Industrials

The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.

Toshiba – The Tender Arrives

By Mio Kato

At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

By Shifara Samsudeen, ACMA, CGMA

Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks.

TRYT IPO: Down 25% and Upside Is Limited

TRYT’s shares started trading on TSE on 24th July. The IPO was priced at ¥1,200 per share and closed at ¥876 per share at the end of first day trading.
The company’s shares are currently trading at around ¥900 per share, at a 25% discount to TRYT (9164 JP) ‘s IPO price.
We recommended staying on the sidelines as the company’s IPO was overvalued and our DCF valuation suggests that shares are fairly valued at the current price.

Nexteel IPO Book Building Results Analysis

Nexteel reported disappointing IPO book building results from institutional investors. The IPO price has been confirmed at 11,500 won which is at the low end of the IPO valuation range.
A total of 700 institutions participated, with a demand ratio of 236 to 1. It is scheduled to be listed on the KOSPI exchange on 21 August.
Despite the weak IPO book building results, we maintain our positive view of the Nexteel IPO. Our base case valuation of Nexteel is implied market cap of 485.8 billion won.

Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin

By Scott Foster

1Q sales growth was strong, but the operating margin was squeezed by the cost of overseas expansion.
The company’s finances remains very strong, but balance sheet ratios reflect the loss of earnings momentum and the dividend payout remains low.
Shares sold off on margin contraction, but valuations still high. A quick rebound cannot be taken for granted.

Bots In The Backroom

By subSPAC

In the aftermath of a stellar third-quarter earnings release, Symbotic, a warehouse automation company, exceeded the expectations of even the most bullish earnings forecasts.
Propelled by the encouraging financial performance, the company’s stock value skyrocketed to over $62 per share, catapulting the company’s market cap to over $35 billion.
There are several reasons to be optimistic, given that the company is riding multiple tailwinds.

Southwest Airlines Company: 4 Key Factors Driving Their Future Growth – Financial Forecasts

Southwest Airlines managed to exceed analyst expectations in terms of revenue as well as earnings.
The demand environment, particularly for leisure travel, is resilient as it sees solid bookings all over this busy summer travel season.
We give Southwest Airlines a ‘Hold’ rating with a revised target price.

Enphase Energy Inc.: Expanded Distribution In Germany & Other Drivers

Enphase delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus in earnings.
Enphase shipped 50,000 microinverters in the quarter from two of its contract manufacturers, Foxconn in Wisconsin and Flex in South Carolina.
This was a solid quarter for the company’s international revenue mainly due to the growth in Australia and Europe.

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Aug 08

Daily Brief Industrials: Toshiba Corp, TRYT , Nexteel, Keyence Corp, Symbotic, Southwest Airlines Co, Enphase Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

JIP Tender Offer for Toshiba (6502) Finally Here
Toshiba – The Tender Arrives
Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
TRYT IPO: Down 25% and Upside Is Limited
Nexteel IPO Book Building Results Analysis
Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin
Bots In The Backroom
Southwest Airlines Company: 4 Key Factors Driving Their Future Growth – Financial Forecasts
Enphase Energy Inc.: Expanded Distribution In Germany & Other Drivers

JIP Tender Offer for Toshiba (6502) Finally Here

The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.

Toshiba – The Tender Arrives

By Mio Kato

At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

By Shifara Samsudeen, ACMA, CGMA

Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks.

TRYT IPO: Down 25% and Upside Is Limited

TRYT’s shares started trading on TSE on 24th July. The IPO was priced at ¥1,200 per share and closed at ¥876 per share at the end of first day trading.
The company’s shares are currently trading at around ¥900 per share, at a 25% discount to TRYT (9164 JP) ‘s IPO price.
We recommended staying on the sidelines as the company’s IPO was overvalued and our DCF valuation suggests that shares are fairly valued at the current price.

Nexteel IPO Book Building Results Analysis

Nexteel reported disappointing IPO book building results from institutional investors. The IPO price has been confirmed at 11,500 won which is at the low end of the IPO valuation range.
A total of 700 institutions participated, with a demand ratio of 236 to 1. It is scheduled to be listed on the KOSPI exchange on 21 August.
Despite the weak IPO book building results, we maintain our positive view of the Nexteel IPO. Our base case valuation of Nexteel is implied market cap of 485.8 billion won.

Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin

By Scott Foster

1Q sales growth was strong, but the operating margin was squeezed by the cost of overseas expansion.
The company’s finances remains very strong, but balance sheet ratios reflect the loss of earnings momentum and the dividend payout remains low.
Shares sold off on margin contraction, but valuations still high. A quick rebound cannot be taken for granted.

Bots In The Backroom

By subSPAC

In the aftermath of a stellar third-quarter earnings release, Symbotic, a warehouse automation company, exceeded the expectations of even the most bullish earnings forecasts.
Propelled by the encouraging financial performance, the company’s stock value skyrocketed to over $62 per share, catapulting the company’s market cap to over $35 billion.
There are several reasons to be optimistic, given that the company is riding multiple tailwinds.

