Japan

• Today, Hillhouse announced it would buy the 63% of SAMTY HOLDINGS Co Ltd (187A JP) not owned by Daiwa Securities Group (8601 JP) at an 18% premium. 
• It’s a highly-levered real estate company. Huge inventory. Decent margins on sale so embedded profit sitting in inventory. Not a very big premium, but an all-time high. 
• Retail including some large former insiders and passive own the vast bulk of the float here. The former get this done. Or not. 

• In FY08/24, the company reported sales of JPY110.6bn (+25.7% YoY) and operating profit of JPY10.5bn (-8.9% YoY).
• Software Testing Related Services segment sales reached JPY71.3bn (+22.4% YoY), with operating profit of JPY16.2bn (+11.4% YoY).
• For FY08/25, the company forecasts sales of JPY130.0bn (+17.5% YoY) and operating profit of JPY13.5bn (+28.1% YoY).

• We analyse ten Japanese midcap banks to target beneficiaries of the realization of strategic shareholdings, as well as beneficiaries of the improving interest rate outlook
• We add Hachijuni Bank and Hokuhoku Financial to the buy list, based on the potential for realization of strategic holdings; these share-holdings are large relative to their respective market capitalizations
• We maintain Gunma Bank on the buy list, primarily for its very strong gearing into the rising interest cycle and its attractive PE multiples

• Hisamitsu Pharmaceutical Co (4530 JP) has reported double-digit revenue growth in H1FY25, mainly driven by 17% YoY growth in OTC pharmaceutical product, Salonpas. Net profit grew 8%.
• Rx business revenues grew 5% as Zicthoru, Apohide etc clocked healthy numbers, while Mohrus product line continues to decline. Since Q1FY24, Zicthoru’s quarterly revenue run-rate has been surpassing ¥1B.
• Hisamitsu has reiterated its FY25 guidance of ¥152B revenue, operating profit of ¥14.5B, and net profit of ¥15.8B. With H1FY25 progress rate, the company is expected to beat the guidance.

• Business portfolio reforms are lagging and improving profitability, the driver of ROE, will take more time. Further Reducing policy shareholdings and cash on hand are needed to improve capital profitability.
• In days of cross-shareholdings, management tended to be less conscious of the goal of sustainable growth in shareholder interests because they need not listen to opinions of other minority shareholders.
• Cross-Shareholdings have decreased, and management is now required to be more conscious of capital profitability. ”TSE’s request” will hopefully prevent this change from going backwards.

• Revenue for Q1 FY05/25 was JPY3.1bn, a decrease of 3.9% YoY, with an operating loss of JPY1.1bn.
• Orders received in Q1 FY05/25 totaled JPY9.0bn, an 8.4% YoY decrease, aligning with initial expectations.
• Full-year earnings forecast remains unchanged due to stable production performance and order backlog, despite uncertain subsidiary impact.

• Revenue increased 15.0% YoY to JPY13.2bn, driven by strong performance in Emergency and Preventive Maintenance Services.
• Operating profit rose 22.5% YoY to JPY921mn, with an operating profit margin increase of 0.4pp to 7.0%.
• The company expanded market share by acquiring new customers and projects, focusing on air conditioning and ventilation systems.

• FY08/24 revenue was JPY326.7bn (+18.2% YoY), with operating profit at JPY29.1bn (+35.0% YoY), exceeding forecasts.
• Subscriber growth and merger boosted FY08/24 revenue to JPY109.1bn (+31.1% YoY), operating profit rose 39.2% YoY.
• FY08/25 forecast: revenue JPY360.0bn (+10.2% YoY), operating profit JPY31.0bn (+6.5% YoY), EBITDA JPY42.5bn (+7.5% YoY).

• H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
• The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing. 
• 7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.

• Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
• The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
• Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.

• Rigaku Holdings (268A JP) is scheduled to be listed at the Tokyo Stock Exchange on 25 October 2024 at a valuation of ~$1.9bn.
• The company’s modest market capitalization fails fast-entry but easily surpasses the quarterly small cap thresholds of both main global indices.
• Rigaku Holdings (268A JP)  is expected to be added at the May and June 2025 quarterly reviews with the potential greenshoe exercise increasing the passive fund demand upon inclusion.

