Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE:  Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<div><p>JPX-Nikkei 400 is composed of common stocks listed in the First Section, Second Section, MOTHERS Market, and the JASDAQ Market of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents that are selected based on several factors including market capitalization, trading value, operating profits, and ROE.</p></div><div><p>A periodic review will be conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review will be conducted using the final business day of June as the base date. </p></div><div><p>Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event. Below is a discussion on the latest adjustments required for the basket portfolio for the 2021 Rebalance based on April-end data. </p></div>

JPX-Nikkei 400 is composed of common stocks listed in the First Section, Second Section, MOTHERS Market, and the JASDAQ Market of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents that are selected based on several factors including market capitalization, trading value, operating profits, and ROE.A periodic review will be conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review will be conducted using the final business day of June as the base date. Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event. Below is a discussion on the latest adjustments required for the basket portfolio for the 2021 Rebalance based on April-end data. 

JPX-Nikkei 400 Rebalance 2021: Pre-Event Basket Adjustments for April-End

Medical & Biological Laboratories / Event-Driven

<p>On 27th October 2020, <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR Corp (4185 JP)</a> ("JSR") announced a <a href="https://ssl4.eir-parts.net/doc/4557/tdnet/1892862/00.pdf" target="_blank" rel="noopener">Tender Offer</a> to acquire the remaining shares in its 50.8%-owned subsidiary <a href="https://www.smartkarma.com/entities/medical-biological-labs-co" target="_blank" data-smartkarma-citation="entities:12811:1" rel="noopener">Medical &amp; Biological Labs Co (4557 JP)</a> ("MBL") in an all-cash Deal that valued the company at a market cap of ~¥ 23bn (US$218mn). The Offer Price was ¥4400/share in cash. </p><p>MBL was founded in 1969 as the first manufacturer of antibodies in Japan. Having evolved over time, the company now offers clinical diagnostics and research reagents designed for analysis of proteins and/or genes associated primarily with autoimmune disorders, cancer, gynecological diseases, and infectious diseases. </p><p>Most importantly, MBL also develops substances that could be used in COVID-19 research and has other COVID-19 related products in its product portfolio such as PCR kits for detecting new coronavirus, Antibody test kits for checking infection history, and Gene extraction kits to extract RNA samples from the upper respiratory tract samples (nasopharyngeal swab samples).</p><p>Previously, I covered this Deal in <a href="https://www.smartkarma.com/insights/jsr-4185-jp-tender-offer-for-medical-biological-labs-4557-jp" target="_blank" data-smartkarma-citation="insights:44617" rel="noopener">JSR (4185 JP) Tender Offer for Medical &amp; Biological Labs (4557 JP)</a>. The Offer came at a premium of 23.8% to the undisturbed price and was below the mid-points of the DCF and Peer Comp Valuation ranges suggested by the Acquirer Advisor. On the other hand, according to Target Advisor's forecasts, the Offer Price translated to EV/Rev and EV/EBITDA multiples of 2.1x, and 9.2x respectively 2021E. Furthermore, the offer was opportunistically timed when MBL's EV/EBITDA (LTM) multiple was close to its 3-year low. Considering these facts and that the company's financial performance could directly benefit from COVID-19 driven demand for testing and research, the Offer Price seemed light. </p><p><strong>Regardless of the lightness of the Offer, I concluded "<em>there might be enough friendly shareholders to get this Deal over line</em>" and that is what has happened. </strong></p><p>On Friday after market close, on the day following the end of the Tender Offer Period, both the Acquirer (<a href="https://ssl4.eir-parts.net/doc/4185/tdnet/1912460/00.pdf" target="_blank" rel="noopener">J-only</a>) and the Target (<a href="https://ssl4.eir-parts.net/doc/4557/tdnet/1912400/00.pdf" target="_blank" rel="noopener">J-only</a>) provided updates on the Transaction. </p><p><em>What next? Read on.</em></p>