Southwest Airlines Company: 4 Key Factors Driving Their Future Growth – Financial Forecasts

Southwest Airlines managed to exceed analyst expectations in terms of revenue as well as earnings.
The demand environment, particularly for leisure travel, is resilient as it sees solid bookings all over this busy summer travel season.
We give Southwest Airlines a ‘Hold’ rating with a revised target price.

Enphase Energy Inc.: Expanded Distribution In Germany & Other Drivers

Enphase delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus in earnings.
Enphase shipped 50,000 microinverters in the quarter from two of its contract manufacturers, Foxconn in Wisconsin and Flex in South Carolina.
This was a solid quarter for the company’s international revenue mainly due to the growth in Australia and Europe.

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Aug 07

Daily Brief Industrials: NGK Insulators, Toshiba Corp, Yamato Holdings, AP Moeller – Maersk A/S and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Japan – Increase in Shorts on Some Interesting Stocks
Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
Trucker Call for End to Free Shipping Will Help Relieve Pressure on Yamato
Maersk Q2: Raised FY23 Guidance | Beat on Earnings, Too | Takeaway: Conditions Not Disastrous

Japan – Increase in Shorts on Some Interesting Stocks

Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.

Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments – E Guardian Inc (6050 JP), Itochu Techno Solutions (4739 JP), Toshiba Corp (6502 JP), Symbio Holdings (SYM AU), Metro Pacific Investments Co (MPI PM).

Trucker Call for End to Free Shipping Will Help Relieve Pressure on Yamato

By Michael Causton

Transport industry officials want to ban ‘free shipping’, forcing customers to pay for all deliveries and even redeliveries.
The aim is to reduce demand in time for new rules on driver overtime due to come into force next year and should relieve pressure on Yamato and others.
There is also more collaboration to reduce costs and labour: Yamato has scrapped its small packet business entirely, passing customers on to Japan Post.

Maersk Q2: Raised FY23 Guidance | Beat on Earnings, Too | Takeaway: Conditions Not Disastrous

By Daniel Hellberg

On Friday container giant AP Moeller – Maersk A/S (MAERSKB DC) raised FY23 guidance, lifting the bottom of its EBITDA range & increasing target FCF from US$2bn+ to US$3bn+
Despite beating Q2 expectations and raising FY guidance, management warned that the “normalization” of container shipping conditions is taking longer than anticipated
Maersk’s shares traded down on the news, but the company’s statements confirm our thesis: market conditions in 2023 are not nearly as bad as expected (Maersk’s TTM ROIC 34%!)

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Aug 07

Daily Brief Industrials: NGK Insulators, Toshiba Corp, Yamato Holdings, AP Moeller – Maersk A/S and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Japan – Increase in Shorts on Some Interesting Stocks
Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
Trucker Call for End to Free Shipping Will Help Relieve Pressure on Yamato
Maersk Q2: Raised FY23 Guidance | Beat on Earnings, Too | Takeaway: Conditions Not Disastrous

Japan – Increase in Shorts on Some Interesting Stocks

Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.

Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments – E Guardian Inc (6050 JP), Itochu Techno Solutions (4739 JP), Toshiba Corp (6502 JP), Symbio Holdings (SYM AU), Metro Pacific Investments Co (MPI PM).

Trucker Call for End to Free Shipping Will Help Relieve Pressure on Yamato

By Michael Causton

Transport industry officials want to ban ‘free shipping’, forcing customers to pay for all deliveries and even redeliveries.
The aim is to reduce demand in time for new rules on driver overtime due to come into force next year and should relieve pressure on Yamato and others.
There is also more collaboration to reduce costs and labour: Yamato has scrapped its small packet business entirely, passing customers on to Japan Post.

Maersk Q2: Raised FY23 Guidance | Beat on Earnings, Too | Takeaway: Conditions Not Disastrous

By Daniel Hellberg

On Friday container giant AP Moeller – Maersk A/S (MAERSKB DC) raised FY23 guidance, lifting the bottom of its EBITDA range & increasing target FCF from US$2bn+ to US$3bn+
Despite beating Q2 expectations and raising FY guidance, management warned that the “normalization” of container shipping conditions is taking longer than anticipated
Maersk’s shares traded down on the news, but the company’s statements confirm our thesis: market conditions in 2023 are not nearly as bad as expected (Maersk’s TTM ROIC 34%!)

