Japan

• The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
• I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
• This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

• Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
• In Kioxia (285A 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 unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: WealthNavi (7342 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), Get Nice Financial Group Ltd (1469 HK), Arcadium Lithium (LTM AU), Canvest.
• Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Elematec Corp (2715 JP), I-PEX (6640 JP). 

• TSE-Listed companies are asked to file “Management Conscious of Capital Cost/Stock Price” awareness reports/policies. Many have. Some are still working on it. And policies change, and CGR reports are updated.
• 344 new CGRs were filed since 31 October. Our tools show every report, links to every document, and now a new diff file tool. Input a name, see the changes.
• The TSE Council for the Followup to Market Restructuring met a month ago. They want more progress and more fairness in fair takeovers. Worth reading the docs (here).

• For the month of November 2024, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
• The average premium for the new transactions announced (or first discussed) in November was ~44%. The average premium YTD is ~43%.
• This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

• Since there’s little confidence that merely disclosed share buybacks and medium-term management plans will increase corporate value in future, it’s natural that institutional investors’ evaluation of these plans is low.
• For companies that develop budgets and plans each January, the key is to incorporate into their budgets the use of cash that will ensure future growth in corporate value.
• For companies that lack the time to translate “mid-term management plan” into strategy to increase corporate value within two months, including “going private is an option” is an effective disclosure.

• 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 IPOs front, listing in the past week didn’t do much, while a number of comapnies are still looking to beat the year end deadline.
• On the placements front, there were a number of secondary selldowns in Japan.

• Revenue for 1H FY03/25 was JPY311.7bn (+2.0% YoY), with operating profit at JPY11.8bn (+5.1% YoY).
• Dairy Products segment revenue was JPY128.5bn (+1.5% YoY), operating profit decreased to JPY4.5bn (-11.7% YoY).
• Beverages and Desserts segment revenue was JPY136.7bn (+3.5% YoY), operating profit increased to JPY4.9bn (+33.9% YoY).

• In response to a Nikkei article, WealthNavi (7342 JP) disclosed Mitsubishi UFJ Financial (MUFG) (8306 JP)’s tender offer at JPY1,950 per share, an 84.3% premium to the undisturbed price.
• The high premium reflects WealthNavi’s steep 46% YTD share price decline, i.e., the timing is opportunistic. The offer is below the Board’s requested price.
• While the irrevocable has a competing offer clause, a competing proposal is unlikely due to MUFG’s stake. However, a bump is possible if activist(s) take around a 15% stake. 

• MUFG (8306) bought 15.5% of WealthNavi (7342 JP) in February at ¥1,718/share – zero premium. The shares fell. Now they are bidding for the rest 13.5% higher.
• WealthNavi forecasts fantastic growth. Dec29 OP is specifically estimated at ¥13.822bn. Everyone agrees there are synergies, but they’re not “valued” because they “cannot be specifically estimated at this moment.” 
• I believe investors should start demanding Synergy CVRs of acquirors when synergies are not included in the fair value calculations. 

• Remain BULLISH Keisei Electric Railway Co (9009 JP)  with low conviction. This is buying on narrative rather than fundamentals but there is no need to not get involved.
• Vitasoy Intl Holdings (345 HK)‘s share price run up is excessive as Philip Ng andYeo Hiap Seng (YHS SP) over-extend their hand.
• Nec Networks (1973 JP) has yet to trade below terms. The premium is small, perhaps reflecting the risk NEC will lower the minimum threshold. But there is still a fight here.

• I tally 48 – 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 this week: NBIOs for SG Fleet (SGF AU) and AVJennings Ltd (AVJ AU); and Shandong Hi-Speed New Energy  (1250 HK)‘s MGO. Fosun Tourism (1992 HK) also suspended.
• Key updates/news took place on: Hotel Property Investments (HPI AU), Capitol Health (CAJ AU), Shanghai Henlius Biotech (2696 HK), Seven & I Holdings (3382 JP) and SAMTY HOLDINGS (187A JP).

