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

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.</li>
<li>Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies. </li>
<li>Of these, they have a combined stake of over US$1bn in 23 companies.</li>
</ul>


Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies. 
Of these, they have a combined stake of over US$1bn in 23 companies.


Japan Cross-Shareholding - Summary Matrix - Over US$100bn of Selling in 118 Companies

<ul>
<li>On 28 Feb, the Nikkei <a href="https://asia.nikkei.com/Business/Business-deals/Mitsubishi-readies-sale-of-stake-in-KFC-restaurant-chain-in-Japan" target="_blank" rel="noopener">reported</a> (an article I missed) <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a> would seek to unload its 35% stake in <a href="https://www.smartkarma.com/entities/kfc-holdings-japan-ltd" target="_blank" data-smartkarma-citation="entities:12358:1" rel="noopener">Kfc Holdings Japan (9873 JP)</a> </li>
<li>The stock popped, then continued to rise further. After the close Friday, the Nikkei <a href="https://asia.nikkei.com/Business/Business-deals/Carlyle-nears-deal-to-buy-KFC-Japan-s-shares-from-Mitsubishi-Corp" target="_blank" rel="noopener">reported</a> MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.</li>
<li>I expect this could be a "Split Price Deal" (like Hitachi Transport and Pasona).</li>
</ul>


On 28 Feb, the Nikkei reported (an article I missed) Mitsubishi Corp (8058 JP) would seek to unload its 35% stake in Kfc Holdings Japan (9873 JP) 
The stock popped, then continued to rise further. After the close Friday, the Nikkei reported MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.
I expect this could be a "Split Price Deal" (like Hitachi Transport and Pasona).


Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) - Deal Likely Imminent

APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC IPOs & Placements

Equity Capital Markets

Ayala Corporation / Equity Capital Markets

<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> is looking to raise US$100m via trimming a portion of its stake in <a href="https://www.smartkarma.com/entities/ayala-corporation" target="_blank" data-smartkarma-citation="entities:1474:1" rel="noopener">Ayala Corporation (AC PM)</a>.</li>
<li>Despite being not explicitly well flagged, Mitsubishi had sold before back in Jan 2019, and in Mar 2018. Thus, we would argue that the deal here is somewhat expected.</li>
<li>While the deal would represent 43 days of the stock’s three month ADV, the recent selldowns by Mitsubishi had held up in the first week.</li>
</ul>



Mitsubishi Corp (8058 JP) is looking to raise US$100m via trimming a portion of its stake in Ayala Corporation (AC PM).
Despite being not explicitly well flagged, Mitsubishi had sold before back in Jan 2019, and in Mar 2018. Thus, we would argue that the deal here is somewhat expected.
While the deal would represent 43 days of the stock’s three month ADV, the recent selldowns by Mitsubishi had held up in the first week.


Ayala Corp Placement - While Overhang Will Exist, the Stock's Momentum Has Been Strong

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

Japan

Sumitomo Corp is a general trading company.  The Company imports and exports a wide variety of goods such as metals, machinery, chemicals, fuel,food products, and textiles.  Sumitomo also operates real estate, construction, shipping, insurance, finance, and leasing businesses.

Marubeni Corporation is a trading company with business divisions in iron & steel, information technology, utility & infrastructure, energy, food, metals & mineral resources, development & construction, and chemicals.  The Company markets its products globally through a network of sales offices and representative firms.

TOYOTA TSUSHO CORPORATION, a member of the Toyota Group, is a trading company. The Company markets automobiles, trucks, steel products, industrial machinery, chemical products, and energy in both domestic and overseas markets.  Toyota Tsusho primarily exports Toyota cars to Southeast Asia, China, the Middle East, and Latin America.

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.

MITSUI & CO., LTD. is a general trading company.  The Company has operating groups including Iron and Steel, Non-Ferrous Metals, Machinery, Chemicals, Foods, Energy, Textiles, and General Merchandise.  Mitsui also operates real estate and overseas development projects.

MonotaRO Co., Ltd. mainly sells machine tools, engine parts, and factory consumable goods on the web site.

