Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

<ul>
<li>We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.</li>
<li>Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.</li>
<li>Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.</li>
</ul>


We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.
Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.
Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.


Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to hold above critical support levels and market dynamics remain largely positive. Until this changes, we believe global equities are headed higher in the coming weeks and months. Additionally, we are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to hold above critical support levels and market dynamics remain largely positive. Until this changes, we believe global equities are headed higher in the coming weeks and months. Additionally, we are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Global Equity Strategy: Small-Caps and Value Stocks Remain in Focus

New economic growth data in Japan was a surprise to the government. As a result of stronger household consumption, government consumption and exports, the latest quarter GDP was revised upward slightly. Recovery and better than expectations continues to driver our global bank view. Banks with the highest credit costs or delta in credit costs during the current year, may have the most to gain. And with economic relief packages still firmly in place, the impact can be even more profound on bank profit.

New economic growth data in Japan was a surprise to the government. As a result of stronger household consumption, government consumption and exports, the latest quarter GDP was revised upward slightly. Recovery and better than expectations continues to driver our global bank view. Banks with the highest credit costs or delta in credit costs during the current year, may have the most to gain. And with economic relief packages still firmly in place, the impact can be even more profound on bank profit. 

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Kansai Mirai Financial Group I / Event-Driven

That was quick.The Nikkei article turned into an announced deal within the day. My insight <a href="https://www.smartkarma.com/insights/resona-to-take-kansai-mirai-private" target="_blank" data-smartkarma-citation="insights:45126" rel="noopener">Resona To Take Kansai Mirai Private?</a> suggested that the Tender Offer could end up being quite low compared to Tangible Book Value. It is. ¥500/share is just over 0.4x tangible book value per share. The alternative is 1.42 shares of <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a>. That is worth ¥524 per share of <a href="https://www.smartkarma.com/entities/kansai-mirai-financial-group" target="_blank" data-smartkarma-citation="entities:26953:1" rel="noopener">Kansai Mirai Financial (7321 JP)</a>, which is a bit better. I can imagine that minority investors would be upset by this, but there appears not much they can do. More about the deal below the fold.

That was quick.The Nikkei article turned into an announced deal within the day. My insight Resona To Take Kansai Mirai Private? suggested that the Tender Offer could end up being quite low compared to Tangible Book Value. It is. ¥500/share is just over 0.4x tangible book value per share. The alternative is 1.42 shares of Resona Holdings (8308 JP). That is worth ¥524 per share of Kansai Mirai Financial (7321 JP), which is a bit better. I can imagine that minority investors would be upset by this, but there appears not much they can do. More about the deal below the fold.  

The Nikkei carried an article last night suggesting that <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a> would seek to take private <a href="https://www.smartkarma.com/entities/kansai-mirai-financial-group" target="_blank" data-smartkarma-citation="entities:26953:1" rel="noopener">Kansai Mirai Financial (7321 JP)</a> which was formed from the merger of <a href="https://www.smartkarma.com/entities/minato-bank-ltd-the" target="_blank" data-smartkarma-citation="entities:1735:1" rel="noopener">Minato Bank (8543 JP)</a>, SMFG-subsidiary <a href="https://www.smartkarma.com/entities/kansai-urban-banking-corp" target="_blank" data-smartkarma-citation="entities:9407:1" rel="noopener">Kansai Urban Banking (8545 JP)</a>, Resona wholly-owned sub Kinki Osaka Bank, back in 2018, listing as Kansai Mirai in April 2018. A year later, under the holdco umbrella, Kansai Urban and Kinki Osaka were merged.  It was always planned that the integration would take years. This was discussed at length in the insights related to <a href="https://www.smartkarma.com/insights/kansai-mirai-the-most-interesting-arb-in-the-world" target="_blank" data-smartkarma-citation="insights:14429" rel="noopener">Kansai Mirai: The Most Interesting Arb In The World</a>. Now it appears that the fact that it remains listed is problematic for governance purposes (highlighted back then, I assure you). The idea now appears to be that the bank needs to be taken in hand to hasten restructuring to lower costs and keep capital in-house rather than paying it out as dividends (to Resona and SMFG as 70% owners). The report suggests that Resona will launch a Tender Offer to take Kansai Mirai private within the month and the stock will be delisted by March where the squeezeout will be a share exchange with Resona Bank shares rather than a cash-out. The <a href="https://www.nikkei.com/article/DGXMZO65998760Z01C20A1EE9000/" target="_blank" rel="noopener">article</a> contains considerable detail.  Resona currently owns 51.2% of the shares outstanding of Kansai Mirai. SMFG has about 21.3% (and group company Cedyna owns 0.95%). Corporates own another 9%. Float is therefore tiny and as long as SMFG tenders into it, the takeover will be successful and minorities can be squeezed out through a merger, quickly approved by Resona. The article suggests that if Resona pays cash for all the shares, that to buy the 49% they don't own of this ¥150bn market cap it would take more than ¥10bn. I expect the article is missing a zero. The last trade before this report was at ¥405 vs Tangible Book Value Per Share of ¥1216. For some investors, this should provide food for thought. The previous deal was done at the wrong price for Minato Bank shareholders. We still do not know the terms here,  but there is a possibility investors will see the terms and say to themselves...<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/505/original/MIMITW%20Shake%20Head.gif?1604984190" class="editor-image img-responsive" data-smartkarma-image-id="170505"></figure></section>And there is every possibility this will not be the most interesting arb in the world.But it might still be interesting.More detail below the fold.

