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

NTT's Big Beautiful Buyback Is Not The Only Reason to Own

The Delayed TOPIX FFW Rebalance: $32bn To Trade

KDDI - Q2 20 Results: Embracing the Industry’s New Look

Quiddity Advisors

Event-Driven

On 30 October, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> announced its Q2 earnings and <a href="https://www.smartkarma.com/profiles/kirk-boodry" target="_blank" data-smartkarma-citation="accounts:1920" rel="noopener">Kirk Boodry</a> ably takes an initial crack at them in <a href="https://www.smartkarma.com/insights/kddi-q2-20-results-embracing-the-industry-s-new-look" target="_blank" data-smartkarma-citation="insights:44747" rel="noopener">KDDI - Q2 20 Results: Embracing the Industry’s New Look</a>.The big news of the day was that KDDI <a href="https://news.kddi.com/kddi/corporate/english/ir-news/2020/10/30/4757.html" target="_blank" rel="noopener">announced</a> a ¥200bn buyback. This is big for a couple of reasons. <ol>
<li>This is the first telco buyback in Japan announced since the administration changed. The pressure exerted by and to be exerted by the new Suga administration to lower costs to consumers (and therefore pressure returns to shareholders) is not seen as being great enough to not buy back shares. </li>
<li>Other than Softbank, which also announced buybacks (having sold significant assets) after covid-19 became a problem, this is a significantly large buyback among Japanese corporations.</li>
<li>This continues KDDI's trend of buying back large amounts of stock for a fifth year in a row.</li>
</ol>The buyback was accompanied by <a href="https://www.kddi.com/extlib/files/english/corporate/ir/library/presentation/2021/pdf/kddi_201030_e_statement_full_xzE6ba.pdf" target="_blank" rel="noopener">slightly-ahead-of-consensus earnings</a> (and no change in full-year guidance) and a planned <a href="https://news.kddi.com/kddi/corporate/english/ir-news/2020/10/30/4756.html" target="_blank" rel="noopener">share placement</a> to <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> of 18.3mm shares for ¥52.2bn to further promote the relationship, create a <a href="https://news.kddi.com/kddi/corporate/english/ir-news/2020/10/30/4755.html" target="_blank" rel="noopener">business alliance</a>, and further R&amp;D into next-gen connected cars and more, shown on p16 of the <a href="https://www.kddi.com/extlib/files/english/corporate/ir/library/presentation/2021/pdf/kddi_201030_e_main_S7bBS2.pdf" target="_blank" rel="noopener">Q2 presentation</a>. Toyota, of course, has been one of KDDI's largest shareholders since KDDI was formed from the three-way merger of KDDI, IDO, and Dai-Ni Denden twenty years ago. <div class="content-highlight">
Below I look at the share buyback dynamics. 
In this case, the buyback is about 8-9% of ADV over the expected buyback period. The impact on volume during the day, however, is different, and buyback programmes change the VWAP curve, sometimes significantly. 
As a result, it is worth understanding the impact against float and investor positioning, and it may be worth altering execution strategy during the buyback period to take advantage of the impact on the VWAP curve.
</div>

On 30 October, KDDI Corp (9433 JP) announced its Q2 earnings and Kirk Boodry ably takes an initial crack at them in KDDI - Q2 20 Results: Embracing the Industry’s New Look.The big news of the day was that KDDI announced a ¥200bn buyback. This is big for a couple of reasons. 
This is the first telco buyback in Japan announced since the administration changed. The pressure exerted by and to be exerted by the new Suga administration to lower costs to consumers (and therefore pressure returns to shareholders) is not seen as being great enough to not buy back shares. 
Other than Softbank, which also announced buybacks (having sold significant assets) after covid-19 became a problem, this is a significantly large buyback among Japanese corporations.
This continues KDDI's trend of buying back large amounts of stock for a fifth year in a row.
The buyback was accompanied by slightly-ahead-of-consensus earnings (and no change in full-year guidance) and a planned share placement to Toyota Motor (7203 JP) of 18.3mm shares for ¥52.2bn to further promote the relationship, create a business alliance, and further R&amp;D into next-gen connected cars and more, shown on p16 of the Q2 presentation. Toyota, of course, has been one of KDDI's largest shareholders since KDDI was formed from the three-way merger of KDDI, IDO, and Dai-Ni Denden twenty years ago. 
Below I look at the share buyback dynamics. 
In this case, the buyback is about 8-9% of ADV over the expected buyback period. The impact on volume during the day, however, is different, and buyback programmes change the VWAP curve, sometimes significantly. 
As a result, it is worth understanding the impact against float and investor positioning, and it may be worth altering execution strategy during the buyback period to take advantage of the impact on the VWAP curve.


KDDI Corp

New KDDI (9433 JP) Buyback Dynamics