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Aug 06

Daily Brief Industrials: Nippon Yusen Kk, Ww Grainger Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
WW Grainger Inc.: What Is Their Biggest Competitive Edge? – Key Drivers

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ

By David Blennerhassett

This may get squeezy after Nippon Yusen Kk (9101 JP) announced a ¥200bn over 9mos. Do not be short. Be long.
On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Remain bullish Kawasaki Kisen Kaisha (9107 JP) vs TOPIX, especially near-term. But this is a much less exciting and squeeze-able opportunity than before,

WW Grainger Inc.: What Is Their Biggest Competitive Edge? – Key Drivers

WW Grainger Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
The quarter finished with daily sales growth.
Along with the strong top-line growth of WW Grainger, it delivered continued ROIC, robust operating cash flow, and substantial EPS growth.

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Aug 06

Daily Brief Industrials: Nippon Yusen Kk, Ww Grainger Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
WW Grainger Inc.: What Is Their Biggest Competitive Edge? – Key Drivers

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ

By David Blennerhassett

This may get squeezy after Nippon Yusen Kk (9101 JP) announced a ¥200bn over 9mos. Do not be short. Be long.
On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Remain bullish Kawasaki Kisen Kaisha (9107 JP) vs TOPIX, especially near-term. But this is a much less exciting and squeeze-able opportunity than before,

WW Grainger Inc.: What Is Their Biggest Competitive Edge? – Key Drivers

WW Grainger Inc. delivered mixed results for the previous quarter, with revenues below the analyst consensus.
The quarter finished with daily sales growth.
Along with the strong top-line growth of WW Grainger, it delivered continued ROIC, robust operating cash flow, and substantial EPS growth.

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Aug 05

Daily Brief Industrials: Ethereal Machines and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Indian Deeptech Startup Ethereal Machines Raises $7.3m

Indian Deeptech Startup Ethereal Machines Raises $7.3m

By Tech in Asia

Investors such as Peak XV’s Surge, Blume Ventures, and Mathew Cyriac, former head of Blackstone India, have backed the US$7.3 million round of India-based Ethereal Machines.
Based in Bangalore, Ethereal Machines uses proprietary Computer Numerical Control machines, such as drills and mills, to produce precision engineering components for aerospace, automobile, and healthcare use.
The company said that its offerings reduce costs by 30% and production lead times by 40%.

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Aug 05

Daily Brief Industrials: Ethereal Machines and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Indian Deeptech Startup Ethereal Machines Raises $7.3m

Indian Deeptech Startup Ethereal Machines Raises $7.3m

By Tech in Asia

Investors such as Peak XV’s Surge, Blume Ventures, and Mathew Cyriac, former head of Blackstone India, have backed the US$7.3 million round of India-based Ethereal Machines.
Based in Bangalore, Ethereal Machines uses proprietary Computer Numerical Control machines, such as drills and mills, to produce precision engineering components for aerospace, automobile, and healthcare use.
The company said that its offerings reduce costs by 30% and production lead times by 40%.

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Aug 04

Daily Brief Industrials: Nippon Yusen Kk, S.F. Holding, Toshiba Corp, Ecopro BM , HNI Corp, Kantsu and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nippon Yusen (9101) BIG Buyback Announced
SF Holding (002352 CH): H-Share Listing & Index Implications
Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares
HNI Corporation – 2Q Preview: Adjusting 2QFY23 Estimate for Kimball Closing
Full Report – Kantsu (9326 JP)

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.

Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares

It has been reported in local media that investors in exchangeable bonds issued by Irum TNC converted about 0.24 million shares of EBs into Ecopro BM equity on 26 July.
There are increasing concerns that the remaining EB could be released into the market in the coming months.
After the poor 2Q 2023 results, we believe the consensus is likely to reduce sales and profit estimates of Ecopro BM from 2023 to 2025.

HNI Corporation – 2Q Preview: Adjusting 2QFY23 Estimate for Kimball Closing

By Water Tower Research

Ahead of the HNI’s 2QFY23 earnings report on Tuesday, August 8, we are only adjusting our estimates for 2QFY23.
HNI completed its acquisition of Kimball International on June 1.
Our revised 2QFY23 estimate relies on our in-place HNI estimate plus an interpolation of our KBAL estimates for the time owned by HNI (the closing occurred after two months had passed).

Full Report – Kantsu (9326 JP)

By Sessa Investment Research

Logistics companies serving the high-growth e-commerce industry are likewise showing strong growth.
Kantsu is a specialist in warehouse logistics, undertaking the entire upstream logistics process, from order processing to delivery.
The company has also created a highly profitable business by selling its in-house IT systems, which it developed to boost efficiency, to external customers.

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Aug 04

Daily Brief Industrials: Nippon Yusen Kk, S.F. Holding, Toshiba Corp, Ecopro BM , HNI Corp, Kantsu and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nippon Yusen (9101) BIG Buyback Announced
SF Holding (002352 CH): H-Share Listing & Index Implications
Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares
HNI Corporation – 2Q Preview: Adjusting 2QFY23 Estimate for Kimball Closing
Full Report – Kantsu (9326 JP)

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.

Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares