In today’s briefing:
- StubWorld: Mickey Upstages Keisei Electric
- MSCI Feb 2023 QCIR Preview: Potential Changes as Review Period Ends
- Toshiba (6502) – Funding Mostly Secured, Still, Again, Maybe. Or Maybe Not. Or Not.
- Oriental Land: Fantasy Springs Is No Longer on Management’s Interest
- Toshiba (6502 JP): Financing Deadline Slips Again as the 3Q Update Looms
- Komatsu (6301) | Plenty of Gas in the Tank
- Board Independence Is Demonstrated by Whether It Is Aligned with Common Shareholder Goal
StubWorld: Mickey Upstages Keisei Electric
- Keisei Electric Railway Co (9009 JP) is trading “cheap” as Oriental Land (4661 JP) enjoys a zero-Covid revival.
- Preceding my comments on Keisei/Oriental Land, are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
MSCI Feb 2023 QCIR Preview: Potential Changes as Review Period Ends
- The review period for the February Quarterly Comprehensive Index Review (QCIR) of the MSCI indices ended yesterday. There will be a number of changes in the Asia Pacific region.
- Most of the inclusions are in China and the country weight in the MSCI Emerging Markets Index should increase leading to outflows from other markets.
- On average, the potential adds have outperformed the potential deletes over the last few weeks. At a glance, pre-positioning appears to be lighter than in the past.
Toshiba (6502) – Funding Mostly Secured, Still, Again, Maybe. Or Maybe Not. Or Not.
- The original bid was supposed to be presented fully-funded by 30 September 2022. Then it was early November, then late November, then early December, late Dec, early Jan, end Jan.
- Today we find out that The Banks and The Preferred JIP Bidding Consortium will aim to reach agreement by 3 Feb. The Bloomberg article details are newish, and odd.
- Shares have deteriorated and vs Peers, they are at their lowest point in many months. And the details do not make me confident this deal is clean yet.
Oriental Land: Fantasy Springs Is No Longer on Management’s Interest
- Aided by the Japanese Government’s efforts to rebuild the COVID-ravaged leisure sector, Oriental Land (4661 JP)’s 3QFY23 OP surpassed consensus by more than 35%.
- We believe 3QFY23 could be a peak in terms of financial performance for Oriental Land, at least until the opening of the Fantasy Springs.
- In addition, the growth story that OLC offered through the expansion of DisneySea, seems to be no longer compelling as the management has simply stopped talking about its progress.
Toshiba (6502 JP): Financing Deadline Slips Again as the 3Q Update Looms
- Bloomberg reports that Japan Industrial Partners (JIP), the preferred bidder, has again extended the deadline for securing bank financing of around JPY1.2 trillion (US$8.8 billion).
- A new issue has pushed the deadline to 3 February. If JIP manages to secure financing for an offer of around JPY5,100, the next challenge is securing Board support.
- The 3QFY2022 update on 14 February needs to avoid further downgrades to keep the deal alive. Toshiba’s multiples are unattractive to peers. Remain on the sidelines for now.
Komatsu (6301) | Plenty of Gas in the Tank
- Komatsu Q3 operating profit rose 54% YoY, beating analyst estimates by around 12%
- Construction and Mining Equipment sales rose 31% in the quarter, or ~10% on a constant currency basis versus industry volume of -6%
- Komatsu shares have sharply lagged the recovery at CAT. We still see significant upside with current P/B of 1.2x
Board Independence Is Demonstrated by Whether It Is Aligned with Common Shareholder Goal
- While shareholder proposals, including those from activist investors, should be considered from independent perspective, it’s clear that even companies with high-% independent directors don’t necessarily get along with activist investors.
- Board independence is not a question of the number or ratio of independent directors; rather, it is a question of whether independent directors are truly functioning on the board.
- If the loss of cash results in missed investment opportunities to expand corporate value, this would conflict with interests of shareholders, so subsequent increases in market capitalization should be verified.
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