Holding the floor

We have recently written about the potential turning point for Value versus Growth which occurred in mid-November.

To recap, we identified a sharp spike in the volatility of the Value / Growth ratio as resembling a similar event in the year 2000, which at that time marked the start of a long period of Value out-performance.

What do we need for the turning point thesis to hold? (more…)

By |2021-02-24T16:36:34+08:003 February 2021|Thought leadership|

Why are volatility spikes significant?

In our last post we highlighted a volatility spike in the Value / Growth ratio as a potential sign that the multi-year under-performance of Value might be coming to an end.

More specifically, we looked at the 10-day volatility of the MSCI Asia-Pacific ex-Japan Value index divided by MSCI Asia-Pacific ex-Japan Growth index, which in November spiked to 30 for the first time in twenty years.

The last time this happened marked the start of a long period of Value outperformance.

Volatility spikes are often associated with market turning points. Why? (more…)

By |2021-02-24T16:36:52+08:006 January 2021|Thought leadership|

A turning point?

We may finally have seen a turning point in the under-performance of Value.

The volatility of the Value / Growth ratio in Asia-Pacific surged to 30% on 6 November. The last time we saw a similar level was just over twenty years ago, on 10 April 2000:

This is significant because (more…)

By |2021-02-24T16:37:31+08:003 December 2020|Thought leadership|

Worst performance of value since 1926

We continue to have a strong conviction in a strategy of buying companies at 80-90% discount to NAV, with an expectation of a catalyst for value realisation.

While over the long-term this has proven to be a very effective strategy, it has performed poorly over the past year.

What could be the cause? We believe the global underperformance of the value factor is the main culprit.

We have previously illustrated this using benchmarks from MSCI and Russell Investments. However, to show just how extreme the current moves are, (more…)

By |2021-02-24T16:39:02+08:004 November 2020|Thought leadership|

Metrica Partners will not tender into the LINE Joint Tender Offer and urges other shareholders to consider following

Metrica Partners Pte. Ltd. (“Metrica”) is the manager of, and adviser to multiple funds (the “Metrica funds”) that own shares in LINE Corp. (“LINE”, Securities Code: 3938). LINE is currently the subject of a tender offer (“the Joint Tender Offer”) by SoftBank Corp. (“SoftBank”, Securities Code: 9434) and NAVER Corporation (‘NAVER”, Securities Code: 035420), which is to be followed by a business integration with Z Holdings (Securities Code: 4689) (the “Business Integration”).

Metrica will not be tendering the shares held by the Metrica Funds into the Joint Tender Offer, and furthermore, it intends to dissent to the subsequent Share Consolidation and exercise its appraisal rights:

  • Metrica considers that the procedures leading up to the LINE Board’s decision to recommend the Joint Tender Offer fall short of the required standard of fairness.
    • The Special Committee has not demonstrated a sufficient degree of independence from the transaction.
    • One of the acquirers ultimately ends up with much higher value from the Business Integration than the price offered to minority shareholders of LINE. The excess value is a tangential benefit deriving more from financial engineering rather than from synergies related to the Business Integration, in Metrica’s view.
    • The other acquirer is a major client of the financial advisor, which may affect the perceived independence of its valuation of the target company.
    • The deal is missing a minimum acceptance condition, depriving shareholders of an important opportunity to exercise their rights.
  • Metrica believes that the Joint Tender Offer price of JPY 5,380 is inadequate.
    • It represents a very low premium when compared with historical precedents.
    • It is below the mid-point of the financial advisor’s DCF valuation, which does not incorporate any projected synergies.
    • The valuation has not been updated to reflect the pandemic’s favourable impact on LINE’s business, nor the substantial increase in comparable company valuation multiples.
    • The joint acquirers are privatising the company just before the point at which it turns profitable on an operating basis, according to management’s own forecasts.

Metrica’s reasoning behind the above conclusions is as follows: (more…)

By |2020-08-25T09:14:58+08:0024 August 2020|Open letters|

Engagement update

We have two situations which are public. The first is NBI Industrial Finance in India, a company which owns shares of a major listed cement company worth almost five times its market cap and which carries on almost no other business.

This month, we sent an open letter to the board which we also released to the press and uploaded to a dedicated website (link).

The letter was structured as a list of questions, in line with our policy of first seeking explanations for corporate behaviour before making our own suggestions.

In the first instance, we are asking: (more…)

By |2020-08-12T14:52:09+08:005 August 2020|Thought leadership|
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