Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a <em>bit</em> of a disappointment.</li>
<li>Why is it a disappointment? <a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a> is not buying back a big chunk, and there is no offering to oblige new investors to take a look.</li>
<li>This is long, slow, leakage on a company which is not <em>overwhelmingly</em> cheap, where it requires good governance to get out well, and even then...</li>
</ul>


We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then...


Denso's Big Multi-Year Toyota Industries (6201) Selldown

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.

Equity Capital Markets

<ul>
<li>2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022  while placements showed upward momentum.</li>
<li>We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.</li>
<li>For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.</li>
</ul>


2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022  while placements showed upward momentum.
We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.
For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.


Aequitas 2023 IPOs and Placements Performance Review - IPOs Forming a Low Base, Placements Pick Up

<ul>
<li>15 minutes after I published what I thought was a <a href="https://www.smartkarma.com/insights/huge-denso-6902-secondary-sale-by-toyota-group-admiral-ackbar-says-it-s-a-trap" target="_blank" rel="noopener">considered analysis</a>, Denso dumps the details. I thought it might be a trap. It looks like a trap.</li>
<li>A holistic view of the three different documents here suggests, indeed, "It was a trap". </li>
<li>This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.</li>
</ul>


15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, "It was a trap". 
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.


Denso Offering, Buyback, and New Cross-Holding Reduction Policy - It WAS a Trap

<ul>
<li>As per Reuters, <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> could look to sell up to 10% of <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso Corp (6902 JP)</a> to raise around US$4.7bn before the end of the year.</li>
<li>Toyota is the company’s largest shareholder and its largest customer.</li>
<li>In this note, we will talk about the deal dynamics.</li>
</ul>


As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
Toyota is the company’s largest shareholder and its largest customer.
In this note, we will talk about the deal dynamics.


Denso Corp Placement - Possible Placement by Toyota to Raise US$4.7bn

Asia and Global Semiconductor and Tech Research

Andrew Lu

Equity Bottom-Up

<ul>
<li>Tesla is facing a dilemma whether to aggressively cut price to boost shipment but lose margins or to keep price stable with a more moderated shipment growth like 10-20% y/y. </li>
<li>Three challenges ahead: 1. Collapsing margin vs. rising margin for key competitors? 2. Cybertruck is selling at a loss, more margin downside? 3. Valuation reset for lower sales CAGR? </li>
<li>Cautious on Tesla as its sales/earnings CAGR is falling below 20% with a rich valuation until we see cost cut on Cybertruck, FSD AI breakthrough, and low price model introduction.</li>
</ul>


Tesla is facing a dilemma whether to aggressively cut price to boost shipment but lose margins or to keep price stable with a more moderated shipment growth like 10-20% y/y. 
Three challenges ahead: 1. Collapsing margin vs. rising margin for key competitors? 2. Cybertruck is selling at a loss, more margin downside? 3. Valuation reset for lower sales CAGR? 
Cautious on Tesla as its sales/earnings CAGR is falling below 20% with a rich valuation until we see cost cut on Cybertruck, FSD AI breakthrough, and low price model introduction.


Tesla (TSLA) No Longer Prevails, a Dilemma and Touch Challenges Ahead

Japan

Toyota Motor Corporation manufactures, sells, leases, and repairs passenger cars, trucks, buses, and their related parts worldwide. The Company also operates financing services through their subsidiaries. Toyota Motor builds homes, produces pleasure boats, and develops intelligent transportation systems including radar cruise control and electronic toll collection systems.

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Toyota Motor (7203 JP)

Denso's Big Multi-Year Toyota Industries (6201) Selldown

Toyota Inds got sold on news of Denso's selldown. It's 6-7% of ADV for 2.5yrs so reasonable to expect heaviness. But while forward EPS ratios...

Travis Lundy

Aequitas 2023 IPOs and Placements Performance Review - IPOs Forming a Low Base, Placements Pick Up

2023 was our eight year of covering Asia ECM. We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115...

Sumeet Singh

Denso Offering, Buyback, and New Cross-Holding Reduction Policy - It WAS a Trap

Denso has announced the secondary offering of roughly 10% of shares out. It is heavily tilted to retail. And the simultaneous announcement of a...

Travis Lundy

Denso Corp Placement - Possible Placement by Toyota to Raise US$4.7bn

As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.

Sumeet Singh

Tesla (TSLA) No Longer Prevails, a Dilemma and Touch Challenges Ahead

Tesla No Longer Prevails, a Dilemma and Three Touch Challenges Ahead: 1. Collapsing margin vs. rising margin for peers; 2. Cybertruck is selling at...

Andrew Lu

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