In this briefing:
- US Lake Charles LNG Liquefaction Plant Tendering for Contractors: Positive for TechnipFMC
- Zozo: Never Meet a Margin Call
- 🇰🇷 🇯🇵 Smartkarma North Asia • That Was The Week That Was – 18th-24th March 2019
- 🇯🇵 Japan: Moving Average Outliers – Market Sell Signal Generated + 6920, 8036, 6758, 2326, 3064
- Kosaido (7868 JP) Reaches Value You Can Sell
1. US Lake Charles LNG Liquefaction Plant Tendering for Contractors: Positive for TechnipFMC
Energy Transfer LP (ET US) and Royal Dutch Shell (RDSA LN) have signed a Project Framework Agreement to further develop a large-scale LNG export facility in Lake Charles, Louisiana and move toward a potential final investment decision (FID). They have started actively engaging with LNG Engineering, Procurement and Contracting (EPC) companies with a plan to issue an Invitation to Tender (ITT) in the weeks ahead. We look at the potential contract size and winners and also the other US LNG projects that could be negatively impacted. More detail on the LNG project queue for this year in: A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies.
2. Zozo: Never Meet a Margin Call
Yusaku Maezawa is once again in the news. This time due to speculation that he is auctioning off at least part of his art collection at Sotheby’s in Hong Kong on April 1st.
Following on from the share buyback that was conducted in May last year which:
- Allowed Maezawa to sell 6m out of his then 118.227m shares into a buyback that totalled just 6.35m shares.
- Led to a ¥38.3bn swing in net cash from +¥24.6bn to -¥13.8bn (the buyback totaled ¥24.4bn)
- Was conducted at the same time that share options for up to 31m shares were issued, of which Maezawa could have been allocated more than 90%.
this looks a lot like a sudden need to raise cash.
3. 🇰🇷 🇯🇵 Smartkarma North Asia • That Was The Week That Was – 18th-24th March 2019
– TW3 NORTH ASIA –Â
This week in North Asia the Smartkarma team Insights were more Bearish than Bullish.Â
- Close Outs or Sales were recommended on: Kosaido (7868 JP), the Amorepacific Group/Corp pair, the Hyosung TNC/Corp pair, Resona Holdings (8308 JP) and the Japanese market overall.
- The Hyundai Autoever IPO was covered by two providers as was the Woori Group all with Bullish flags.
- Caution was expressed on Mercari (4385 JP), Onward (8016 JP), and Lasertec (6920 JP) in Japan as well as the Convenience Store and Consumer Electronics retailers there. Â
- The upcoming KOSPI 200 re balancing was also covered with a list of potential additions and deletions. Â
 – NORTH ASIAN INSIGHT OF THE WEEK –Â
Our Top Insight of the week was Douglas Kim ‘s interesting note on Korean companies pulling out of China or restructuring their operations in that country.Â
As Douglas notes, “The pace of major Korean companies that are discontinuing part or all of their operations in China in the past year has been UNPRECEDENTED in the past two decades. This trend is very concerning since it suggests deteriorating business conditions and reduced employment in China”.Â
The main reason why the Korean companies are pulling out of China is primarily due to the difficulty of generating profits under the current, difficult operating conditions.
However, the reasons why it has become more difficult for these Korean companies to generate profits in China is more complex. The difficult operating environment is a combination of:Â –
- lower Chinese consumer demand for products such as smartphones, autos, cosmetics, and other consumer goods
- many of the Korean companies’ products have become less competitive as compared to the products made by the Chinese companies, and.Â
- additional regulatory pressures that are placed on these Korean companies operating in China have contributed towards the difficult operating environment
 – OTHER INSIGHTS OF THE WEEK –Â
EVENT DRIVEN: BULLISH
Linkbal (6046 JP): Offering & TOPIX Inclusion Late Summer 2019?
