Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Casino Business Review LLC

Extensive experience in marketing and development in the Asian gaming market

Global Gaming and Casinos Industry

Equity Bottom-Up

Universal Entertainment / Equity Bottom-Up

<ul>
<li>The long, tortured legal mess between Universal and its ousted founder over control of its lucrative Manila integrated casino resort now has a clear path to its spin off IPO.</li>
<li>The Okada Manila resort is among the sector leaders in the burgeoning Philippines gaming market now ramping rapidly toward full GGR recovery.</li>
<li>At UE's current price of 2,347jpy, the stock bears a built in premium of a Spac IPO now appearing to be pointed to debut this year.</li>
</ul>


The long, tortured legal mess between Universal and its ousted founder over control of its lucrative Manila integrated casino resort now has a clear path to its spin off IPO.
The Okada Manila resort is among the sector leaders in the burgeoning Philippines gaming market now ramping rapidly toward full GGR recovery.
At UE's current price of 2,347jpy, the stock bears a built in premium of a Spac IPO now appearing to be pointed to debut this year.


Universal Entertainment of Japan: IPO for Its Manila Casino Draws Closer

<ul>
<li>The Philippine gaming market is recovering fast from covid with the future of hs biggest casino property plagued by legal battles.</li>
<li>Founder Kazuo Okada dismissed in 2017 by the Universal board over his alleged financial self dealing, is seen behind a May 31st strong arm takeover of the property.</li>
<li>The Manila government thus far remains neutral but plans for a Spac IPO by Universal and a US based hedge fund is delayed, but is scheduled to debut by September.</li>
</ul>


The Philippine gaming market is recovering fast from covid with the future of hs biggest casino property plagued by legal battles.
Founder Kazuo Okada dismissed in 2017 by the Universal board over his alleged financial self dealing, is seen behind a May 31st strong arm takeover of the property.
The Manila government thus far remains neutral but plans for a Spac IPO by Universal and a US based hedge fund is delayed, but is scheduled to debut by September.


Okada Manila Mess: How to Play This Chaotic Legal Drama Between Universal and Its Ousted Founder

<ul>
<li>Manila Entertainment Zone casinos now operating at 75% capacity in pandemic endgame that looks like the beginning of a cycle that should bring it near a run rate near 2019  baseline gross gaming revenues.</li>
<li>The property's owners Universal Entertainment of Japan have long sought to convert this property to a separate public company. That deal is now done. </li>
<li>The envisioned Spac would raise US$263m in cash. Universal will roll 100% of its equity into the deal sponsored by its partner Spring Owl Asset Management of New York</li>
</ul>


Manila Entertainment Zone casinos now operating at 75% capacity in pandemic endgame that looks like the beginning of a cycle that should bring it near a run rate near 2019  baseline gross gaming revenues.
The property's owners Universal Entertainment of Japan have long sought to convert this property to a separate public company. That deal is now done. 
The envisioned Spac would raise US$263m in cash. Universal will roll 100% of its equity into the deal sponsored by its partner Spring Owl Asset Management of New York


Okada Manila: Spac Deal Will Create a Public Gaming Company with Strong Upside

<ul>
<li>After a long, frustrating effort to bring its successful Manila casino public, Universal Entertainment of Japan has announced it will pursue the Spac route.</li>
<li>Recent histories of Spac IPOs show doubling and tripling of market caps as both institutions and retail buyers flock to these issues and bid them up quickly.</li>
<li>Okada will aim its Spac IPO at a NASDAQ listing which assures high volume trading from the launch at the same time, we are entering the early endgame of the pandemic in Asia.</li>
</ul>


After a long, frustrating effort to bring its successful Manila casino public, Universal Entertainment of Japan has announced it will pursue the Spac route.
Recent histories of Spac IPOs show doubling and tripling of market caps as both institutions and retail buyers flock to these issues and bid them up quickly.
Okada will aim its Spac IPO at a NASDAQ listing which assures high volume trading from the launch at the same time, we are entering the early endgame of the pandemic in Asia.


Okada Manila Casino Resort Plans Spac IPO This Year to Finally Unlock Value

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/496/original/2020-06-30_14-16-44.png?1593494217" class="editor-image img-responsive" data-smartkarma-image-id="143496"></figure>
<div class="content-caption">Source • Japan Analytics</div>
THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.
Net Working Capital Days varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-
<ul>
<li>
+ Receivables/Revenue - the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.</li>
<li>
+ Inventory/Cost of Goods Sold - the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.</li>
<li>- Payables/Cost of Goods Sold -the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.</li>
</ul>
The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/529/original/2020-06-30_15-09-41.png?1593497395" class="editor-image img-responsive" data-smartkarma-image-id="143529"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/530/original/2020-06-30_15-10-32.png?1593497471" class="editor-image img-responsive" data-smartkarma-image-id="143530"></figure>
<div class="content-caption">Source • Japan Analytics</div>
<div class="content-caption"></div>
NET WORKING CAPITAL DAYS AS A STRESS TEST - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  <a href="https://www.smartkarma.com/entities/nikon-corp" target="_blank" data-smartkarma-citation="entities:7117:1" rel="noopener">Nikon (7731 JP)</a>, or ignored - <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a> since 2018. (For more on SMC working capital issues, please see my colleague <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s Insight of last year - <a href="https://www.smartkarma.com/insights/smc-6273-jp-getting-in-line-with-reality" target="_blank" data-smartkarma-citation="insights:30081" rel="noopener">SMC (6273 JP): Getting in Line with Reality</a>).   
For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the DETAIL section below, we shall cover the outliers at both ends of Receivables Days, Inventory Days, Payables Days, and finally Net Working Capital Days.


Source • Japan Analytics
THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.
Net Working Capital Days varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-


+ Receivables/Revenue - the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.

+ Inventory/Cost of Goods Sold - the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.
- Payables/Cost of Goods Sold -the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.

The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.


Source • Japan Analytics

NET WORKING CAPITAL DAYS AS A STRESS TEST - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  Nikon (7731 JP), or ignored - SMC (6273 JP) since 2018. (For more on SMC working capital issues, please see my colleague Scott Foster's Insight of last year - SMC (6273 JP): Getting in Line with Reality).   
For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the DETAIL section below, we shall cover the outliers at both ends of Receivables Days, Inventory Days, Payables Days, and finally Net Working Capital Days.

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

Japan

Universal Entertainment Corporation develops, manufactures, and sells pachinko, pachinko slot machines, amusement equipments & casino equipments designed for overseas use.  The Company also engages in casino hotel management.

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Universal Entertainment (6425 JP)

Universal Entertainment of Japan: IPO for Its Manila Casino Draws Closer

Japan's Universal Entertainment's plans to take its successful manila resort public now are past obstructions and appear ready for a spac IPO...

Howard J Klein

Okada Manila Mess: How to Play This Chaotic Legal Drama Between Universal and Its Ousted Founder

Universal Entertainment Corp (6425T) is engaged in a legal battle with its ousted CEO and founder that has broken out into a physical takeover that...

Howard J Klein

Okada Manila: Spac Deal Will Create a Public Gaming Company with Strong Upside

The proposed Okada Spac deal has bullish attributes other Spacs generally do not. Therefore its potential post issue is more likely to outperform...

Howard J Klein

Okada Manila Casino Resort Plans Spac IPO This Year to Finally Unlock Value

Okada Manila plans a Spac IPO that holds the promise of a major boost in market cap as investor response to such offerings have proven highly...

Howard J Klein

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to...

Campbell Gunn

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