Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

This is a story about the potential evolution of a small cap company. I use this as an example.I saw news of the buyback yesterday and spoke today in a Smartkarma webinar about the possible market effects of Yoshihide Suga succeeding Shinzo Abe, and I thought this an appropriate example of something which would be an appropriate way to discuss some of the issues. Thursday 3 September 2020, after the close, <a href="https://www.smartkarma.com/entities/zaoh-company-ltd" target="_blank" data-smartkarma-citation="entities:10065:1" rel="noopener">Zaoh Company (9986 JP)</a> made an <a href="https://www.zaohnet.co.jp/struct/wp-content/uploads/jikokabushikikaitsuke.pdf" target="_blank" rel="noopener">announcement</a> (Japanese-only) they would buy back some of their shares the next morning in a ToSTNeT-3 transaction. This is not normally a big thing. It happens reasonably often. Since the onset of covid-19 reactive weakness in the economy, it seems to have happened less often than previous times, but the last month has seen 25 announced and completed, and there have been 316 announced and now completed in the past 52 weeks. Usually they are small. This one is small. Zaoh announced it would buy UP TO 600,000 shares at today's closing price of ¥1,405/share (it is for about $8mm) between 8:00-8:45am local time on the ToSTNeT-3 venue, which is a pre-market venue on the TSE catering to off-market on-exchange share buybacks at a fixed price. The process is that Company announces Board has approved sometime before about 5pm local time (after the close) and the next morning anyone can participate. Usually there is some kind of reason why companies announce these. In this case, the top shareholder, a Mr. Sasaki Kenji - lead shareholder (and relative of the founder) for at least the last 18 years - told Zaoh that he wanted to sell his 8.6% stake. The company considered the problem and decided that if he sold in the market, it might cause the share price to fall so they decided to improve return on capital and buy back the shares. That's nice. So they aimed to buy back 8.6-9.6% of shares outstanding this morning. Even if it is only ¥834mm -max. It is bigger than it looks. And it is an interesting case study...

This is a story about the potential evolution of a small cap company. I use this as an example.I saw news of the buyback yesterday and spoke today in a Smartkarma webinar about the possible market effects of Yoshihide Suga succeeding Shinzo Abe, and I thought this an appropriate example of something which would be an appropriate way to discuss some of the issues. Thursday 3 September 2020, after the close, Zaoh Company (9986 JP) made an announcement (Japanese-only) they would buy back some of their shares the next morning in a ToSTNeT-3 transaction. This is not normally a big thing. It happens reasonably often. Since the onset of covid-19 reactive weakness in the economy, it seems to have happened less often than previous times, but the last month has seen 25 announced and completed, and there have been 316 announced and now completed in the past 52 weeks. Usually they are small. This one is small. Zaoh announced it would buy UP TO 600,000 shares at today's closing price of ¥1,405/share (it is for about $8mm) between 8:00-8:45am local time on the ToSTNeT-3 venue, which is a pre-market venue on the TSE catering to off-market on-exchange share buybacks at a fixed price. The process is that Company announces Board has approved sometime before about 5pm local time (after the close) and the next morning anyone can participate. Usually there is some kind of reason why companies announce these. In this case, the top shareholder, a Mr. Sasaki Kenji - lead shareholder (and relative of the founder) for at least the last 18 years - told Zaoh that he wanted to sell his 8.6% stake. The company considered the problem and decided that if he sold in the market, it might cause the share price to fall so they decided to improve return on capital and buy back the shares. That's nice. So they aimed to buy back 8.6-9.6% of shares outstanding this morning. Even if it is only ¥834mm -max. It is bigger than it looks. And it is an interesting case study...

ZAOH (9986) - Just Putting This Out There...

Japan

ZAOH COMPANY, LTD. imports, exports, manufactures, and wholesales cleaning and washing equipment such as dry cleaning machinery used primarily for industrial purposes.  The Company also sells power scavengers, vacuum sweepers, floor cleaners, and high pressure washers.

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ZAOH (9986) - Just Putting This Out There...

Today after the close, Zaoh Company (9986 JP) made an announcement they would buy back some of their shares tomorrow morning in a ToSTNeT-3...

Travis Lundy