Korean Stubs: A Pair Trade Between Ecopro Co and Ecopro BM
EVENT DRIVEN: BEARISH
Kosaido (7868 JP) Reaches Value You Can Sell
Descente Tamed, Itochu Delicacy Required And Investors Can Probably Wait
TRADE IDEA –Â Amorepacific Stub (002790 KS): Buyback Helped, Close the Trade
Korean Stubs: Close Out the Pair Trade Between Hyosung TNC & Hyosung CorpÂ
IPOs & PLACEMENTS: BULLISH
A Trading Strategy for Hyundai Autoever Post IPO
Hyundai Autoever IPO Bookbuilding: Street Bets on Autoever/Glovis Merger
Woori Financials – One Overhang Gone in a Well Flagged Deal, Another Remains
EQUITY BOTTOM UP: BULLISH
Woori Bank: Overhang Versus Valuation
Hankyu Invests ¥1.75 Billion in Hankyu Men’s Tokyo
EQUITY BOTTOM UP: BEARISH
Mercari (4385) A Great Business but Over-Priced
After Zozo:Â Onward Sets Sights on Digital Renaissance
Lasertec (6920 JP): Pricing in Long-Term Growth
THEMATIC & STRATEGY: BULLISH
KOSPI 200 June 2019 Rebalancing:Â List of Addition/Deletion Candidates
Uniqlo Japan’s Most Valuable Retail Brand
THEMATIC & STRATEGY: BEARISH
Major Korean Companies Shutting Down or Restructuring Operations in ChinaÂ
Japanese Convenience Stores: Shorter Hours
Consumer Electronics Chains Set for Major Boost This Year – But It Will Be Temporary
🇯🇵 Japan: Moving Average Outliers – Market Sell Signal Generated
TECHNICAL: BEARISH
Resona Holding Faces Further Pressure After Corrective Bounce Terminates
4. 🇯🇵 Japan: Moving Average Outliers – Market Sell Signal Generated + 6920, 8036, 6758, 2326, 3064
– MARKET COMPOSITE –
FIVE-MONTH HIGH – This bear market rally is now ending. The market composite rose by 15% from the Christmas Day low, peaking on 26th February at Â¥659t. The market-value-based percentage above moving averages reached a five-month on Friday. However, the three-month change in that percentage is suggesting that a new bear phase will now commence.
SELL SIGNAL – The three-month change in the market-value-based percentage above moving averages reached 38 on Friday. Although this indicator is not always reliable as a long-term indicator, it has been helpful over shorter periods and has called the most recent peak in October and December’s trough. We now expect at least a decline in the market composite to below Â¥600t and, if economic conditions continue to weaken, a re-test of the December low.Â
– SECTORS –Â
SECTOR BREAKDOWN – The top six sectors remain mostly domestic and defensive. REITs,Restaurants, Healthcare, Transportation, and Utilities continue from our previous review with Other Commercial Products replacing Information Technology. Equally predictable is the bottom half-dozen – Banks, Non-Bank Finance, Autos, Retail, and Metals remain from two weeks ago, with Energy replacing Construction. With the Yen having broken the Â¥110 level against the US dollar on Friday, we would expect the Autos, Machinery, Electrical Equipment, Technology Hardware, and Chemicals sectors to weaken further as indicated by their Negative Crossover percentages.Â
– COMPANIES –
COMPANY MOVING AVERAGE OUTLIERS – As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company’s share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. ‘Extreme’ values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen.Â
In the DETAIL section below, we highlight the current top and bottom twenty-five large capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note.
Our most extreme positive outlier two weeks ago, AnGes (4563 JP) is still the most extreme large cap positive outlier and gained a further 8% over the fortnight. We recommend taking short-term profits.
In the same sector Eisai (4523 JP) is the most extreme negative outlier after falling by 16.6% on Friday on the discontinuation of the clinical phase 3 trials of Biogen’s Alzheimer’s treatment Aducanumab as the primary endpoint is unlikely to be reached. Now at an eight-month Relative Price Score low, a short-term recovery to above Â¥8,000 is likely.
5. Kosaido (7868 JP) Reaches Value You Can Sell
On Monday the 18th of March, Yoshiaki Murakami-associated companies announced they had raised their stake in Kosaido Co Ltd (7868 JP) above 10%. That stake raise happened at a price ABOVE where Bain Capital Japan’s bidding entity had set its “final” Tender Offer Price of Â¥700/share beforehand, indicating there was no way Murakami-associated companies would accept Bain’s price.
On the 20th, Minami Aoyama Fudosan – another Murakami-associated company heretofore uninvolved – announced a Tender Offer for a minimum of 50.00% of Kosaido (and up to 100% of the shares out) at ¥750/share (and announced they had bought more bringing their stake to 13.47% in total).Â
The shares reacted strongly Friday the 22nd after a market holiday Thursday, rising 16.6% to close 14.5% through the Murakami-fund terms.Â
After the close on Friday, the Murakami-affiliated company Reno KK which has been the lead entity to date in the effort – announced a larger position (as I noted on the 19th was likely). Also after the close, Kosaido itself made three public releases.
It is worth reading them, and it is worth thinking about what the company’s options are.
For Recent Insights on the Kosaido Situation Published on Smartkarma… | |
Date | Insight |
21-Jan-2019 | Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do? |
7-Feb-2019 | Kosaido: Activism Drives Price 30+% Through Terms |
19-Feb-2019 | Kosaido TOB (7868 JP) Situation Gets Weird – Activists and Independent Opposition to an MBO. |
26-Feb-2019 | Kosaido (7868 JP) TOB Extended |
19-Mar-2019 | Kosaido (7868 JP) – Reno Goes Bigger But TOB Price (This Time) Is Final So What Next? |
21-Mar-2019 | Murakami-San Goes Hostile on Kosaido (7868 JP), Overbids Bain’s “Final” Offer |
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