• Gaming Award nominations could spark sales lift into key holiday selling season   
• Highly watched Industry Scores are moving higher for FF7 Rebirth. FF7 Rebirth moving higher up key US gaming charts
• Five CQ4 release titles could drive revenues higher from recent lower reset. Big valuation discount and balance sheet opportunities exist

• Sales increased by JPY580mn (+2.3% YoY), driven by growth in Creative (Japan) and Other sectors, despite project reductions.
• Operating profit decreased by JPY407mn (-15.6% YoY), impacted by development costs and reduced profits in most segments except Creative (South Korea).
• Medical Principle’s sales and operating profit decreased YoY due to reduced COVID-19 projects and structural reforms.

• This AM, partway through the morning session, Bloomberg carried an article saying Alimentation Couche-Tard (ATD CN) had upped its bid for Seven & I Holdings (3382 JP) to US$18.19/share.
• The stock popped, then faded sharply. Near and after the close we got more headlines. Some of these preview tomorrow’s earnings report. Some preview the restructuring announcements.
• The Nikkei comment regarding an earnings shortfall vs Plan suggests weaker US convenience store sales and consumer footfall are to blame. Details will matter. But I’d buy dips.

• In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a revised non-binding proposal from Alimentation Couche-Tard (ATD CN). 
• The rumoured revised offer is US$18.19, a 22.4% premium to the initial US$14.86 offer. The revised terms are attractive vs precedent transactions and analyst price targets.
• The Board would cite regulatory concerns and the revised offer’s implied discount compared to peer multiples. At tomorrow’s results, the Board must present a credible alternative value generation path.

• Mercari is a Japanese e-commerce company known for operating the leading online used goods marketplace in Japan with over 23 million monthly active users and significant annual GMV.
• The company’s strong network effects moat and growth prospects in Japan’s second-hand goods market suggest substantial potential value, despite investor frustration with loss-making initiatives like Mercari US and its Fintech segment.
• Analysts believe that Mercari Japan alone is worth nearly double the company’s current market cap, highlighting potential for significant upside.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Rigaku Holdings (268A JP) is looking to raise up to US$756m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
• In our earlier notes, we looked at the firm’s past performance and discussed our thoughts on valuation. In this note, we look at Rigaku’s valuation at the final indicative range.

• Oisix is planning to double its sales by 2030 and looks set to reach this targets early through both organic expansion and M&A.
• The recent acquisition of several B2B and other companies will help sales grow 72% this year alone.
• But the longer-term consumer-facing business continues to look positive thanks to continued demand for convenience meal kits and home delivery of quality foods. Profit though remains anaemic.

• A comparison of two surveys shows progress in disclosing GHG emissions over half-year, with small increase in Scope 1 and Scope 2, while little progress was made in Scope 3.
• Many companies are cautious about disclosing in annual securities reports, even if they are certified by a third-party certification body or stated in their own integrated reports.
• However, FSA will require companies with over 3 trillion yen in market capitalization to disclose to Scope 3 in FY3/2027, and most companies are likely to comply with this requirement.

• Revenue for 1H FY02/25 was JPY24.4bn, a 9.4% YoY increase, surpassing the company forecast of JPY23.9bn.
• Operating profit rose 53.0% YoY to JPY1.6bn, exceeding the forecast of JPY1.0bn, with OPM at 6.4%.
• Net income attributable to owners surged 82.0% YoY to JPY1.2bn, surpassing the forecast of JPY705mn.

• Sales were JPY43.9bn (+7.5% YoY), operating profit JPY2.9bn (+41.8% YoY), and net income JPY374mn (-68.3% YoY).
• In Japan, sales reached record highs due to weather-driven demand, while China faced delayed sales recovery.
• The company opened 92 facilities and closed 52, totaling 1,207 facilities, with 737 in Japan and 470 overseas.