Sojitz Corporation is a general trading company.  The Company has business divisions such as Machinery & Aerospace, Energy & Mineral Resources, Chemicals & Plastics, Real Estate Development & Forest Products, Consumer Lifestyle Business, and New Business Development Group.  Sojitz was formed through the business integration between Nichimen and Nissho Iwai.

MISUMI Group Inc. distributes precision machinery parts by mail order. The products include a variety of components such as press die, plastic mold, automated machinery, pc & network, and wiring.  The Company also sells supplies for factories, hospitals, and restaurants and semi-conductors by mail order.

IWATANI CORPORATION is a trading company supplying gases for industrial and household use.  The Company also handles fuel, consumer products, industrial materials, minerals, construction, agriculture, and medical products.  Iwatani produces liquid hydrogen with Mitsubishi Heavy Industries.

NAGASE & COMPANY, LTD. is a trading firm specializing in chemical products such as dyestuff, synthetic resins and rubber, and inorganic and organic chemicals.  The Company also handles electronics such as semiconductor manufacturing equipment and liquid crystal display (LCD) materials, as well as health care products such as cosmetics and medical equipment.

Adani Enterprises Limited is an international trading house that operates from offices in India as well as other countries. The Company is involved in coal mining, cargo handling and power generation.  Adani also trades in a large number of products including textiles, energy, metals and agricultural products.

United Rentals, Inc., through its subsidiary, is an equipment rental company operating a network of locations in the United States and Canada.  The Company serves the construction industry, industrial and commercial concerns, homeowners, and other individuals.

Fastenal Company sell industrial and construction supplies in a wholesale and retail fashion.  The Company markets its products and services throughout the United States, Canada, Mexico, Puerto Rico, Singapore, China, and The Netherlands.

Watsco, Inc. distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.  The Company operates various locations in the United States, with primary markets in the Sunbelt.

W.W. Grainger, Inc. distributes maintenance, repair and operating supplies, and related information to the commercial, industrial, contractor, and institutional markets in North America.  The Company's products include motors, HVAC equipment, lighting, hand and power tools, pumps, and electrical equipment.

Ashtead Group Plc is an international equipment rental company servicing customers nationwide in the US and the UK. The Company rents construction and industrial equipment. Ashtead generates approximately 85% of its revenue in the US through its subsidiary, Sunbelt Rentals with 388 locations across the US. The Group's UK business, A-Plant, has 106 locations nationwide.

Bunzl plc is a distribution group supplying a range of non-food consumable products for customers to operate their businesses but which they do not actually sell. The Company partners with both suppliers and customers in providing outsourcing solutions and service oriented distribution. Bunzl's main customer markets include grocery, foodservice, cleaning and safety.

AerCap Holdings NV is the world's largest aircraft leasing firm by fleet value, and is listed on the New York Stock Exchange (AER). It has its headquarters in Dublin with offices in Amsterdam, Los Angeles, Shannon, Fort Lauderdale, Singapore, Shanghai, Abu Dhabi, Seattle and Toulouse.

Ferguson PLC distributes HVAC and industrial supplies. The Company offers products for heating and ventilation, fabrication, facilities supply, and residential construction. Ferguson serves customers in North America.

Ashtead Group plc operates as an international equipment rental company. The Company rents construction and industrial equipment. Ashtead Group serves customers in the United Kingdom, the United States, and Canada.

Mitsubishi Corporation is a general trading company.  The Company has business groups such as New Business Initiatives, IT & Electronics, Fuels, Metals, Machinery, Chemicals, Living Essentials, and Professional Services.  Mitsubishi diversifies by satellite communications through a joint venture.

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Mitsubishi Corp (8058 JP)

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

Japan Cross-Shareholding - Summary Matrix - Over US$100bn of Selling in 118 Companies

In this note we summarize our work by looking at where most of the selling will likely come. Of the companies that we have looked, collectively...

Sumeet Singh

Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) - Deal Likely Imminent

The Nikkei reported two months ago that MitCorp would sell its 35% KFC Japan (9873) stake. Two months later, we may have a deal imminent.

Travis Lundy

Ayala Corp Placement - While Overhang Will Exist, the Stock's Momentum Has Been Strong

Mitsubishi Corp (8058 JP) is looking to raise US$100m via trimming a stake in Ayala Corporation (AC PM). Despite being not explicitly well flagged,...

Clarence Chu

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

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