Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Taiyo Pacific Partners took the original parent company (<a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a> of <a href="https://www.smartkarma.com/entities/roland-dg-corp" target="_blank" data-smartkarma-citation="entities:10653:1" rel="noopener">Roland DG Corp (6789 JP)</a> private in 2014. It was re-listed in 2020. </li>
<li>Roland DG is one of the world's leading large format digital printer manufacturers. They also make some interesting medical devices and systemic tools, and 3D milling/printing/engraving/photo impact machines.</li>
<li>This TOB is at a 30.1% premium. Almost a 10yr high. But it is not expensive. And even if TPP has 20%, there is a LOT of float left over.</li>
</ul>


Taiyo Pacific Partners took the original parent company (Roland Corp (7944 JP) of Roland DG Corp (6789 JP) private in 2014. It was re-listed in 2020. 
Roland DG is one of the world's leading large format digital printer manufacturers. They also make some interesting medical devices and systemic tools, and 3D milling/printing/engraving/photo impact machines.
This TOB is at a 30.1% premium. Almost a 10yr high. But it is not expensive. And even if TPP has 20%, there is a LOT of float left over.


Roland DG (6789) - Tender Offer by Taiyo Partners - Nice Premium But Too Cheap

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 whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.</p></div><div><p>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is 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 and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-October 2021.</p></div>

JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is 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 and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-October 2021.

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Oct 2021

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

<p><a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a>, a global leader in the electronic musical instruments industry, has been shifting production away from China and Japan to concentrate most of the production activities to the Malaysian plant established in 2014 as a part of the business turnaround process that followed a vicious downward spiral in the post-global financial crisis (GFC) environment.</p><p>While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities. We believe Roland may fail to meet demand amidst disruptions to the main production facility in Malaysia while <a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a> seems to be well placed to outperform the market through capturing Roland’s lost demand.</p>

Roland Corp (7944 JP), a global leader in the electronic musical instruments industry, has been shifting production away from China and Japan to concentrate most of the production activities to the Malaysian plant established in 2014 as a part of the business turnaround process that followed a vicious downward spiral in the post-global financial crisis (GFC) environment.While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities. We believe Roland may fail to meet demand amidst disruptions to the main production facility in Malaysia while Yamaha Corp (7951 JP) seems to be well placed to outperform the market through capturing Roland’s lost demand.

Short Roland/Long Yamaha as Roland May Fail to Meet Demand Due to Production Shortages

<p><a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a>’s biggest competitor, <a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a>, is scheduled to make a return to the first section of Tokyo Stock Exchange on 16<sup>th</sup> December 2020. Roland is priced relatively cheaper than Yamaha’s inflated valuation multiples. Moreover, Roland is relisting after five consecutive years of relative outperformance in revenue and OP growth compared to Yamaha. We analyse the impact of Roland's return to the Tokyo Stock Exchange on Yamaha's share price below. </p>

Yamaha Corp (7951 JP)’s biggest competitor, Roland Corp (7944 JP), is scheduled to make a return to the first section of Tokyo Stock Exchange on 16th December 2020. Roland is priced relatively cheaper than Yamaha’s inflated valuation multiples. Moreover, Roland is relisting after five consecutive years of relative outperformance in revenue and OP growth compared to Yamaha. We analyse the impact of Roland's return to the Tokyo Stock Exchange on Yamaha's share price below. 

Roland Returns at Cheaper Multiples: Not Going to Sing Well With Yamaha

Equity Capital Markets

<ul>
<li>The <a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a> IPO, which is scheduled to list on the first section of the Tokyo Stock Exchange on 16<sup>th</sup> December 2020, was priced at  ¥3,100 per share on 8<sup>th</sup> December. The application period started on 9<sup>th</sup> December and will remain open until 14<sup>th</sup> Monday.</li>
<li>After a woeful period following the global financial crisis, that resulted in a MBO and delisting from the Tokyo Stock Exchange in 2014, Roland has made a number of changes to its business and has outperformed the local peer <a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a> and the overall electronic musical instrument industry through 2015-20.</li>
<li>We prefer Roland over Yamaha on a relative value basis, since Roland has trimmed its fixed costs, streamlined operations, and stands in a strong financial position heading into a tough time period in the business cycle. Roland is priced at a discount to its closest peer, Yamaha. However, the domestic musical instruments industry is currently overvalued, considering the cyclical nature of the business. Therefore, we would avoid this IPO on long-term fundamentals.</li>
<li>Nonetheless, Roland could be an excellent hedge for a short position in Yamaha.</li>
</ul>


The Roland Corp (7944 JP) IPO, which is scheduled to list on the first section of the Tokyo Stock Exchange on 16th December 2020, was priced at  ¥3,100 per share on 8th December. The application period started on 9th December and will remain open until 14th Monday.
After a woeful period following the global financial crisis, that resulted in a MBO and delisting from the Tokyo Stock Exchange in 2014, Roland has made a number of changes to its business and has outperformed the local peer Yamaha Corp (7951 JP) and the overall electronic musical instrument industry through 2015-20.
We prefer Roland over Yamaha on a relative value basis, since Roland has trimmed its fixed costs, streamlined operations, and stands in a strong financial position heading into a tough time period in the business cycle. Roland is priced at a discount to its closest peer, Yamaha. However, the domestic musical instruments industry is currently overvalued, considering the cyclical nature of the business. Therefore, we would avoid this IPO on long-term fundamentals.
Nonetheless, Roland could be an excellent hedge for a short position in Yamaha.


Japan

Roland Corporation manufactures and distributes musical instruments. The Company produces keyboards, digital synthesizers, digital recorders, pianos, rhythm machines, guitars, drums, and other products. Roland markets its products worldwide.

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Roland Corp (7944 JP)

Roland DG (6789) - Tender Offer by Taiyo Partners - Nice Premium But Too Cheap

Taiyo Pacific Partners - which MBOed the parent 10yrs ago - is MBOing Roland DG. 30% premium, but too cheap. Their equity check is 3.3x PER. And...

Travis Lundy

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Oct 2021

In this insight, we take a look at the potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading...

Janaghan Jeyakumar, CFA

Short Roland/Long Yamaha as Roland May Fail to Meet Demand Due to Production Shortages

While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities....

Oshadhi Kumarasiri

Roland Returns at Cheaper Multiples: Not Going to Sing Well With Yamaha

Yamaha’s biggest competitor, Roland, is scheduled to make a return to the first section of Tokyo Stock Exchange on 16th December 2020. Roland is...

Oshadhi Kumarasiri

Roland IPO: Valuation

We would avoid the Roland IPO on long term fundamentals. However, Roland is an excellent hedge for a short position in Yamaha, whose valuation...

Oshadhi Kumarasiri

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