• Sales increased YoY across multiple segments, driven by price revisions and new contracts, despite rising costs.
• Aeon Delight’s medium-term plan focuses on efficiency, consulting capabilities, and expanding the Construction Work business.
• The company plans JPY20.0bn investment in productivity, new services, and human capital for sustained growth.

• Post-Close on the 5th business day of October every year, the TSE announces the Free Float Weight review for all stocks where the FY ends in the Jan-March quarter.
• Yesterday saw 210 decent changes to FFW (more up than down). There are still 400+ Phased Weight Reductions, 3 new adds (3663, 3993, 9341), and some share cancellation-based share-count reductions.
• It turns out there is a LOT to trade. I see ¥2trln one-way (¥2trln net to buy on 245 names, and ¥2trln to sell on the other nearly 1,900 names). 

• With results due October 15, we expect net sales growth of 29% YoY, bringing 9-month revenue on track to meet full-year guidance.
• Money Forward’s businesses are Japan-centric, creating a steady revenue stream insulated from yen volatility and uncertain global macro conditions.
• By targeting larger corporations, Money Forward aims to unlock substantial cross-selling potential, supporting long-term growth and market penetration.

• Revenue increased by 4.1% YoY to JPY69.4bn, achieving 84.7% of the full-year forecast, driven by Development business growth.
• Operating profit rose 18.0% YoY to JPY17.1bn, reaching 93.8% of the full-year forecast, with notable profit margin improvements.
• Tosei revised its full-year forecast, lowering revenue by 11.1% but raising profit forecasts due to strategic adjustments.

• Revenue increased by 9.4% YoY to JPY113.9bn, with growth in comparable store revenue and customer count.
• Operating profit rose by 10.7% YoY to JPY5.3bn, supported by higher gross profit and cost control measures.
• The company expanded its network by opening 10 drugstores and six in-store dispensing pharmacies, closing one store.

• Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering. 
• Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
• Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.

• Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
• Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
• Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO. 

• Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.4bn in its Japan IPO.
• Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
• We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

• Rigaku Holdings (268A JP) listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
• At the reported indicative IPO price of JPY 1230/share, Rigaku Holdings (268A JP) will be valued at JPY 277.1bn (US$1.87bn).
• The stock should be added to the TOPIX INDEX on 28 November while inclusion in global indices will take place in February and June next year.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Our long-term pre-event candidate CELSYS (3663 JP) has moved to TSE Prime. There will be a TOPIX Inclusion event on 30-Oct-24. The stock has outperformed TOPIX by 43% since July.
• PKSHA Technology (3993 JP) and GENOVA (9341 JP) also moved to the TSE Prime market in September and will be having TOPIX Inclusion events at the end of October 2024.

• Essilor’s investment underscores Nikon’s undervalued potential, spotlighting its advanced optical technologies as strategic growth drivers in emerging high-tech sectors like AR.
• Nikon’s established expertise in precision optics is highly adaptable for AR applications, positioning the company to capitalize on rising demand for wearable and immersive technology.
• Increased collaboration with EssilorLuxottica may enhance Nikon’s R&D capabilities, promising new innovations and potential revenue streams, which could strengthen Nikon’s profitability and share value long-term.

• Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement, and testing instruments. It is seeking to raise up to US$737 million.
• We previously discussed the IPO in Rigaku Holdings (268A JP) IPO: The Bull Case and Rigaku Holdings (268A JP) IPO: The Bear Case.
• In this note, we discuss valuation. Our analysis suggests that Rigaku is attractively valued at the IPO price compared to peer multiples.

• In our last Nikkei 225 insight we predicted that the Nikkei 225 INDEX was overbought and about to pullback and that is exactly what happened the following week.
• We also reiterated our view about the index’s overall trend, not looking good, and the fact that our seasonal quantitative model point to a coin flip scenario (up/down) for October.
• This week the index gapped up and the current SHORT pattern model is showing a good chance to rally from here. Let’s check how high it can go.

