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

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> is world's second-largest automaker, with 2018 sales results of 10.39mm vehicles, just eclipsed by <a href="https://www.smartkarma.com/entities/21738" target="_blank" data-smartkarma-citation="entities:21738:1">Volkswagen AG (VOW GR)</a> at 10.62mm (and the combination of <a href="https://www.smartkarma.com/entities/21536" target="_blank" data-smartkarma-citation="entities:21536:1">Renault SA (RNO FP)</a>, <a href="https://www.smartkarma.com/entities/72" target="_blank" data-smartkarma-citation="entities:72:1">Nissan Motor (7201 JP)</a>, and <a href="https://www.smartkarma.com/entities/794" target="_blank" data-smartkarma-citation="entities:794:1">Mitsubishi Motors (7211 JP)</a> at 10.76mm.Alongside autos and the finance business associated with auto sales/leasing, they have an "Other" business, which while small at 4.3% of total consolidated OP, still had ¥105bn of Operating Profit in the fiscal year to 31 March 2019. The complete explanation in the Short form earnings report (30 pages long) is:<blockquote>All Other:  Net revenues for all other businesses increased by 30.2 billion yen, or 1.8%, to 1,676.3 billion yen in FY2019 compared with FY2018, and operating income increased by 4.7 billion yen, or 4.7%, to 105.5 billion yen in FY2019 compared with FY2018.</blockquote>One of the businesses in "Other" is homebuilding, called "Housing Services" in some reports.If you look hard in the quarterly report <a href="https://global.toyota/pages/global_toyota/ir/financial-results/2019_4q_overview_en.pdf" target="_blank">overview</a>, the earnings release <a href="https://global.toyota/pages/global_toyota/ir/financial-results/2019_4q_presentation_en.pdf" target="_blank">presentation</a>, and the <a href="https://global.toyota/pages/global_toyota/ir/financial-results/2019_4q_summary_en.pdf" target="_blank">summary financials</a> offered yesterday for Toyota's FY earnings release for information , you'll see it clearly shown.... nowhere. Not one word. In either the English or the Japanese earnings reports, the best you get is the "All Other" segment.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/314/original/Screenshot%202019-05-09%20at%2011.52.42%20AM.png?1557373983" class="editor-image img-responsive" data-smartkarma-image-id="87314"></figure><div class="content-caption">source: <a href="https://global.toyota/pages/global_toyota/ir/financial-results/2019_4q_summary_en.pdf" target="_blank">quarterly report</a> for Q4 and FY ending 31 March 2019</div>The home building business is inside what is called Toyota Housing Corporation, with a website only in Japanese at <a href="https://www.toyotahome.co.jp/" target="_blank">https://www.toyotahome.co.jp/</a>. They do detached house construction as well as condominium development and housing renovations, operating in 29 of Japan's 47 prefectures, and in the year before the one just ended, they sold 16,222 units on a consolidated basis and generated net consolidated revenues of ¥547.9bn. You can find a small description of the business on p50 of the English language version of the <a href="https://global.toyota/en/ir/library/annual/" target="_blank">2018 Annual Report</a> (for the year ended 31 March 2018). In late November 2016, Toyota bought a further stake in <a href="https://www.smartkarma.com/entities/20728" target="_blank" data-smartkarma-citation="entities:20728:1">Misawa Homes (1722 JP)</a> (it had owned a minority stake for almost a decade), bringing Toyota to a consolidation stake of 51%. This was discussed in <a href="https://www.smartkarma.com/insights/misawa-homes-goes-under-the-toyota-group-umbrella-another-interesting-arb" target="_blank" data-smartkarma-citation="insights:7313">Misawa Homes Goes Under The Toyota Group Umbrella - Another Interesting Arb</a>. <h2>The New News</h2>Today, Toyota and Misawa Homes <a href="https://global.toyota/pages/global_toyota/ir/stock/share_exchange_20190509_en.pdf" target="_blank">announced</a> the boards of both companies had decided to merge (with Toyota being the surviving company and Misawa becoming a wholly-owned subsidiary) with the effective date of the merger on 7 January 2020 after shareholder meetings to approve the deal in November 2019. The proposed merger ratio is 0.155 shares of Toyota for every share of Misawa Homes held.Interestingly, this is part of the joint venture plan <a href="https://global.toyota/en/newsroom/corporate/28037654.html" target="_blank">announced</a> simultaneously between <a href="https://www.smartkarma.com/entities/222" target="_blank" data-smartkarma-citation="entities:222:1">Panasonic Corp (6752 JP)</a> and Toyota to expand the "town development" business. Misawa, after integration with Toyota, will slot into Toyota's side of that development which will involve the merger of Toyota's Housing Business and Panasonic's housing service business pooled into a single company to be called Prime Life Technologies Corporation. It is currently expected to be a 50/50 JV though apparently <a href="https://www.smartkarma.com/entities/20799" target="_blank" data-smartkarma-citation="entities:20799:1">Mitsui &amp; Co Ltd (8031 JP)</a> may join according to a Nikkei <a href="https://asia.nikkei.com/Business/Business-deals/Toyota-and-Panasonic-to-merge-housing-businesses" target="_blank">article</a>.In the Toyota/Misawa announcement, there is a lot of talk using buzzwords like IoT, "Sustainable Smart Towns", CASE (“Connected,” “Autonomous,” “Shared,” and “Electric") which is the acronym du jour for aspiring autonomous EV tech aspirants, "MaaS" (Mobility as a Service") and similar.The value of the explanation of how all this will work for Misawa is shown in a description of Toyota Housing's methodology.<blockquote>Toyota Housing strives to deliver peace of mind during construction, after construction, and through support, in order to help customers realize their ideal lifestyles throughout their lifetime. Peace of mind during construction means high quality through advanced technology, peace of mind after construction means the ability to guarantee the home in the long term, and peace of mind through support means the corporate strength of the Toyota group. In order to continue realizing an ideal lifestyle, Toyota Housing will promote initiatives diversifying its business in response to its customers’ needs.</blockquote>It doesn't really matter, however. Assuming this gets passed by shareholders, Misawa Homes will disappear into the automotive behemoth briefly (Toyota Housing Corporation) before being merged into the new Prime Life Technologies Corporation, which because Toyota's share will be 50%, will continue to be a tiny part in "Other" in Toyota's financial statements. The question is whether the Misawa transaction goes through.

Toyota Motor (7203 JP) is world's second-largest automaker, with 2018 sales results of 10.39mm vehicles, just eclipsed by Volkswagen AG (VOW GR) at 10.62mm (and the combination of Renault SA (RNO FP), Nissan Motor (7201 JP), and Mitsubishi Motors (7211 JP) at 10.76mm.Alongside autos and the finance business associated with auto sales/leasing, they have an "Other" business, which while small at 4.3% of total consolidated OP, still had ¥105bn of Operating Profit in the fiscal year to 31 March 2019. The complete explanation in the Short form earnings report (30 pages long) is:All Other:  Net revenues for all other businesses increased by 30.2 billion yen, or 1.8%, to 1,676.3 billion yen in FY2019 compared with FY2018, and operating income increased by 4.7 billion yen, or 4.7%, to 105.5 billion yen in FY2019 compared with FY2018.One of the businesses in "Other" is homebuilding, called "Housing Services" in some reports.If you look hard in the quarterly report overview, the earnings release presentation, and the summary financials offered yesterday for Toyota's FY earnings release for information , you'll see it clearly shown.... nowhere. Not one word. In either the English or the Japanese earnings reports, the best you get is the "All Other" segment.source: quarterly report for Q4 and FY ending 31 March 2019The home building business is inside what is called Toyota Housing Corporation, with a website only in Japanese at https://www.toyotahome.co.jp/. They do detached house construction as well as condominium development and housing renovations, operating in 29 of Japan's 47 prefectures, and in the year before the one just ended, they sold 16,222 units on a consolidated basis and generated net consolidated revenues of ¥547.9bn. You can find a small description of the business on p50 of the English language version of the 2018 Annual Report (for the year ended 31 March 2018). In late November 2016, Toyota bought a further stake in Misawa Homes (1722 JP) (it had owned a minority stake for almost a decade), bringing Toyota to a consolidation stake of 51%. This was discussed in Misawa Homes Goes Under The Toyota Group Umbrella - Another Interesting Arb. The New NewsToday, Toyota and Misawa Homes announced the boards of both companies had decided to merge (with Toyota being the surviving company and Misawa becoming a wholly-owned subsidiary) with the effective date of the merger on 7 January 2020 after shareholder meetings to approve the deal in November 2019. The proposed merger ratio is 0.155 shares of Toyota for every share of Misawa Homes held.Interestingly, this is part of the joint venture plan announced simultaneously between Panasonic Corp (6752 JP) and Toyota to expand the "town development" business. Misawa, after integration with Toyota, will slot into Toyota's side of that development which will involve the merger of Toyota's Housing Business and Panasonic's housing service business pooled into a single company to be called Prime Life Technologies Corporation. It is currently expected to be a 50/50 JV though apparently Mitsui &amp; Co Ltd (8031 JP) may join according to a Nikkei article.In the Toyota/Misawa announcement, there is a lot of talk using buzzwords like IoT, "Sustainable Smart Towns", CASE (“Connected,” “Autonomous,” “Shared,” and “Electric") which is the acronym du jour for aspiring autonomous EV tech aspirants, "MaaS" (Mobility as a Service") and similar.The value of the explanation of how all this will work for Misawa is shown in a description of Toyota Housing's methodology.Toyota Housing strives to deliver peace of mind during construction, after construction, and through support, in order to help customers realize their ideal lifestyles throughout their lifetime. Peace of mind during construction means high quality through advanced technology, peace of mind after construction means the ability to guarantee the home in the long term, and peace of mind through support means the corporate strength of the Toyota group. In order to continue realizing an ideal lifestyle, Toyota Housing will promote initiatives diversifying its business in response to its customers’ needs.It doesn't really matter, however. Assuming this gets passed by shareholders, Misawa Homes will disappear into the automotive behemoth briefly (Toyota Housing Corporation) before being merged into the new Prime Life Technologies Corporation, which because Toyota's share will be 50%, will continue to be a tiny part in "Other" in Toyota's financial statements. The question is whether the Misawa transaction goes through.

Misawa Homes

Toyota To Take Over Rest of Misawa Homes