• 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: Kioxia Holdings (285A JP) and FineToday Holdings Co Ltd (289A JP) IPOs, Hulic Co Ltd (3003 JP) and Sanrio (8136 JP) placements.
• Event-Driven developments: Seven & I Holdings (3382 JP), WealthNavi (7342 JP), ESR Group (1821 HK), Shandong Hi-Speed New Energy G (1250 HK), Vitasoy Intl Holdings (345 HK).       

• While female directors and nominating/compensation committee, for which TSE has specified specific goals, have made progress, foreign directors, for whom no specific goals have been set, have lagged behind.
• Even now, with over 40% of companies with P/Bs below 1x and ROE not exceeding the cost of capital, not many companies moved to value-creating management with functioning corporate governance.
• Nominating committee should make its selection, including whether to replace the incumbent director with another candidate. If it fails to do so, it’s not fulfilling its responsibilities as nominating committee.

• Early this morning, a Nikkei article said Mitsubishi UFJ Financial (MUFG) (8306 JP) would buy out the remaining 85% of WealthNavi (7342 JP). Expected to be completed by March.
• MUFJ Bank and WealthNavi signed a Business Alliance in February. WealthNavi issued 9.11mm new shares to MUFJ at ¥1,718/share. That was a discount to market and shares are down ~40%.
• WealthNavi’s AUM is growing (¥1.3trln at end-Oct) and the goal is to launch a money advisory platform by FY2026. Now they need to decide on the premium.

• Today after the close Dai Nippon Printing (7912 JP) announced 16 corporate and financial entities would be selling cross-held shares in a ~US$240mm equity offering.
• The stock has gotten shellacked (relatively speaking given structurally low volatility) since three weeks ago. There’s a reason for that. But it makes it cheaper. 
• This offering is only 10% of the cross-held total. There’s more to come. But there is more outbound cross-holding to sell too. There’s value here.

• A group of shareholders are looking to raise US$214m from selling their respective stakes in Dai Nippon Printing (7912 JP).
• While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted capped index composed of 400 constituents.
• The annual index review takes place in August every year. We look at the latest rankings of potential ADDs/DELs every month.
• Below is a look at the rankings of potential ADDs/DELs for the JPX-Nikkei 400 August 2025 rebalance based on trading data as of end-November 2024.

• Revenue increased by 8.3% YoY, with the EC business rising 7.0% and the Financial business 10.0%.
• Operating profit rose 89.9% YoY, driven by reduced advertising expenses and a decline in SG&A expenses.
• Financial business segment profit increased 48.9% YoY, with external payments handled growing 13.0% YoY to JPY20.1bn.

• Some speed bumps at the Device segment – Continuing positive demand from the smartphone sector and sustained growth at the Eco-Solution segment were overshadowed by a loss in earnings momentum at the Devices segment in Q1-2 FY3/25.
• The recovery in demand from the industrial sector remains delayed, together with a sales mix lowering gross margins and FX impact contributing to overall OP falling 3.8% YoY, despite 11.3% sales growth driven primarily by acquisitive growth.
• The current outlook for H2 FY3/25 is assisted by the weak Japanese yen, acquisitive growth, and we expect to see a continuation of the positive demand themes from smartphone and alternative energy.

• Positive trajectory – Q2FY3/25 results continued to show signs of recovery in margins (2.4% Q2 FY3/24, 3.7% Q2 FY3/25), reflecting price hikes, volume expansion, and cost reduction.
• By segment, Films was the largest contributor to OP growth (+686.5% YoY), followed by Environmental and Functional Materials (+102.1%).
• Strong OP growth attributed to moderating cost pressures, and improving demand, which has led to unit price hikes without sacrificing volume. 

