Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Under the requirements of the Amended Mongolian Banking Law (Feb 2021), <a href="https://www.smartkarma.com/entities/khan-bank-llc" target="_blank" data-smartkarma-citation="entities:36883:1" rel="noopener">Khan Bank (KHAN MO)</a> needed to IPO. It did, and <a href="https://www.smartkarma.com/entities/hs-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">HS Holdings (8699 JP)</a>'s stake fell to 49.77%. </li>
<li>It was de-consolidated. They were locked up for 6mos. The look-through financials are easier now. The company has bought back stock and trades at &lt;0.5x book.</li>
<li>But the Mongolian Banking Law required one more thing. All D-SIBs had to get all shareholders below 20% by 31 December 2023. It's not clear that happened. </li>
</ul>


Under the requirements of the Amended Mongolian Banking Law (Feb 2021), Khan Bank (KHAN MO) needed to IPO. It did, and HS Holdings (8699 JP)'s stake fell to 49.77%. 
It was de-consolidated. They were locked up for 6mos. The look-through financials are easier now. The company has bought back stock and trades at &lt;0.5x book.
But the Mongolian Banking Law required one more thing. All D-SIBs had to get all shareholders below 20% by 31 December 2023. It's not clear that happened. 


HS Holdings (8699) - New Year, New Issues So Lots of Value But Buyer Beware!

<ul>
<li>Today, it was announced that <a href="https://www.smartkarma.com/entities/hs-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">HS Holdings (8699 JP)</a> subsidiary Khan Bank LLC - Mongolia's largest bank - would IPO this month. </li>
<li>This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.</li>
<li>There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.</li>
</ul>


Today, it was announced that HS Holdings (8699 JP) subsidiary Khan Bank LLC - Mongolia's largest bank - would IPO this month. 
This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.
There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.


Khan Bank IPO Is Here - At IPO Price, the Stake Is Worth More than HS Holdings' Share Price

<ul>
<li>Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn - 20% of mkt cap.</li>
<li>On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency - the last "earning asset" except for the 55% stake in Khan Bank. </li>
<li>This lifts shadow book value even higher... Deep value with a catalyst. BUT... in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a... pawnshop?
</li>
</ul>


Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn - 20% of mkt cap.
On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency - the last "earning asset" except for the 55% stake in Khan Bank. 
This lifts shadow book value even higher... Deep value with a catalyst. BUT... in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a... pawnshop?



HS Holdings (8699 JP) - Huge Q1, Even Better Q2 Ahead, The 2nd To Last Asset Sale... And a Pawnshop?

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Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/j-trust-co-ltd" target="_blank" data-smartkarma-citation="entities:20246:1" rel="noopener">J Trust Co Ltd (8508 JP)</a> is a financial services group operating banking and finance businesses in Asia. </li>
<li>In FY12/23, the company reported full-year consolidated operating revenue of JPY114.3bn, operating profit of JPY8.1bn, pre-tax profit of JPY9.8bn, and profit attributable to owners of parent of JPY16.3bn.</li>
<li>On February 13, 2024, J Trust Co., Ltd. announced it has resolved on matters concerning the repurchase and cancellation of own shares.</li>
</ul>



J Trust Co Ltd (8508 JP) is a financial services group operating banking and finance businesses in Asia. 
In FY12/23, the company reported full-year consolidated operating revenue of JPY114.3bn, operating profit of JPY8.1bn, pre-tax profit of JPY9.8bn, and profit attributable to owners of parent of JPY16.3bn.
On February 13, 2024, J Trust Co., Ltd. announced it has resolved on matters concerning the repurchase and cancellation of own shares.


David Blennerhassett

<ul>
<li>Stay long in <a href="https://www.smartkarma.com/entities/hs-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">HS Holdings (8699 JP)</a>.But beware. It is possible that there is a slightly uncomfortable outcome. </li>
<li>
<a href="https://www.smartkarma.com/entities/celltrion-pharm-inc" target="_blank" data-smartkarma-citation="entities:992:1" rel="noopener">Celltrion Pharm (068760 KS)</a> is up 37% since the <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>/<a href="https://www.smartkarma.com/entities/celltrion-healthcare-co-ltd" target="_blank" data-smartkarma-citation="entities:23641:1" rel="noopener">Celltrion Healthcare (091990 KS)</a> merger completed; and Inc is up 22%. That's A LOT of expectation baked in. </li>
<li>NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.</li>
</ul>


Stay long in HS Holdings (8699 JP).But beware. It is possible that there is a slightly uncomfortable outcome. 

Celltrion Pharm (068760 KS) is up 37% since the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger completed; and Inc is up 22%. That's A LOT of expectation baked in. 
NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.


Last Week in Event SPACE: HS Holdings, Celltrion Pharm, NISA, PICC/PICC P&C

Japan

HS Holdings Co., Ltd. offers banking services. The Company provides deposits, loans, domestic settlement, fund management, and other services. HS Holdings also offers securities dealing, securities brokerage, securities underwriting, and other services.

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HS Holdings (8699 JP)

HS Holdings (8699) - New Year, New Issues So Lots of Value But Buyer Beware!

HS Holdings trades below 0.5x book where its major asset, comprising 60+% of book, trades with high growth, and at 4x PER. But it has to sell that...

Travis Lundy