On 27th October 2020, JSR Corp (4185 JP) ("JSR") announced a Tender Offer to acquire the remaining shares in its 50.8%-owned subsidiary Medical &amp; Biological Labs Co (4557 JP) ("MBL") in an all-cash Deal that valued the company at a market cap of ~¥ 23bn (US$218mn). The Offer Price was ¥4400/share in cash. MBL was founded in 1969 as the first manufacturer of antibodies in Japan. Having evolved over time, the company now offers clinical diagnostics and research reagents designed for analysis of proteins and/or genes associated primarily with autoimmune disorders, cancer, gynecological diseases, and infectious diseases. Most importantly, MBL also develops substances that could be used in COVID-19 research and has other COVID-19 related products in its product portfolio such as PCR kits for detecting new coronavirus, Antibody test kits for checking infection history, and Gene extraction kits to extract RNA samples from the upper respiratory tract samples (nasopharyngeal swab samples).Previously, I covered this Deal in JSR (4185 JP) Tender Offer for Medical &amp; Biological Labs (4557 JP). The Offer came at a premium of 23.8% to the undisturbed price and was below the mid-points of the DCF and Peer Comp Valuation ranges suggested by the Acquirer Advisor. On the other hand, according to Target Advisor's forecasts, the Offer Price translated to EV/Rev and EV/EBITDA multiples of 2.1x, and 9.2x respectively 2021E. Furthermore, the offer was opportunistically timed when MBL's EV/EBITDA (LTM) multiple was close to its 3-year low. Considering these facts and that the company's financial performance could directly benefit from COVID-19 driven demand for testing and research, the Offer Price seemed light. Regardless of the lightness of the Offer, I concluded "there might be enough friendly shareholders to get this Deal over line" and that is what has happened. On Friday after market close, on the day following the end of the Tender Offer Period, both the Acquirer (J-only) and the Target (J-only) provided updates on the Transaction. What next? Read on.

JSR Deal Tender Results for MBL (4557 JP) Imply Faster Squeeze-Out

<p>Today after market-close, <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR Corp (4185 JP)</a> ("JSR") announced a <a href="https://ssl4.eir-parts.net/doc/4557/tdnet/1892862/00.pdf" target="_blank" rel="noopener">Tender Offer</a> to acquire the remaining shares in its 50.8%-owned subsidiary <a href="https://www.smartkarma.com/entities/medical-biological-labs-co" target="_blank" data-smartkarma-citation="entities:12811:1" rel="noopener">Medical &amp; Biological Labs Co (4557 JP)</a> ("MBL").</p><p>MBL specializes in clinical diagnostics and research reagents and has recently added COVID-19 research/testing-related products to its portfolio. </p><p>The Offer Price would be ¥4400/share in cash which translates to a deal size of ¥11.2bn (~US$107mn). The Tender Offer Period will be from 28th Oct-2020 to 10th Dec-2020. </p><p>The Deal has a minimum acceptance condition which requires the Acquirer to reach two-thirds control.</p><p><em>More below the fold. </em></p>

Today after market-close, JSR Corp (4185 JP) ("JSR") announced a Tender Offer to acquire the remaining shares in its 50.8%-owned subsidiary Medical &amp; Biological Labs Co (4557 JP) ("MBL").MBL specializes in clinical diagnostics and research reagents and has recently added COVID-19 research/testing-related products to its portfolio. The Offer Price would be ¥4400/share in cash which translates to a deal size of ¥11.2bn (~US$107mn). The Tender Offer Period will be from 28th Oct-2020 to 10th Dec-2020. The Deal has a minimum acceptance condition which requires the Acquirer to reach two-thirds control.More below the fold. 

JSR (4185 JP) Tender Offer for Medical & Biological Labs (4557 JP)

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><p style="text-align: left;">Our 'best' and 'worst' pairing from Monday's announcements is 'social e-commerce' business <a href="https://www.smartkarma.com/entities/enigmo-inc" target="_blank" data-smartkarma-citation="entities:7036:1" rel="noopener">Enigmo (3665 JP)</a> and tech and auto materials company <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR (4185 JP)</a> which has seen a 35-40% slump in auto-related demand. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/000/original/2020-09-15_05-00-30.png?1600113643" class="editor-image img-responsive" data-smartkarma-image-id="159000"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/001/original/2020-09-15_05-08-17.png?1600114115" class="editor-image img-responsive" data-smartkarma-image-id="159001"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><hr><p style="text-align: center;"><strong>DAILY STATS</strong></p><hr><p><strong>IMPROVING</strong> -37% of quarterly results, 61% of annual forecasts/revisions and 40% of interim forecasts have negative Scores. Only 10% of companies reporting lost money for the quarter. Most of the Results metrics were positive for the first time in many months; revisions are still trending negatively.</p><p style="text-align: center;"><strong>41 Quarterly Results</strong></p><div><ul style="list-style-type: disc;">
<li>
<strong>Results Score:</strong> 44% Positive / 20% Neutral / 37% Negative</li>
<li>
<strong>Average Results Score Change: </strong>+0.9 points</li>
<li>
<strong>Average % Change in Revenue:</strong> +5.8% Quarter YoY / +5.6% Rolling TTM YoY </li>
<li>
<strong>Average Operating Profit Margin Change:</strong> 1.5ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 10%</li>
</ul></div><hr><div><p>23 Annual • 10 Interim Forecasts/Revisions</p></div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 22% Positive / 17% Neutral / 61% Negative</li>
<li>Interim Forecast/Revision Score Change: 50% Positive / 10% Neutral / 40% Negative</li>
<li>Average Forecast/Revision Score Change: -3.5 points</li>
</ul></div>