• For H-1337, DWTI completed dosing of subjects in the Phase IIb clinical trial in August, and top-line data was announced on November 18.
• All three doses of H- 1337 achieved clinically and statistically significant decreases of up to 30% in intraocular pressure (IOP) which was in the same range as the positive control, existing beta-blocker timolol (p <0.001), and DWTI expects H-1337 will proceed to Phase 3 study based on these results (see P10 for details).
• For DWR-2206, DWTI submitted a notification of clinical trial plan for domestic Phase II clinical trials to the PMDA in March, and the transplant for the first subject was performed in July.

• An article in Japanese weekly magazine Bunshun this morning sent shares inSBI Sumishin Net Bank (7163 JP) limit up +17% with a headline that NTT Docomo was interested to buy.
• Without access to the article, I can’t go deep, but the base concept is that NTT Docomo is “worried” about KDDI (which has a bank, as does Softbank Corp)
• It is not clear how serious it is, SBI Sumishin is super-expensive, and buying a bank isn’t the same as buying a company. Hmmm…

• 7&I traded at less than 5x reported EV/EBITDA consistently for roughly 4 years straight, and no one seemed to care or notice.
• Now that it trades close to 9x, there is an overflow of eager financiers and a mile-long line of analysts who will tell you that it is still undervalued.
• This is the stock market equivalent of duct tape and a banana.

• Kioxia Holdings (6600 JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO.
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• We have looked at the company’s past performance in our earlier notes. In this note we undertake a peer comparison.

• Kioxia Holdings (285A JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO.
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• We have looked at the company’s past performance in our earlier notes. In this note we talk about valuations.

• Kioxia Holdings (6600 JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.   
• Bain Capital, Toshiba Corp (6502 JP) and Hoya Corp (7741 JP) currently own 56.23%, 40.64% and 3.13% of the voting rights, respectively. 
• The bull case rests on an attractive market opportunity, a return to revenue growth, margins close to all-time highs, a favourable cash conversion cycle, and modest leverage. 

• Kioxia Holdings (285A JP) ’s long waited IPO is now live and plans to raise US$700m at a much lower valuation of US$4.8bn vs price paid by Bain 6-years ago.
• The company’s IPO is very timely as earnings have almost approached the cycle peak, but margins have continued to trail peers who have a more balanced product portfolio.
• Kioxia’s valuation has declined while market sentiment for memory names has also been that great. We will discuss our valuation in a follow-up insight. 

• FY24 1H results and update on the ongoing long-term plan

• FY24上期決算と長期計画のアップデート

• Market expectations that the BoJ’s monetary policy meeting will raise benchmark interest rates in December are reflected in the rising JGB yields, and in the domestic lending rate trends
• We reiterate our core recommendations of Resona and Mizuho for their leverage to higher interest rates, their low LDRs and their high share of strategic holdings relative to market capitalisation
• We reduce Chiba to neutral from buy, keep our buy on Concordia; we add Shizuoka for its gearing to higher interest rates and very high share of strategic shareholdings

• Olympus Corp (7733 JP) shares retreated 17% over the last one month, dragged by resignation of the CEO and weak H1FY25 result. No definite time for CEO succession is announced.
• Favorable Fx inflated H1FY25 result. On a Fx neutral basis, revenue growth is only 3% YoY, while adjusted operating profit growth is just 4% YoY.
• Olympus has guided for 9% YoY revenue growth to ¥1,009B in FY25, indicating H2FY25 revenue of ¥535B (-9% YoY). ESD revenue guidance seems to be aggressive amid current macro backdrop.

• The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
• The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled. 
• This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.

• Today, Hulic Co Ltd (3003 JP) announced a large secondary offering where about a quarter of the crossholdings will sell down holdings. Some exit entirely. Some partially. 
• After this selldown, there is a fair bit more to go later, but more of that will be corporate. It’s a BIG offering: 55d of ADV and 55% of MRWF. 
• It is “only” about $800mm and retail gets 80% of it. The high div yield will be a selling point but there is a lot of debt.

