Law amendment were required to sell down after obtaining permission to do so, and subsequently required Khan Bank to come up with a plan to list itself, and to see its stake reduced below 20%* by mid 2022. * Absolutely coincidentally (I believe), Upsilon is the 20th letter in the greek alphabet. This caused considerable upheaval in the share price as the second largest investor sold down their stake from the high 20%s level to near zero in just a few months. The rule change early in the year caused a sharp drop. The 16th of March saw the release of a statement by Sawada detailing the Mongolian Central Bank's demands. After the major shareholder received permission to sell their stake down further. They sold, and the volume spike on a price drop then subsequent bounce saw the transfer of roughly 25% of the shares out and 50% of the float from one shareholder to others. Despite warnings that shareholdings above 5% might trigger a requirement to get permission, J Trust Co Ltd (8508 JP) bought a large portion of shares sold in the market, reaching a stake of 14.39% as of mid-June. On July 2, Upsilon asked investors not to tender. On 17 July, the tender offer completed, without Upsilon getting to the minimum stake required under the conditions. At the end of July, Khan Bank reported excellent H1 results, and in mid-August, Sawada Holdings reported that Khan Bank had submitted its Listing Plan to regulators. The play, as it stood until Friday October 1st, was that investors in Sawada at say ¥950-1050/share were long a stock with a 60% stake in a Mongolian bank which where the stake would need to be sold down within 9 months, plus a hodgepodge of other interests. On October 1 2021, that changed somewhat.Upsilon has just bought ~33% of Sawada. 

Sawada - Upsilon Gets Its Stake And Still We Wait

<h2>It's OFF. </h2>On Friday 2 July, Upsilon Investment Partnership announced that because of the delay of receiving approval from the Bank of Mongolia, and the lack of communication (only administrative emails so far and no response since the document dated 29 January 2021), it deemed it appropriate to end the Tender Offer process.The <a href="https://disclosure.edinet-fsa.go.jp/E01EW/BLMainController.jsp?uji.verb=W00Z1020initialize&amp;uji.bean=ek.bean.EKW00Z1020Bean&amp;TID=W00Z1020&amp;PID=W1E63041&amp;SESSIONKEY=1625288042489&amp;lgKbn=2&amp;dflg=0&amp;iflg=null&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=S100LX4G" target="_blank" rel="noopener">announcement</a> is tediously long. But it indicates that somewhat strangely, it decided not to withdraw the Tender Offer (my understanding is that the lack of Central Bank of Mongolia approval would constitute a legitimate excuse for withdrawal under the FIEA) but instead arrange with shareholders who had previously agreed to tender to have them not tender, hoping that the Tender Offer  would not go through. Both the Tender Offeror and the Company (Sawada) now implore shareholders to not tender. There are agreements in place to not tender to the tune of 44.69%. This is not a "blocking stake" but it is significant. <h2>And It's ON. </h2>The other news this week is that Khan Bank has applied with the Central Bank of Mongolia and the Financial Supervisory Commission to list its shares. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/216/613/original/Screenshot+2021-07-03+at+12.48.08+PM.png?1625287863" class="editor-image img-responsive" data-smartkarma-image-id="216613"></figure></section>The application was made under the auspices of the Amended Banking Law which requires the top 5 banks in Mongolia to list their shares by 30 June 2022. This is the beginning of the next step. But first we have to get past the end of the previous step. And there is some gamesmanship involved.<hr>The history of insights on the Sawada Tender Offer situation is below.    <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-tender-an-odd-duck" target="_blank" data-smartkarma-citation="insights:36802" rel="noopener">Sawada Holdings Partial Tender - An Odd Duck</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-offer-arb-grids-pro-ration" target="_blank" data-smartkarma-citation="insights:37141" rel="noopener">Sawada Holdings Partial Offer - Arb Grids &amp; Pro-Ration</a>     <a href="https://www.smartkarma.com/insights/sawada-withholds-opinion-on-tob-mongolia-deal-risk-may-exist" target="_blank" data-smartkarma-citation="insights:36959" rel="noopener">Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist</a>     <a href="https://www.smartkarma.com/insights/sawada-withholds-opinion-on-tob-mongolia-deal-risk-may-exist" target="_blank" data-smartkarma-citation="insights:36959" rel="noopener">Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-tender-holding-pattern" target="_blank" data-smartkarma-citation="insights:37764" rel="noopener">Sawada Holdings Tender Holding Pattern</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-offer-update-it-s-a-buy-here" target="_blank" data-smartkarma-citation="insights:37345" rel="noopener">Sawada Holdings Partial Offer Update - It's a Buy Here</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-8699-partial-tender-delayed-again-13th-time-a-charm" target="_blank" data-smartkarma-citation="insights:42124" rel="noopener">Sawada Holdings (8699) Partial Tender. Delayed Again. 13th Time a Charm?</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-still-a-long-but" target="_blank" data-smartkarma-citation="insights:43548" rel="noopener">Sawada Holdings - Still A Long But...</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-change-of-paradigm-means-opportunity" target="_blank" data-smartkarma-citation="insights:47739" rel="noopener">Sawada Holdings - Change of Paradigm Means Opportunity</a>     <a href="https://www.smartkarma.com/insights/sawada-8699-jp-stuck-between-mongolian-central-bank-idealism-and-reality" target="_blank" data-smartkarma-citation="insights:48921" rel="noopener">Sawada (8699 JP) Stuck Between Mongolian Central Bank Idealism and Reality</a>     <a href="https://www.smartkarma.com/insights/sawada-gets-some-good-news-expect-a-selldown" target="_blank" data-smartkarma-citation="insights:50551" rel="noopener">Sawada Gets Some Good News - Expect a Selldown</a>     <a href="https://www.smartkarma.com/insights/sawada-selldown-may-be-done-now-on-to-earnings" target="_blank" data-smartkarma-citation="insights:50721" rel="noopener">Sawada Selldown May Be Done - Now On To Earnings</a>     <a href="https://www.smartkarma.com/insights/sawada-selldown-was-not-done-shareholder-structure-looks-different-now" target="_blank" data-smartkarma-citation="insights:51240" rel="noopener">Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now</a>     <a href="https://www.smartkarma.com/insights/sawada-is-a-different-stock-now" target="_blank" data-smartkarma-citation="insights:51901" rel="noopener">Sawada Is A Different Stock Now</a>     <a href="https://www.smartkarma.com/insights/be-careful-of-expectations-on-sawada-8699" target="_blank" data-smartkarma-citation="insights:52303" rel="noopener">Be Careful of Expectations on Sawada (8699)</a>

