Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).</li>
<li>If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.</li>
<li>This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.</li>
</ul>


Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.


Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025 </li>
<li>NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off </li>
<li>NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced </li>
</ul>


NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025 
NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off 
NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced 


NEC (6701) | Significantly Undervalued with Upcoming Catalyst

Thematic (Sector/Industry)

<ul>
<li>The Nikkei was flat over the past five days, while the yen strengthened from ¥136 to ¥132.5/$ </li>
<li>Sony cuts profit outlook due to weak games sales. Segment OP cut ¥50b (-16%) </li>
<li>Japan and US to enter chip alliance to develop next-generation 2-nm semiconductors </li>
</ul>


The Nikkei was flat over the past five days, while the yen strengthened from ¥136 to ¥132.5/$ 
Sony cuts profit outlook due to weak games sales. Segment OP cut ¥50b (-16%) 
Japan and US to enter chip alliance to develop next-generation 2-nm semiconductors 


Japan Stocks on the Move | M3, BayCurrent, Makita, NEC

Telco/Internet specialist

Kirk Boodry

Redex Research

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

<ul>
<li>NTT announced it would build and operate a third trans-Pacific subsea cable (JUNO) with NEC as the vendor and a 2024 activation date</li>
<li>This also represents the second trans-Pacific cable in five years and the one with the highest capacity to date</li>
<li>This is not core to NTT's business but it does highlight how capacity needs are expanding as network speeds accelerate and how those costs can be managed</li>
</ul>


NTT announced it would build and operate a third trans-Pacific subsea cable (JUNO) with NEC as the vendor and a 2024 activation date
This also represents the second trans-Pacific cable in five years and the one with the highest capacity to date
This is not core to NTT's business but it does highlight how capacity needs are expanding as network speeds accelerate and how those costs can be managed


NTT (Buy) - Some Quick Takeaways from the Subsea Cable Announcement

<ul>
<li>Overnight, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> has released an <a href="https://www.global.toshiba/content/dam/toshiba/ww/ir/corporate/news/20220719_2.pdf" target="_blank" rel="noopener">update</a> "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  </li>
<li>Nikkei <a href="https://asia.nikkei.com/Spotlight/Toshiba-in-turmoil/Japan-Industrial-Partners-Bain-advance-in-bidding-for-Toshiba" target="_blank" rel="noopener">reported</a> those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.</li>
<li>Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). </li>
</ul>


Overnight, Toshiba Corp (6502 JP) has released an update "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  
Nikkei reported those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.
Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). 


Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

Japan

Canon Inc. is a professional and consumer imaging solutions company and patent-holder of digital imaging technologies. The Company's products include networked multifunction devices, digital and analog copiers, computer peripherals, facsimile machines, image filing systems, camcorders, cameras and lenses, semiconductor, and broadcast and medical equipment.

FUJIFILM Holdings Corporation develops, sells and services Imaging, Information, and Document Solutions.  Its products include color films, digital cameras, photofinishing products and equipment.  The Group also manufactures medical and graphic art use equipment and materials, FPD materials, and optical devices, and provides services on office copy machines, printers, and related equipment.

BROTHER INDUSTRIES, LTD. manufactures and markets communications and office equipment.  The Company's main products include facsimiles, digital copy machines, label printers, and word processors.  Brother Industries also manufactures and sells sewing machines and other tools.  The Company operates its business worldwide.

RICOH COMPANY, LTD. manufactures and markets office automation equipment, electronic devices, and photographic instruments.  The Company's diverse product line includes facsimiles, image scanners, printers, digital cameras, and personal computers, as well as a full range of analog, digital, and color copiers. Ricoh operates with a network of sales offices and tie-ups worldwide.

Seiko Epson Corporation manufactures communications equipment, electronic devices, and precision products.  The Company's products include printers, scanners, Liquid Crystal Projectors, semiconductors, quartz devices, and watches.

Konica Minolta Inc is mainly engaged in manufacturing office equipment and performance materials. It also operates health care businesses. The Company also makes copiers, personal computer peripherals, optical lenses, and measuring instruments.

Noritsu Koki Co., Ltd. manufactures various photo processors.  The Company specializes in high-speed mini-photo processing lab systems.  Noritsu Koki also produces OEM (original equipment manufacturer) supply for Kodak and Konica.

MCJ Co., Ltd. manufactures and markets personal computers and its related products.  The Company provides desktop and laptop computers, computer memories, printers, and hard drives.

TOSHIBA TEC CORPORATION manufactures electronic equipment for distribution system, document processing, and household use.  The Company's products include Point of Sale (POS) systems, bar code scanners, copy machines, printers, and vacuum cleaners.

ELECOM CO., LTD. designs, manufactures, and markets computer peripherals, supplies, and accessories.  The Company offers a diverse range of products including adapters, cables, switches, local area network (LAN) devices, paper, keyboard covers, and chairs.

Western Digital Corporation is a global provider of solutions for the collection, storage, management, protection and use of digital content, including audio and video. The Company's products include hard drives, solid-state drives, and home entertainment and networking products.

Wistron Corporation manufactures and markets notebook computers, personal computers, and other related information products.

Quanta Computer Inc. manufactures and markets notebook computers and related peripheral equipment.

HP Inc. provides imaging and printing systems, computing systems, mobile devices, solutions, and services for business and home. The Company offers products which includes laser and inkjet printers, scanners, copiers and faxes, personal computers, workstations, storage solutions, and other computing and printing systems. HP sells its products worldwide.

Advantech Co., Ltd. manufactures and markets embedded personal computers (PC), network computing products, industrial automation products, and panel PCs.

Seagate Technology Holdings Public Limited Company offers computer hardware products. The Company designs, manufactures, and markets hard disk drives for enterprise applications, client compute applications, client non-compute applications, personal data backup systems, portable external storage systems and digital media systems.

Asustek Computer Inc. manufactures and markets computer motherboards, interface cards, notebook computers, and other related products.

Lenovo Group Limited, through its subsidiaries, sells, and manufactures personal computers and handheld devices. The Company also provides Internet services and IT services, and contracting manufacturing business.

Focus Media Information Technology Co., Ltd. engages in media network for advertisements including within cinemas, posters and advertising displays in commercial offices or buildings.

Focus Media Information Technology Co, Ltd. (002027 CH)

Focus Media Information Technology Co, Ltd.

NetApp, Inc. provides storage and data management solutions. The Company's storage solutions include specialized hardware, software, and services that provide storage management for open network environments. NetApp  serves enterprises, government agencies, and universities worldwide.

NEC Corporation manufactures and markets computers, telecommunication equipment, electronic devices, semiconductors, and software.  The Company's products include printers, modems, cellular phones, plasma display panels (PDP), network systems, memory, integrated circuits (IC), thin film transistor-liquid crystal display (TFT-LCD), and printed circuit boards (PCB). NEC operates worldwide.

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NEC Corp (6701 JP)

Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

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NTT's third subsea trans-Pacific cable is the highest-capacity deployment to date and highlights how network traffic growth requires capcity...

Kirk Boodry

Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

Toshiba (6502) is -8% vs Peer Basket after the late June pop on a "¥7,000 deal." Semi/memory peers weaker while industrials better. That lifts IRR...

Travis Lundy

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