• NHK reports that Seven & I Holdings (3382 JP)‘s first bidding round for a YORK Holdings stake ends on 28 November. The sale provides a third-party valuation benchmark for the asset. 
• It is an incremental positive for the founding family MBO as it supports the post-privatisation strategy and assists in securing bank financing.
• This is an incremental negative for Alimentation Couche-Tard (ATD CN) as it shows that the Board believes the restructuring plan will increase shareholder corporate value.  

• CVC Capital is aiming to raise over US$500m, via selling some of its stake in FineToday Holdings Co Ltd (289A JP)in Japan.
• FineToday (FT) is a beauty and personal care company in Asia offering a range of products, including hair care, skin care and body care products.
• In our previous note, we looked at the company’s past performance. In this note, we will undertake a peer comparison.

• Hulic Co Ltd (3003 JP) has announced a secondary offering of up to 85.4 million shares (98.2 million including overallotment), worth around US$800 million (US$920 million including overallotment).
• Unlike the 2021 offer, this is a pure secondary offering. It is smaller in terms of outstanding shares and 1-year ADV. The shares are hovering around all-time highs.
• Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 December (likely 10 December).

• A group of domestic financial institutions are looking to raise US$775m from trimming their stakes in Hulic Co Ltd (3003 JP).
• The deal will be a large one to digest at 48 days of the stock’s three month ADV, representing 11% of its shares outstanding.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Overnight, Hulic Co Ltd (3003 JP) announced a placement of 85.37m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 12.8m shares.
• There will be limited passive buying in the short-term and the number of shares offered is a very large percentage of real float of the stock.
• A price drop of 20% or more puts Hulic Co Ltd (3003 JP) at risk of deletion from a global index and could lead to a further price drop.

• Kioxia has been under-investing in Capex (27% of revenue versus competitors 37%) and R&D (5% versus 11%) because Free Cash Flow is low, too low to pay back debt. 
• The Memory cycle peaked in June-24 and NAND prices have been declining since. Memory stocks (Micron, Samsung, SK Hynix) peaked in June. 
• The valuations multiples that reconcile with a US$4.9bn market value are half or one-third that of competitors. A huge discount is applied, reflecting the financial and technological weakness of Kioxia. 

• Gravitation towards businesses with traditional competitive advantages and large reinvestment runways for future outperformance
• Genda’s growth primarily through mergers and acquisitions in the Japanese entertainment industry, taking advantage of the aging population of business owners
• CFO Taiju Watanabe’s background in Goldman Japan Investment Banking and transition to Jinda, highlighting the company’s potential for growth and profitability

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• On Monday, I had the great pleasure to speak to Kaonavi’s (4435 JP – US$131 million) CFO, Kimitaka Hashimoto.
• He provided color on Kaonavi’s second-quarter earnings result, which were released on 13 November and led to a negative reaction from the market.
• In short, Kaonavi is a Japanese developer of talent management software. It helps companies manage their employees by solving staffing problems, designing their organizational structure, performance reviews, surveys, training, internal recruitment, etc.

• 13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661). 
• Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh. 
• Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.

• Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin. 
• The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
• I think one could give this a pass, and even sell it if it opens down small. 

• In October 2023 and then in early 2024, activist Palliser Capital demanded that Keisei Electric Railway Co (9009 JP) sell down its stake in Oriental Land (4661 JP) to sub-15%.
• Keisei in March sold 1% of OLC but in doing so, rejected the concept of removing equity affiliate status. They could go to a level just >15%, or just >20%. 
• Today, OLC announced a ToSTNeT-3 buyback of 18mm shares – the total for the 2yrs to Mar-26 announced (p19) in April. Keisei will sell and will stay above 20%. 

• Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
• There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
• However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

• Sanrio (8136 JP) has announced a secondary offering of up to 25.9  million shares (29.8 million including overallotment), worth around US$840 million (US$970 million including overallotment). 
• Sanrio’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
• Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 13 December (likely 10 December).

• A group of domestic financial institutions and the firm’s executives are looking to raise US$840m from trimming their stakes in Sanrio (8136 JP).
• While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Kioxia Holdings (6600 JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO.
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• In this note, we talk about the not-so-positive aspects of the deal.