• Nikkei 225 (NKY INDEX) volatility is trading at historically high levels, and the skew is steep.
• National, regional and global catalysts provide the potential for further near-term market turbulence. Downside risk persists.
• The current vol environment lends itself to tactical option trades, such as put spreads or risk reversals.

• Medley (4480 JP) is a safe bet for hiding from the negative impact of strengthening yen. The company should benefit from digital healthcare push from the newly elected Prime Minister.
• Although Medley has reported mixed 2Q24 result, with robust topline and declining profitability, the long-term growth potential remains intact. The company guided for 43% YoY revenue growth in 2024.
• Continued shortage of human resource, including doctors and nurses at medical care facilities in Japan and underpenetrated market remain the main growth engines of the company.

• Tokyo Metro (9023 JP) operates 9 out of the 14 subway lines that provides essential public transportation services within the Greater Tokyo area. 
• Many are unaware of Tokyo Metro’s cost savings, and we believe it could reach ¥110bn OP, exceeding the ¥100bn OP that most currently expect.
• Even without factoring in the cost savings, the indicative IPO price appears reasonably cheap, as it’s priced near the lower end of peer multiples.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, the roaring China/HK market led to some refilings, in what is likely to be the start of a tsunami of refilings, if the market momentum sustains. 
• On the placements front, given the China/HK holidays there weren’t any deals. We instead looked at Bharti Hexacom upcoming lockup expiry.

• Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
• In our earlier notes, we looked at the firm’s past performance and peers. In this note, we discuss our thoughts on valuation.

• The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I see 2 IN and 2 OUT for the Mar25 Nikkei 225 Rebal.
• There is also a capping event for Fast Retailing which on mild outperformance could become a double-capping event. 
• There is a bit of a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. The Committee will regret not adding PPIH last time.

• In August, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
• Everyone had expected a delay, but the stock fell. Then tech/AI fell out of bed, Ibiden crashed, China export restrictions noise/pushback caused further upset. But Ibiden and tech are rebounding.
• At 9% it was a raging buy;post-dip at 7% it was good. Now it’s 6+%. Still wide, still interesting, still stable but year-end path dependency… So I still like Ibiden.

• I tally 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals discussed this week: T Gaia (3738 JP)‘s and Shinsegae E&C (034300 KS) Tender Offers, and MPHB (MPHB MK)‘s SCR. Plus ASMPT (522 HK) in the crosshairs. Again.
• Key updates took place on: Sigma Healthcare (SIG AU), Descente Ltd (8114 JP), Shin Kong Financial Holding (2888 TT), Pacific Smiles (PSQ AU), and Greatview Aseptic Packaging (468 HK).

• 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: Tokyo Metro (9023 JP), Rigaku Holdings (268A JP), K Bank (279570 KS) and China Resources Beverage (CRB HK) IPOs.
• Event-Driven developments: ASM Pacific Technology (522 HK), Greatview Aseptic Packaging (468 HK), Samson Holding (531 HK), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

• TSE’s classification translates into three groups: companies which can independently increase capital profitability, companies which haven’t yet fully implemented plans, and companies which haven’t yet responded to “TSE’s request.”
• Mock engagements by TSE, which doesn’t have voting rights, will be focused on whether they actually make the company think about management strategies and implement them, thereby increasing corporate value.
• To help companies effectively implement “TSE’s request,” an idea would be to offer time-limited discount on listing fee paid to TSE by companies that have significantly increased their market capitalization.

• Nippon Paint Holdings (4612 JP) is a branded decorative paint player.  China made up nearly 40% of the operating profit of the company. 
• Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.
• Shiseido Company (4911 JP) is a Japanese beauty company that relies heavily on China.

