In today’s briefing:
- Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float
- MTR (66): Open or Closed?
- Toshiba – Headed For A Showdown
- HAL Holding/Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium
- Hyundai Engineering & Construction: Top Five Catalysts
- Why Do Bigger Companies in Japan Repeat Scandals? – Learning from Mitsubishi Electric –
- GreenWood Investors First Quarter 2022 Letter
Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float
- Every year, the yukashoken hokokusho shows a breakdown of share ownership by owner category. It only happens once a year for most companies.
- It is a crucial input to knowing where the shares are and how people are positioned. It also shows who and how big is Real World Float.
- This year’s data shows a surprisingly small change year-on-year for Foreign Active Ownership, which is the biggest category. A little musical chairs, but no chairs removed.
MTR (66): Open or Closed?
- HK reopening is debatable and seems to be very hard to predict as the Chinese government is keen to keep zero COVID stands although recent quarantine time reduction is positive.
- The number of passengers remains weak although the shorter quarantine reduction could provide short-term relief to the share price.
- Valuation looks undemanding compared to the peers although the outlook is more uncertain. Stay out for now.
Toshiba – Headed For A Showdown
- Following the resignation of director Mariko Watahiki yesterday, the results for the shareholder votes are in for Toshiba.
- Watahiki unsurprisingly had a low approval ratio of 65.87% but activist-linked directors also saw less than stellar approval ratios as did new CEO Taro Shimada.
- Toshiba’s path forward looks increasingly murky and lofty valuations bid up on privatisation hopium look increasingly tenuous.
HAL Holding/Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium
- The acceptance period runs until 2 September. HAL now controls 52.9% of Boskalis (Stichting Hyacinth will presumably keep buying at €32 or less). HAL will consolidate Boskalis from H2 2022.
- The Boards of Boskalis have concluded that the offer price is not sufficiently convincing to recommend it to Boskalis’ shareholders. Good try, but twisting HAL’s arm seems difficult. Premium is 0.06%.
- Considering the precedent of Orange/Orange Belgium, I would only open a position below the offer price. HAL will now consolidate Boskalis and does not need to sweeten the offer.
Hyundai Engineering & Construction: Top Five Catalysts
- We highlight the top five catalysts of why we believe Hyundai E&C is likely to outperform the market in the next 6-12 months.
- Higher housing supply, surge in new orders, expansion in nuclear projects/inclusion in nuclear ETFs, Neom mega project, and shift to value stocks are likely to drive Hyundai E&C’s outperformance.
- Housing/Architecture accounted for 57.1% and 59.7% of total sales in 2021 and 1Q 2022, respectively. Plants/power plants accounted for 25.7% of total sales in 2021.
Why Do Bigger Companies in Japan Repeat Scandals? – Learning from Mitsubishi Electric –
- Regarding the Nikkei article, “Mitsubishi Electric to Reform Strict Governance to Revamp Organization,” I would like to summarize the points and discussed the issues.
- This case proves that we cannot rely on the appearance of board practices alone. We can think of companies with similar organizational structures that have had repeated scandals.
- I will focus on the board diversity from the perspective of whether Mitsubishi Electric can seriously change its corporate culture to one that accepts different values and discusses issues head-on.
GreenWood Investors First Quarter 2022 Letter
- GreenWood Investors is a mostly-long, deep value investment firm focused on areas of extreme pessimism, structural inefficiencies and low competition.
- Performance of our funds was down 5.3% USD-based and 5.7% EUR-based for the first quarter, in line with global market indices down 5.5% USD-based.
- More than ever, we need street-fighting CEOs with skin in the game to navigate these turbulent market conditions.
- We remain patient in deploying capital to new longs, and remain balanced with our increased short exposure.
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