Smartkarma Daily Briefs

• Inaba has bumped its Yaizu Suisankagaku Industry (2812 JP) offer by 6.5% to JPY1,438 and lowered the minimum number of shares to be purchased from 66.67% to 60.00% ownership ratio.
• The bump was forced by 3D Investment Partners increasing its shareholding from 9.78% to 13.81% ownership ratio after the previous JPY1,350 offer was announced on 5 February.
• While the offer continues to value YSK below book value, Murakami and 3D’s support paves the way for completion. At the last close, the gross spread was 7.1%.  

• Back in December 2022, agri-food play Japfa Ltd (JAP SP) spun-off its 62.5% stake in AustAsia Group (2425 HK), as discussed in Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution 
• Last Friday, Bloomberg reported its key shareholder, Renaldo Santosa and his family, who collectively control ~75.5%, are considering taking Japfa private.
• The family acknowledges it has been approached by various financiers, investment banks, but nothing definitive has emerged. Still, Japfa is worth a revisit.

• Back in 2004, Hahn & Co and Hankook Tire (161390 KS) acquired a 70% stake in Hanon Systems (018880 KS) from Visteon (VC US), an automotive electronics supplier, for ₩3.8tn.
• Three years ago, Hahn/Hankook explored the sale of this 70% stake, which was expected to fetch ~₩8tn (US$7bn). Reportedly, Carlyle, TPG, Bain and auto supplier Mahle submitted preliminary bids.
• That 70% stake is now worth ₩2.3tn. And reportedly, Carlyle has returned to the trough. 

• Gopal Snacks (1592789D IN) IPO worth INR 6.5 bn is live on the bourses. 
• The company is a prominent snacks manufacturer in India, especially in the state of Gujarat. It boasts one of the highest fixed asset turnover ratio and high ROCEs. 
• On the flipside, caution must remain on its dull revenue growth post F22 and on its related party transactions, especially with promoter companies.

• Ola Electric is looking to raise about US$1bn in its upcoming India IPO.
• Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
• In our previous note we looked at the company’s past performance and undertook a peer comparison. In this note, we will talk about valuations.

• Many are asking why KDDI would want to buy 50% of Lawson, Japan’s third biggest convenience store chain.
• Some more imaginative analysts suggest this could be just the first step towards KDDI merging with Rakuten in order to beat Amazon.
• The more likely future is an ecosystem to challenge Rakuten and LY Corp (Yahoo etc), starting with points and payments and evolving to other Fintech, e-commerce and health.

• Seria Co Ltd (2782 JP) operates 100-yen stores throughout Japan, buying products from manufacturers and selling them at a flat price of JPY100 (plus tax).
• In FY03/23, sales were JPY212.4bn (+2.1% YoY), operating profit was JPY15.4bn (-26.2% YoY), recurring profit JPY15.6bn (-26.8% YoY), and net income JPY10.3bn (-28.3% YoY).
• On January 31, 2024, Seria Co., Ltd. announced a revision of its full-year FY03/24 earnings forecast.

• The fact that many companies have low actual returns is the crux of the problem; investors will likely increase pressure on the companies as ROEs haven’t increased noticeably in 2023.
• TSE may have indicated the points for disclosure, based in part on the experience of few companies that achieved the listing criteria by successfully disclosing their “plans” for transitional measures.
• March 2023, TSE published “Request for Disclosure on the Status of Dialogue with Shareholders.” However, mismatches between companies and investors makes it difficult to require all prime market companies this.

• Mitsubishi Shokuhin (7451 JP) is Japan’s largest general food wholesaler by revenue.
• In FY03/23, the company reported revenue of JPY1,996.8bn, operating profit of JPY23.4bn, recurring profit of JPY25.2bn, and net income attributable to owners of the parent of JPY17.1bn.
• In May 2021, the company announced its “Medium-term Management Plan 2023,” covering the period between FY03/22 and FY03/24.

Informa’s FY23 results were strong, slightly ahead of guidance at January’s update. Underlying revenues grew 30.4% and adjusted operating margin expanded from 21.9% to 26.8%, with all four operating segments posting underlying revenue progress. The momentum has continued into FY24, and formal guidance has been edged ahead. The group generates significant amounts of cash, and leverage at end FY23 of 1.4x was below the guided range of 1.5–2.5x. With modest investment requirements and M&A opportunities of a large enough scale hard to come by, it seems likely that the share buyback programme will be extended further, underpinning the valuation.