In this briefing:
- Mitsubishi Selling off Stake in Aeon, Ministop in Limbo
- Business Happenings in the Americas that May Be “Below the Radar” – Week Ending January 17, 2019
- Japan: Relative Price Scores – Overbought and Oversold Companies – Calling ‘Tops’ & ‘Bottoms’
- Courts Asia To Be Taken Over By Nojima
- The Burden of Too Big Government
1. Mitsubishi Selling off Stake in Aeon, Ministop in Limbo
Mitsubishi has finally given up its hope of convincing Aeon to merge Ministop (9946 JP) with Lawson and is selling its stake in the largest retail group.
There will be no change to the extensive supply relationship between the two companies and Mitsubishi’s food wholesale arm, Mitsubishi Shokuhin (7451 JP).
While Aeon seems to have spurned Mitsubishi for now, it is hard to see how Aeon will progress in the convenience store sector without Mitsubishi’s help. In the short-term Ministop looks like a poor investment but Aeon may have to sell to Mitsubishi eventually and will want a good price for it.
2. Business Happenings in the Americas that May Be “Below the Radar” – Week Ending January 17, 2019
Highlights of significant recent happenings include:
- Substantive Deep Dive – Canada’s BlackBerry Ltd (BB CN) seeks to be the go-to provider of web Security: Why we believe investors should look at Blackberry as a way to hedge their exposures to the increasing list of companies who are susceptible to adverse impact from security breaches.
- Feeding the Dragon – Chinese buying of US firms brakes abruptly, obliterating the long-term trend, and now Japan has become the second-largest market for outbound M&A globally. Also, South Korean food giant Cj Cheiljedang (097950 KS) is continuing its aggressive expansion into the U.S. market
- Local News on Global Companies – Kroger Co (KR US) and Microsoft Corp (MSFT US) take on Amazon.com Inc (AMZN US) with digital grocery store experiment. “Wal Mart Stores (WMT US) plans to have enough online grocery pickup sites to cover 69% of U.S. households by the end of this month. Alphabet Inc Cl C (GOOG US)‘s proposes a “software-defined network” which is a new method of accessing the internet by removing the need for home routers, for the new Toronto neighbourhood it is planning. Mining companies are cutting back operations in largest coal region in the U.S., and Berkshire Hathaway Inc Cl A (BRK/A US), and Union Pacific (UNP US) will be adversely impacted.
3. Japan: Relative Price Scores – Overbought and Oversold Companies – Calling ‘Tops’ & ‘Bottoms’
![](https://static-prod.smartkarma.com/images/media/000/075/837/original/2019-01-18_11-35-42.png?1547778954)
Source: Japan Analytics
RELATIVE PRICE SCORE – The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, ‘overbought’ and ‘oversold’ outliers and changes in scoring can reveal short-term and longer-term trading opportunities. This insight updates our list of overbought and oversold companies, reviews the best and worst performing companies by RPS over the last two months and adds some specific comments on stocks on each category.
RPS STATISTICS – The Company ‘outlier’ thresholds are set to “+4” for overbought and “-2” for oversold. Currently, of the 3,686 listed companies for which monthly data is available, 91 companies are ‘Overbought’, and 120 are ‘Oversold’ – 2.5% and 3.2%, respectively of the total. For companies with a market capitalisation of over ¥100b, there are 35 ‘Overbought’ and 24 ‘Oversold’ companies.
RPS ‘TOPS’ – In the last two years, 445 companies have achieved an RPS of ‘4’ or more. 80% have seen their RPS fall to below ‘4’ within the following two months. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 63% – demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last two months have been Descente (8114 JP), Ariake Japan (2815 JP), Fancl (4921 JP), Bandai Namco (7832 JP), Don Quijote (7532 JP), and Gmo Payment Gateway (3769 JP).
![](https://static-prod.smartkarma.com/images/media/000/075/838/original/2019-01-18_11-36-19.png?1547778995)
![](https://static-prod.smartkarma.com/images/media/000/075/839/original/2019-01-18_11-37-01.png?1547779035)
![](https://static-prod.smartkarma.com/images/media/000/075/840/original/2019-01-18_11-37-37.png?1547779070)
![](https://static-prod.smartkarma.com/images/media/000/075/841/original/2019-01-18_11-38-07.png?1547779100)
Source: Japan Analytics
RPS ‘BOTTOMS’ – 296 companies have seen their RPS fall to ‘-2’ or below in the last two years. 58% have seen their RPS recover to above ‘-2’ within three to six months. For larger capitalisation companies, the numbers are 72 companies and 67%. Some recent examples of positive RPS mean reversion in the last two months have been LINE Corp (3938 JP) – a ‘contrarians only’ selection in our last Insight, and Tokyo Electric Power (9501 JP).
![](https://static-prod.smartkarma.com/images/media/000/075/842/original/2019-01-18_11-39-56.png?1547779218)
![](https://static-prod.smartkarma.com/images/media/000/075/843/original/2019-01-18_11-42-06.png?1547779350)
In the DETAIL section below we list the current very overbought (RPS>5), too late to buy (RPS >4<5) and oversold (RPS <-2) stocks as well as the largest two-month positive and negative changes in RPS.
NB – All data is as of January 17th close.
4. Courts Asia To Be Taken Over By Nojima
Courts Asia Ltd (COURTS SP), a leading electrical, consumer electronics and furniture retailer in predominantly Singapore and Malaysia, has announced a voluntary conditional offer from Nojima Corp (7419 JP) at $0.205/share, a 34.9% premium to the last closing price.
The key condition to the Offer is the valid acceptances of 50% of shares out. Singapore Retail Group, with 73.8%, has given an irrevocable to tender. Once tendered, this offer will become unconditional.
CAL’s share price has endured a steady decline since touching $1.14 back in May 2015. It traded above the Offer price as recently as late-July 2018.
However, the controlling shareholder, which has maintained its stake since CAL’s listing in 2012, is cashing in. Nojima has stated it will exercise its right to compulsorily acquisition if acceptances reach 90%; and it does not intend to support any action or take steps to maintain the listing status of the company in the event its suspended due to free float requirements. I would look to cash out also. Consideration under the Offer may be remitted as early as the fourth week of Feb.
5. The Burden of Too Big Government
From our very own “Austrian” Leigh Skene:
Wars in old times were made to get slaves. The modern implement of imposing slavery is debt. Ezra Pound
Governments used public sector balance sheets to bail out private financial institutions and assist private companies to emerge from bankruptcy in the GFC. These actions transferred credit risk from the private to the public sector, yet falling nominal interest rates minimised, and in some cases froze, the cost of servicing the mounting government debt until late 2016. Since then, many borrowers have paid rising interest rates on increasing amounts of debt. Debt service charges are rising faster than nominal GDP in a growing number of nations as a result. It is estimated that the US federal funding requirement will rise from minus US$ 700bn to US$ 2tr in 2022.
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