It's OFF. On Friday 2 July, Upsilon Investment Partnership announced that because of the delay of receiving approval from the Bank of Mongolia, and the lack of communication (only administrative emails so far and no response since the document dated 29 January 2021), it deemed it appropriate to end the Tender Offer process.The announcement is tediously long. But it indicates that somewhat strangely, it decided not to withdraw the Tender Offer (my understanding is that the lack of Central Bank of Mongolia approval would constitute a legitimate excuse for withdrawal under the FIEA) but instead arrange with shareholders who had previously agreed to tender to have them not tender, hoping that the Tender Offer  would not go through. Both the Tender Offeror and the Company (Sawada) now implore shareholders to not tender. There are agreements in place to not tender to the tune of 44.69%. This is not a "blocking stake" but it is significant. And It's ON. The other news this week is that Khan Bank has applied with the Central Bank of Mongolia and the Financial Supervisory Commission to list its shares. The application was made under the auspices of the Amended Banking Law which requires the top 5 banks in Mongolia to list their shares by 30 June 2022. This is the beginning of the next step. But first we have to get past the end of the previous step. And there is some gamesmanship involved.The history of insights on the Sawada Tender Offer situation is below.    Sawada Holdings Partial Tender - An Odd Duck     Sawada Holdings Partial Offer - Arb Grids &amp; Pro-Ration     Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist     Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist     Sawada Holdings Tender Holding Pattern     Sawada Holdings Partial Offer Update - It's a Buy Here     Sawada Holdings (8699) Partial Tender. Delayed Again. 13th Time a Charm?     Sawada Holdings - Still A Long But...     Sawada Holdings - Change of Paradigm Means Opportunity     Sawada (8699 JP) Stuck Between Mongolian Central Bank Idealism and Reality     Sawada Gets Some Good News - Expect a Selldown     Sawada Selldown May Be Done - Now On To Earnings     Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now     Sawada Is A Different Stock Now     Be Careful of Expectations on Sawada (8699) 

Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List

Japan

J Trust Co., Ltd. provides various financial services. The company provides financial business mainly banking services in South Korea and Indonesia. The company's services also include credit guarantee and debt recovery business in Japan.  They also provide entertainment business associated with amusement machine.

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J Trust Co Ltd (8508 JP)

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

HS Holdings (8699 JP): Khan Bank IPO Delayed but Path Clear

HS Holdings may not be quite what you think it is. It is two large assets, a tiny HQ which has been selling assets, and deadline to sell the big...

Travis Lundy

Sawada/HS Holdings (8699) - A Quite Salutary Development.. And We Wait...

Sawada/HS Holdings (8699) had a non-salutary development 10 days ago selling a stake in Khan Bank at a discount to book, but just bought back 21%...

Travis Lundy

Sawada - Upsilon Gets Its Stake And Still We Wait

Upsilon tried for 16 months to get permission to buy 50% of Sawada Holdings from the Founder and his associate. It didn't work. The Tender ended,...

Travis Lundy

Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List

The Sawada Tender Offer Will End. The Khan Bank listing saga is about to begin. There is gamesmanship, a prisoner's dilemma, and a new example of...

Travis Lundy

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