Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Sakai Ovex Tender Offer Fails But The Stock Gains an Activist

Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)

Quiddity Advisors

Event-Driven

<p>In early February 2021, the CEO of <a href="https://www.smartkarma.com/entities/sakai-ovex-co-ltd" target="_blank" data-smartkarma-citation="entities:20002:1" rel="noopener">Sakai Ovex (3408 JP)</a>, who owned very few shares, and an activist investor decided to launch an MBO for the company at ¥2,850/share. </p><p>The stock had been trading cheap, and the price was "high" but the price was wrong. It needed to be 40% higher - at a minimum - in my opinion. I wrote a detailed breakdown of why I thought so in <a href="https://www.smartkarma.com/insights/sakai-ovex-mbo-wrong-price-and-the-bidder-knows-it" target="_blank" data-smartkarma-citation="insights:47961" rel="noopener"><strong>Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)</strong></a>. The management forecasts had been low-balled and I called that out, and the equity affiliate earnings somewhat ignored. Get rid of the financial assets and the Offer Price was at negative enterprise value.  </p><p>My conclusions on 9 February were as follows:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/719/original/Screenshot+2021-07-27+at+7.01.29+PM.png?1627383716" class="editor-image img-responsive" data-smartkarma-image-id="220719"></figure><p></p></section><p>Not long after that, the bidders offered a very weak bump to ¥3,000/share, discussed in <strong><a href="https://www.smartkarma.com/insights/savai-ovex-mbo-a-very-weak-bump" target="_blank" data-smartkarma-citation="insights:48933" rel="noopener">Savai Ovex MBO - A Very Weak Bump</a></strong>. This was not enough. The shares traded above terms and revised terms, only falling below when the Tender Offer went ex-. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/688/original/Sakai+Ovex+THEN.png?1627372930" class="editor-image img-responsive" data-smartkarma-image-id="220688"></figure><p></p></section><p>In the end, the bid was not successful. They ended up missing by 3% of the shares. BUT.... in the process, they gained an activist in Murakami-san, who did indeed pop in to own 6.9%, through City Index Eleventh, discussed in <strong><a href="https://www.smartkarma.com/insights/sakai-ovex-tender-offer-fails-but-the-stock-gains-an-activist" target="_blank" data-smartkarma-citation="insights:49739" rel="noopener">Sakai Ovex Tender Offer Fails But The Stock Gains an Activist</a></strong>after the Tender failed. CIE later revised their position to 7.93% which meant they were the fulcrum investor to get this deal over the line the next time, and now they own 8.33% according to today's document.</p><h3>Since Then...</h3><p>The shares have traded at or around ¥3,000/share ± ¥100/share for the past three months, trading in lower-than-pre-announcement volumes.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/689/original/Screenshot+2021-07-27+at+4.05.48+PM.png?1627373210" class="editor-image img-responsive" data-smartkarma-image-id="220689"></figure></section><p>Earnings were decent when reported in May. And the forecast for the year to March 2022 turned out to be substantially higher (revenues nearly 10% higher than the management forecast included in the Tender Offer documentation, and OP 35% higher).</p><p>And today we have new news.</p><p>The Bidders are back. And now City Index Eleventh is joining them. It pays to be the fulcrum investor. </p><p>And now they are bidding ¥3,810. Which is still cheap. </p><p>Much more below the fold. </p>

In early February 2021, the CEO of Sakai Ovex (3408 JP), who owned very few shares, and an activist investor decided to launch an MBO for the company at ¥2,850/share. The stock had been trading cheap, and the price was "high" but the price was wrong. It needed to be 40% higher - at a minimum - in my opinion. I wrote a detailed breakdown of why I thought so in Sakai Ovex MBO - Wrong Price (And the Bidder Knows It). The management forecasts had been low-balled and I called that out, and the equity affiliate earnings somewhat ignored. Get rid of the financial assets and the Offer Price was at negative enterprise value.  My conclusions on 9 February were as follows:Not long after that, the bidders offered a very weak bump to ¥3,000/share, discussed in Savai Ovex MBO - A Very Weak Bump. This was not enough. The shares traded above terms and revised terms, only falling below when the Tender Offer went ex-. In the end, the bid was not successful. They ended up missing by 3% of the shares. BUT.... in the process, they gained an activist in Murakami-san, who did indeed pop in to own 6.9%, through City Index Eleventh, discussed in Sakai Ovex Tender Offer Fails But The Stock Gains an Activistafter the Tender failed. CIE later revised their position to 7.93% which meant they were the fulcrum investor to get this deal over the line the next time, and now they own 8.33% according to today's document.Since Then...The shares have traded at or around ¥3,000/share ± ¥100/share for the past three months, trading in lower-than-pre-announcement volumes.Earnings were decent when reported in May. And the forecast for the year to March 2022 turned out to be substantially higher (revenues nearly 10% higher than the management forecast included in the Tender Offer documentation, and OP 35% higher).And today we have new news.The Bidders are back. And now City Index Eleventh is joining them. It pays to be the fulcrum investor. And now they are bidding ¥3,810. Which is still cheap. Much more below the fold. 

Sakai Ovex MBO Reloaded - Up 27% from Last Weak Bump But Still Cheap