• Major indexes in the three largest global equity markets (U.S., Europe, Japan) all remain below critical resistances of 5783 on SPX, 5000-5120 on EURO STOXX 50, and 2740-2820 on TOPIX
• Additionally, broad global MSCI indexes (local currency) including the ACWI, ACWI ex-U.S., and EAFE all remain at/below resistance from their YTD highs; reduce exposure or shift to defensives.
• In late-July we discussed expectations for a 1-to 4-month pullback/consolidation period on MSCI ACWI. We believe it seems likely to last closer to four months, and potentially 4- to 6-months

• Sales, profits and the share price are bottoming out and good 1Q results make FY Mar-25 guidance look conservative.
• Demand for advanced packaging should drive recovery, with the operating margin regaining its previous peak in three or four years.
• Management’s long-term guidance implies a decline in the projected P/E ratio from 26x to 10X by FY Mar-28, but even 15x would make the shares an attractive investment.

• Revenue for 1H FY02/25 was JPY26.9bn, a 13.0% YoY increase, with record highs in monthly and half-year periods.
• Operating profit for 1H FY02/25 reached JPY2.8bn, up 15.7% YoY, despite rising ingredient and personnel costs.
• The company plans six new store openings in Q3, focusing on northern Kanto expansion and recruitment enhancement.

• The drugstore space in Japan is super-interesting. The stories, the mergers, the activists. And of course, the defence against activists.
• In Feb-2024, Aeon did a deal with an activist to cause a future deal between Tsuruha and Welcia. Aeon also owns a stake in Kusuri no Aoki Holdings (3549 JP). 
• The Aoki brothers (CEO and VP) exercised warrants in August and re-arranged their holdings. Now the family owns 34.7%. Today, after Q1 earnings, the company announced a 5+% buyback.

• Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
• In Rigaku Holdings (268A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on weakening forward growth indicators, China revenue risk, rising cash conversion cycles, mid-tier FCF margin and large post-IPO share overhang. 

• Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
• In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.

• Onward’s FY02/25 forecast: sales JPY210.0bn (+10.7% YoY), operating profit JPY12.5bn (+11.0% YoY), net income JPY8.3bn (+24.8% YoY).
• Q2 FY02/25 sales JPY43.7bn (+8.0% YoY), operating profit JPY181mn, first Q2 profit in 17 years.
• Onward made Wego Co., Ltd. a consolidated subsidiary in Q3 FY02/25, revising full-year sales forecast upward.

• The first problem is that companies desperately match numbers, and original goal of ensuring board diversity has been lost; the second is the increase in the number of board memberships.
• The low ratio of women in managerial positions has forced companies to rely on outside talent for female board members, which has further increased matching numbers.
• There are problems both for the company that knowingly hires board members to serve concurrently in multiple companies and for the outside board members who knowingly accept such positions.

• Revenue decreased by 15.6% YoY to JPY8.4bn, primarily due to a drop in adult diaper machinery sales.
• Gross profit margin fell to 16.6%, leading to an operating loss of JPY179mn from a previous profit.
• Net loss attributable to parent shareholders was JPY705mn, affected by tax-effect accounting and stock holding downsizing.

• The Japanese eyewear company Intermestic (262A JP) has set the terms for its Tokyo IPO and plans to raise US$121m through the IPO.
• Our analysis shows that the company’s IPO is valued attractively compared to JINS Inc (3046 JP) , who offers eyewear at a similar price range to Intermestic.
• Japanese eyewear makers who have aggressively expanded into overseas markets seems to be suffering from falling sales and margins, particularly in China due to economic slowdown.

• Fast Retailing, through its flagship Uniqlo, is redefining retail by focusing on high-quality, functional apparel, surpassing global peers in operating profit margins.
• The company’s “scrap & build” strategy revitalizes underperforming stores in China, while expanding internationally, with a strong growth trajectory across North America and Europe.
• With a revised fair value of 52,500 yen, we forecast significant sales growth, driven by favorable seasonal trends, global expansion and recovering consumer sentiment in China.

• Of the companies that have been removed from the list of companies subject to transitional measures, only about half have been able to meet the criteria for maintaining their listing.
• It’s not easy for companies applying transitional measures to comply with the criteria for maintaining listing, so it’s realistic to move to a market with looser criteria for maintaining listing.
• Besides problems with listing screening process, many managers consider IPO to be the goal and have little will to grow the company after listing, leading to slump in corporate value.