Japan Activism: Sohn Conference edition
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With activism in Japan heating up, here’s a quick look at the pitches from the Hong Kong edition of the Sohn Investment Conference. The big trend has been the openness to increasing shareholder returns, but also exploring M&A - which has been notably lackluster in Japan over the last decade.
Yet, corporate governance changes are underway and companies in Japan have close to $2 trillion in cash that needs to be put to work. Some companies have already started, think: Fanuc, which was targeted by Dan Loeb, and shortly after put in place a buyback and higher dividend.
As far as Hong Kong Sohn goes...
Tybourne Capital pitched airport operators, namely Japan Airport Terminal, which is a bet on more Chinese traveling, driven by rising incomes. In Japan, airports are basically huge malls; more travel means more spending. Another Tybourne play is Shanghai International Airport, where that city will see a Disneyland resort open next year - increasing travel to the city.
Indus Capital is long Coca-Cola West on the belief that it will begin consolidation of bottlers across the Western part of the globe. The key is getting margins more in line with the number two player, Suntory Beverage, which will lead to higher dividends.
Oasis Capital was pumping Kyocera, which focuses on packaging for smartphones. The problem with Kyocera isn’t its packaging business, but its U.S. telecom business. This segment lost over $150mm while generating $2.8bn in revenues last year. It’s holding the company back, while there’s no hope for competing in the U.S. market. Kyocera could also do a YieldCo for its solar business. Recall that Oasis was involved with Nintendo last year to get into mobile games. He’s crushed it in Nintendo.
Balydasny Asset Management is long Suzuki Motor as a misunderstood play. One that needs to be unwound, where Volkswagen owns 20% of the company and Suzuki owns 1.5% of Volkswagen. Suzuki also owns Maruti Suzuki India, which is a pure play on the growing car market in India.
Graticule Asset Management fingered Chinese brokerage houses as top plays - including CITIC Securities, Haitong Securities and China Galaxy Securities. It’s a bet on higher trading volumes driven by monetary easing.
Saga Tree Capital called out Sun Hung Kai & Company given its exposure to the growing income levels in China. Its wealth management and brokerage businesses will thrive as the country becomes wealthier.