In this briefing:
- TRADE IDEA – Toyota Industries (6201 JP) Stub: Riding the Automation Wave
- Nexen Corp Holdco Trade: Status Update & Recommended Action
- BGF Holdo Trade: Status Update & Recommended Action
- HDC Holdings Holdco Trade: Status Update & Recommended Action
1. TRADE IDEA – Toyota Industries (6201 JP) Stub: Riding the Automation Wave
If ever there was a stub business that is poised to capitalize on global trends of factory automation, automated logistics handling and electric vehicle prevalence, it is that of Toyota Industries (6201 JP). In August, I took an in-depth look at the major businesses of Toyota Industries and concluded that the market was not giving the company credit for the global leadership it has established in the forklifts and automobile A/C compressor businesses, nor for the progress it has made in the logistics equipment business. While the market’s oversight appeared to have corrected in September and October as the discount to NAV contracted from 34% to 25%, the trend has since reversed and the discount is back at trough levels of 35%. In August, I implied that this would be a good trading opportunity. Today, I explicitly recommend going long the stub.
In this insight I will cover:
- A market-neutral trade setup
- A review of the core unlisted businesses
- Alternative data used to gauge performance in the core business
- Risks of the trade
- A recap of ALL my stub trade ideas on Smartkarma, including track record of performance
2. Nexen Corp Holdco Trade: Status Update & Recommended Action
- Nexen Corp (005720 KS) / Nexen Tire Corp (002350 KS) stub trade yield is 6.07%. Price ratio is now at 20D MA. Holdco discount now stands at 41.57% to NAV.
- Shorting on Tire has softened in the last two trading days. No yearend dividend boosting effect is expected on Holdco. Holdco discount isn’t particularly high. Price ratio is well above yearly avg. I’d close this position now at a 6.07% yield.
3. BGF Holdo Trade: Status Update & Recommended Action
- BGF Co Ltd (027410 KS) / Bgf Retail (282330 KS) stub trade is at a 4.38% loss. Price ratio is still well below -1 σ. It is actually at a new yearly low. Holdco discount now stands at 48.55% to NAV.
- Holdco price discount is too harsh. It’d be too tempting to pass up. An estimated 1.5~2%p difference in dividend yield must be pushing up price ratio soon.
- I still believe below -1 σ wouldn’t last for as long as it used to. I’d hold onto this position a bit longer with a 10% loss cut.
4. HDC Holdings Holdco Trade: Status Update & Recommended Action
- HDC Holdings (012630 KS) / HDC-OP (294870 KS) stub trade yield is now 0.38%. Price ratio is still below -1 σ. It is close to yearly low. Holdco discount now stands at 47.92% to NAV.
- The major shareholder Chung Mong-kyu bought an additional 0.63% stake for ₩16.1bil from Dec 6~10. I didn’t expect it. But it now seems that the owner buying factor is truly over.
- I’d wait a bit longer to capitalize on this newly developed situation. Price ratio is close to yearly low. Yearend dividend factor should be helping the situation.