• Tier-2 commodity Memory is a lousy business, which requires high Capex and R&D, generates very low Free Cash Flows. DRAM is more sustainable than NAND as peak margins are higher. 
• Kioxia only makes NAND, has a high market share (16%) but is a Tier-2 supplier with a roadmap lagging SK Hynix by ~2 years, and a high exposure to Consumer. 
• The Memory cycle has recovered, probably close to peak earnings. That’s why stocks have been declining (Micron, Hynix).  Part 2 will cover financials (there’s a bad surprise) and valuations. 

• FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
• We previously discussed the IPO in FineToday Holdings (289A JP) IPO: The Bull Case and FineToday Holdings (289A JP) IPO: The Bear Case.
• Our valuation analysis suggests that the IPO reference price of JPY2,150 per share is unattractive. Therefore, we would pass on the IPO.

• The Nikkei 225‘s trend is uncertain at the moment: the new N225 WEEKLY QUANTCHART presented here (freely accessible 24/7 clicking here) shows us the current MRM models’ support and resistance.
• In the last few months the index stalled, currently it is stuck in a range roughly between 37650 and 40250, and it has closed down for 2 consecutive weeks (CC=-2).
• At the moment we expect the index to fall maybe another week (closing this week down) and then a LONG reversal the following week.

• On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
• The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering. 
• That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered. 

• Keisei Electric Railway Co (9009 JP) rose 14% after reports that a fund linked to activist investor Murakami bought a stake, while Oriental Land also gained 2.9% in a volatile market.
• Down 50% since February 2024, Keisei Electric seems to have limited downside risks. We believe its valuation could increase if Murakami’s stake leads to activism.
• The long Keisei Electric, short Oriental Land (4661 JP) trade could work well too, especially if Murakami’s activism and the risks to Oriental Land’s guidance materialize.

• Since the US$3.5 billion primary/secondary offering announcement, Kansai Electric Power (9503 JP)’s shares have been down 20.6% from the undisturbed price of JPY2,397 per share (13 November).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, KEPCO’s shares have followed the pattern of previous large placements.
• The offering will likely be priced on 26 November. The average large Japanese placement tends to generate positive returns.

• Keisei Electric Railway Co (9009 JP) gained 13.8% yesterday on news that activist investor Murakami-san had acquired a stake.
• Preceding my comments on Keisei Electric are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Kioxia Holdings (6600 JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• In this note, we talk about the positive aspects of the deal.

• Post-Covid, Aeon Co Ltd (8267 JP) began to deliver real profit growth but 1H2024 showed it cannot rest on its laurels. 
• While it’ll be happy not to be worrying about a takeover bid like its rival, Seven & I, it still doesn’t have a profit machine similar to Seven Eleven Japan.
• Welcia helps and so does expanding e-commerce but there is still plenty of room for cutting overhead.

• The limit is to serve on the boards of two companies concurrently in order to preview the agenda for the monthly board meetings in advance.
• There may be challenges to the effectiveness of the nominating committee of a company that nominates a candidate to serve on the board of directors of three or more companies.
• With the growing demand for female outside board members, it’s hoped that active investment managers will pay attention to the issue of concurrent board membership and make a clear statement.

• On November 7, 2024, Migalo Holdings Inc. (hereafter, the Company) announced its Q2 FY2025/3 earnings results.
• In H1, sales increased 23.3% YoY to JPY 30,001 mn, and operating profit fell 15.6% YoY to JPY 1,935 mn.
• Q1 saw a decline in sales and profit due to the impact from last year’s concentration of new property deliveries.

