Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.</li>
<li>If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.</li>
<li>I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.</li>
</ul>


Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.
If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.
I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.


Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> has announced two buyback programs this year of ¥50bn each. <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a> announced one in May for ¥30bn. </li>
<li>The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.</li>
<li>Buyback impact-related trade timing has worked for Canon. Ricoh's buyback ends imminently. There may be a trade to do here.</li>
</ul>



Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn. 
The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
Buyback impact-related trade timing has worked for Canon. Ricoh's buyback ends imminently. There may be a trade to do here.


Canon Buyback Done, Ricoh's Done Shortly, Back To Your Regularly Scheduled Program

<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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first "second buyback within a single year" since 2014.</li>
<li>History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.</li>
<li>Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical "quality premium."</li>
</ul>



Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first "second buyback within a single year" since 2014.
History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical "quality premium."


<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn. </li>
<li>The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies. </li>
<li>There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade. </li>
</ul>



Canon Inc (7751 JP) has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn. 
The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies. 
There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade. 


Looking at Canon Buyback Dynamics History - Patterns Vs Peers Gives Execution Hints

Japan

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.

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.

Eizo Corp develops, designs, manufactures, and markets computer displays and monitors for amusement products.  The Company's products include liquid crystal displays (LCD) and cathode ray tube (CRT) displays.

Wacom Co., Ltd. manufactures pen tablets utilizing electronic pen and multitouch technologies. The Company's pen tablets are used in various fields, including film making, industrial  design, medical, education and financials. Wacom also manufactures components for smart phones and tablets.

RISO KAGAKU CORPORATION is a manufacturer of copying and printing machines for office, home, and educational use.  The Company specializes in lithograph printers and also produces software, computer interfaces, and peripherals such as sorters, card counters, and sheet feeders.

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.

Compal Electronics Inc. manufactures and markets notebook computers and color monitors.  The Company also produces liquid crystal displays and other computer related products.  Compal Electronics exports its products to the United States, Europe, and Asia.

Catcher Technology Co., Ltd. manufactures aluminum and magnesium die casting products which are used in notebook computers, cellular phones, and hard disk drive bases.

Micro-Star International Co., Ltd. manufactures and markets motherboards and video graphic accelerate (VGA) cards.  The Company exports its products to Europe, North America, and other Asian countries.

Chicony Electronics Co., Ltd. develops, manufactures, and markets keyboards for laptops and notebook computers, computer mice, digital cameras and other related parts.

Lite-On Technology Corp. manufactures and markets a wide range of computer components and Peripheral equipment. The Company's products include computers, digital home products, consumer electronics, communications products, key components and sub-systems, and optoelectronic components. Power Supplies, Enclosures, and LEDs business are the core of Lite-On Technology's business.

Acer Inc. manufactures and distributes semiconductor products, personal computers, computer peripherals, multimedia products, and computer software. The Company also provides maintenance and repair services to customers.  In addition, Acer Inc. operates real estate business. The Company markets its products under the Acer brand name.

Ninestar Corporation provides printing and imaging products, output solutions, and managed print services. The Company researches, develops, and produces printer consumables chips, printers, and other products. Ninestar markets its products across worldwide.

Gigabyte Technology Co., Ltd. manufactures and markets computer motherboards and other peripheral products.

China Greatwall Technology Group Co Ltd manufactures and develops computers and peripheral equipment.  The Company's products include computers, servers, monitors, printers, power packs, and other related products.  Greatwall Computer also develops computer software, provides networking system integration, and consults on e-commerce solution.

China Greatwall Technology Group Co Ltd (000066 CH)

Inventec Corporation manufactures and markets computers and electronic word processing products.  The Company's products include notebook computers, desktop computers, workstations, scientific graphic calculators, and electronic dictionaries.  Inventec markets its products under the brand name "Besta".

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.

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Ricoh Company Ltd (7752 JP)

Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

Bidders are approaching 2nd Round deadlines, and news/comments are starting to seep out. Expect more. I expect a decision at/after H1 results. If...

Travis Lundy

Canon Buyback Done, Ricoh's Done Shortly, Back To Your Regularly Scheduled Program

Canon's buyback ended at end-August. Ricoh's ends shortly. The post-buyback selling 'shadow' on Canon should be finished shortly. Ricoh will simply...

Travis Lundy

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

The IRR to be obtained by buying Toshiba and expecting Probability X% of a Privatisation and (1-X%) of no deal has gone up sharply since end-June....

Travis Lundy

Canon (7751) - Buyback Progress Update

Canon recently set a 2nd ¥50bn buyback for 2022. Canon Buybacks historically take 15-20 days. This is on track for 15-18. Usually Canon lags peers...

Travis Lundy

Looking at Canon Buyback Dynamics History - Patterns Vs Peers Gives Execution Hints

Canon has done 6 buybacks in the last 15 years. They all have particular terms and patterns in common and that can help guide execution.

Travis Lundy

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