The Nikkei carried an article last night suggesting that Resona Holdings (8308 JP) would seek to take private Kansai Mirai Financial (7321 JP) which was formed from the merger of Minato Bank (8543 JP), SMFG-subsidiary Kansai Urban Banking (8545 JP), Resona wholly-owned sub Kinki Osaka Bank, back in 2018, listing as Kansai Mirai in April 2018. A year later, under the holdco umbrella, Kansai Urban and Kinki Osaka were merged.  It was always planned that the integration would take years. This was discussed at length in the insights related to Kansai Mirai: The Most Interesting Arb In The World. Now it appears that the fact that it remains listed is problematic for governance purposes (highlighted back then, I assure you). The idea now appears to be that the bank needs to be taken in hand to hasten restructuring to lower costs and keep capital in-house rather than paying it out as dividends (to Resona and SMFG as 70% owners). The report suggests that Resona will launch a Tender Offer to take Kansai Mirai private within the month and the stock will be delisted by March where the squeezeout will be a share exchange with Resona Bank shares rather than a cash-out. The article contains considerable detail.  Resona currently owns 51.2% of the shares outstanding of Kansai Mirai. SMFG has about 21.3% (and group company Cedyna owns 0.95%). Corporates own another 9%. Float is therefore tiny and as long as SMFG tenders into it, the takeover will be successful and minorities can be squeezed out through a merger, quickly approved by Resona. The article suggests that if Resona pays cash for all the shares, that to buy the 49% they don't own of this ¥150bn market cap it would take more than ¥10bn. I expect the article is missing a zero. The last trade before this report was at ¥405 vs Tangible Book Value Per Share of ¥1216. For some investors, this should provide food for thought. The previous deal was done at the wrong price for Minato Bank shareholders. We still do not know the terms here,  but there is a possibility investors will see the terms and say to themselves...And there is every possibility this will not be the most interesting arb in the world.But it might still be interesting.More detail below the fold. 

Japan

Kansai Mirai Financial Group, Inc. operates as an investment company. The Company provides commercial banking and securities investments services. Kansai Mirai Financial Group serves customers in Japan.

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Kansai Mirai Financial Group I (7321 JP)

Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

We look at how important or unimportant core banking income is to 50 banks in Japan, to better understand where divesting cross shareholding can be...

Daniel Tabbush

Global Equity Strategy: Small-Caps and Value Stocks Remain in Focus

We are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Vermilion Research

Japan – Economic Strength, Bank Relief

The latest quarter GDP was revised upward slightly. Banks with the highest credit costs or delta in credit costs during the current year, may have...

Daniel Tabbush

Resona To Take Kansai Mirai Private!

Now we have an announced deal. The Resona Deal for its Kansai Mirai sub is not friendly to minorities, but it could have been worse. It could have...

Travis Lundy

Resona To Take Kansai Mirai Private?

It appears as if Resona may take Kansai Mirai private through a TOB and share exchange for those who do not tender. That suggests, despite a cheap...

Travis Lundy

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