• Sales and profit fall – Q1-2FY3/25 sales and OP declined as the difficult annual comps for new games and consoles continued into Q2.
• This ate into strong demand for the company’s reuse (second- hand) clothes and used smartphones.
• Q1-2 sales fell 7.4% to ¥199.7bn while OP declined at a faster 25.9% pace to ¥5.4bn. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Get Nice Financial Group Ltd (1469 HK), Shinko Electric Industries (6967 JP), Arcadium Lithium (LTM AU). 
• Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Nec Networks & System Integr (1973 JP), Fuji Soft Inc (9749 JP), Xingda International (1899 HK), Elematec Corp (2715 JP). 

• A group of investors are looking to raise US$264m from trimming a portion of their stakes in Meiji Holdings (2269 JP).
• While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
• In FineToday Holdings (289A 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 the weak 3Q24 revenue performance, mid-tier revenue growth, leveraged balance sheet, share overhang and pre-IPO dividend.

• 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 IPOs front, S.F. Holding (6936 HK) and Kioxia Holdings (6600 JP) launched their much awaited IPO, while we had a new launche in Australia in as well.
• On the placements front, Keppel DC REIT (KDCREIT SP) undertook a large placement

• Takasago Thermal Engineering (1969 JP) is one of the top 10 players in Japan for energy efficiency players for industrial clients, especially semiconductors. 
• Japan Metropolitan Govt bought stake in Rapidus, signifying a potential long-term business potential for Takasago Thermal Engineering. 
• Valuation is no longer dirt cheap but still at a favorable level given its potential enlarged revenue growth. 

• Meiji Holdings (2269 JP) on Friday announced 9 different banks would sell 4.7% of float in an equity offering to price in the first few days of December 2024.
• The shares closed Friday within 1.5% of a 52wk low. The shares are less than 9% off a 9-year low. The offering is about US$300mm and 15 days of ADV.
• Given the stock is under-levered, and structurally a low volatility name, a large move should encourage buying.

• Kioxia plans to complete its IPO on 18 December, valuing Kioxia at 750 billion yen ($4.8 billion), down nearly 50% from the initial market value estimates about 2-3 months ago. 
• Kioxia had revenue of 909.4 billion Yen (up 84.6% YoY) and EBITDA of 449.6 billion Yen in 1H FY24, driven by the recovering demand for data center and enterprise SSDs.
• As of 2Q 2024, Samsung Electronics was the largest player in the global NAND Flash market with a 36.9% market, followed by SK Group (22.1%), and Kioxia (13.8%).

• At equal price to ACT, Ito-san wins because of certainty/immediacy, but provided his price is above the bottom of the range and adequately compensates 7&i for “additional actionable avenues.”
• The Amcor Limited (AMC AU)/Berry Global Group (BERY US) merger looks clean. However, Berry’s % of earnings (revs, EBITDA, and profit), are higher than the % under the share split
• This Temasek-led development will have a marginal impact on Tuya Inc (TUYA US). Creating supply and demand is hard. And Temasek-held/backed vehicles on the SGX are already abundant.

• Kioxia Holdings (285A JP) is scheduled to be listed on 18 December 2024, at the prime market of TSE at an expected valuation of ~$4.9bn.
• The security’s low free float is the main cause of Fast-Entry rejection by both global indices and quarterly exclusion from the one global index.
• Quarterly inclusion to the other global index is forecasted for June 2025 following the 3-month minimum trading requirement. 

• Even if the initial AUM is small, the impact of launch of a publicly offered mutual fund for retail investors by a foreign activist investor is expected to be significant.
• If Dalton gains the support of individual investors through publicly offered investment trust, it would give more legitimacy to the management improvement plans that Dalton is pressing Japanese company for.
• Increased attention to the activist investors is expected to lead to a certain number of individual shareholders voting in favor of shareholder proposals, as well as  overseas investor engagement.

• FineToday Holdings Co Ltd (289A JP) is scheduled to be listed on 17 December 2024, at the prime market of TSE at an expected valuation of ~$1.5bn.
• Addition to the small-cap segment of both global indices is forecasted to take place at the May and June 2025 quarterly reviews.
• Full exercise of the greenshoe can increase free float from 35% to 45% hence the security’s passive fund demand upon inclusion.