• BEST &amp; WORST •Our 'best' and 'worst' pairing from Monday's announcements is 'social e-commerce' business Enigmo (3665 JP) and tech and auto materials company JSR (4185 JP) which has seen a 35-40% slump in auto-related demand. Source for all charts &amp; tables: Japan AnalyticsDAILY STATSIMPROVING -37% of quarterly results, 61% of annual forecasts/revisions and 40% of interim forecasts have negative Scores. Only 10% of companies reporting lost money for the quarter. Most of the Results metrics were positive for the first time in many months; revisions are still trending negatively.41 Quarterly Results

Results Score: 44% Positive / 20% Neutral / 37% Negative

Average Results Score Change: +0.9 points

Average % Change in Revenue: +5.8% Quarter YoY / +5.6% Rolling TTM YoY 

Average Operating Profit Margin Change: 1.5ppt

Percentage Making Quarterly Losses: 10%
23 Annual • 10 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 22% Positive / 17% Neutral / 61% Negative
Interim Forecast/Revision Score Change: 50% Positive / 10% Neutral / 40% Negative
Average Forecast/Revision Score Change: -3.5 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​​14 - Tsuruha, Kura Sushi, Arcland Sakamoto, JSR

Japan

JSR Corporation manufactures synthetic rubber and synthetic resins.  The Company's rubber products are used mainly for auto tires.  JSR Corporation also manufactures LCD-related materials and photo-resists.

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JSR Corp (4185 JP)

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

JPX-Nikkei 400 Rebalance 2021: Pre-Event Basket Adjustments for April-End

JPX Nikkei 400 2021 Rebal Pre-Event L/S Basket +2.9% in April (thru the 28th). The 30th is rebal day for readers. 2 potential deletes and 7...

Janaghan Jeyakumar, CFA

JSR Deal Tender Results for MBL (4557 JP) Imply Faster Squeeze-Out

The JSR (4185) deal for (MBL) got 92+%. That leaves a roughly riskless Rate Of Return Residual Trade for the next 3 months.

Janaghan Jeyakumar, CFA

JSR (4185 JP) Tender Offer for Medical & Biological Labs (4557 JP)

JSR (4185) launches a deal to buy in minorities in Medical & Biological Labs (4557 JP), a medical research, diagnostics, and reagent business. The...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/14 - Tsuruha, Kura Sushi, Arcland Sakamoto, JSR

• BEST & WORST • DAILY STATS PERCENTAGES -50% of quarterly results, 66% of annual forecasts/revisions and 69% of interim forecasts...

Campbell Gunn

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52-week Range

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Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

JPX-Nikkei 400 Rebalance 2021: Pre-Event Basket Adjustments for April-End

JPX Nikkei 400 2021 Rebal Pre-Event L/S Basket +2.9% in April (thru the 28th). The 30th is rebal day for readers. 2 potential deletes and 7...

Janaghan Jeyakumar, CFA

JSR Deal Tender Results for MBL (4557 JP) Imply Faster Squeeze-Out

The JSR (4185) deal for (MBL) got 92+%. That leaves a roughly riskless Rate Of Return Residual Trade for the next 3 months.

Janaghan Jeyakumar, CFA

JSR (4185 JP) Tender Offer for Medical & Biological Labs (4557 JP)

JSR (4185) launches a deal to buy in minorities in Medical & Biological Labs (4557 JP), a medical research, diagnostics, and reagent business. The...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​14 - Tsuruha, Kura Sushi, Arcland Sakamoto, JSR

• BEST & WORST • DAILY STATS PERCENTAGES -50% of quarterly results, 66% of annual forecasts/revisions and 69% of interim forecasts...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/14 - Tsuruha, Kura Sushi, Arcland Sakamoto, JSR