Japan

By Shifara Samsudeen, ACMA, CGMA

In today’s briefing:

Recruit: Share Price Continues to Fall with Labor Markets Further Slow Down
The Rift Between Managers and Shareholders of Standard Market-Listed Companies Is Likely to Deepen

Recruit: Share Price Continues to Fall with Labor Markets Further Slow Down

Recruit’s share price is down more than 10% over the last 30-days despite there being a significant improvement in job openings in the US for the month of August.
The web traffic on both Glassdoor and Indeed also have declined in September compared to August where there was a MoM improvement in August 2023.
Though Recruit has guided for a decline in earnings, we think there is further downside to the company’s guidance.

The Rift Between Managers and Shareholders of Standard Market-Listed Companies Is Likely to Deepen

Many of the companies that didn’t meet the listing criteria for the prime market still failed to gain market recognition over an 18-month period and moved to the standard market.
It is believed that TSE expects more companies to gradually drop out of Prime Market by raising the hurdle for effort targets that aren’t explicitly stated in the listing criteria.
As quality differences gradually emerge between the Prime and Standard markets, the rift between management awareness and shareholders of Standard market-listed companies is likely to deepen in the future.

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Oct 19

Daily Brief Japan: Shinko Electric Industries, Descente Ltd, Kenedix Office Investment Co, Sankei Real Estate, Money Forward , Softbank Group and more

In today’s briefing:

Shinko Electric (6967) Update – MitCorp In The Mix?
ANTA Sports Investor Day Targets DESCENTE (8114) For Growth
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan
Money Forward (3994) | A Deep Dive into the Corporate Business
SoftBank Group (9984 JP): More Downside Risk to the NAV than Upside Potential

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

ANTA Sports Investor Day Targets DESCENTE (8114) For Growth

Yesterday, Anta Sports Products (2020 HK) held its Investor Day in Beijing. They talked about Descente Ltd (8114 JP) and their plans.
The presentation made by the Descente China Chairman talked about the evolution of performance and the target for 2026, suggesting higher profit now and growth going forward than market expectations.
None of this changes my outlook for why Itochu Corp (8001 JP) is buying Descente shares in the market. And the stock is going up.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

By Arun George

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan

On 16 October, the Asset Management Co of Sankei Real Estate (2972 JP) announced earnings, the execution of a Revival Plan, and said the sponsor, Sankei Building would buy more.
They’ll buy for up to 220 days starting sometime before Feb-end. Presumably after the Revival Plan transactions have been executed.
The REIT is cheap to peers. It is small to peers. It needs some reviving. But when a sponsor promises to buy, it pays to take a look.

Money Forward (3994) | A Deep Dive into the Corporate Business

By Mark Chadwick

Money Forward’s Corporate SaaS business is thriving, with +44% year-over-year growth in ARR, a 139,000-strong customer base, and a healthy CAC-to-LTV ratio of 3.7x.
Despite strong fundamentals, the stock’s 20% decline is attributed to market fixation on quarterly earnings and concerns about rising interest rates.
The company’s untapped potential lies in the mid-market segment, where cross-selling opportunities across 18 paid products could significantly boost ARPA, tapping into a TAM estimated at $15 billion.

SoftBank Group (9984 JP): More Downside Risk to the NAV than Upside Potential

By Victor Galliano

There is downside risk to SoftBank’s NAV, due to valuations relating to Arm and the Vision Funds including LatAm; on aggregate, these holdings account for 70% of group equity value
We believe that Arm’s super-premium valuation is unsustainable; there is lack of transparency on the valuations relating to the unlisted Vision Fund holdings, especially in SVF2
We estimate that SoftBank shares trade at a 44% NAV discount, tighter than the average at the end of the last eight quarters; add to this Arm’s current over valuation

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Oct 18

Daily Brief Japan: Ryoyo Electro, TSE Tokyo Price Index TOPIX, Intloop and more

In today’s briefing:

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
Parent-Subsidiary Listing Strategy Expected to Be Even More Attractive
Initiating Coverage – Intloop (9556)

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge

Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

Parent-Subsidiary Listing Strategy Expected to Be Even More Attractive

In TOB case from a parent company, managers of acquired company finally realized that there’s litigation risk from shareholders if there’s flaw in their fiduciary duty to maximize shareholder interests.
In the past, acquisitions with negative goodwill were conducted, but a TOB at a price below book value would require plausible rationales. TSE’s request to raise P/B may have affected.
In addition to the increasing dissolution of parent-subsidiary listings, TOBs (or sales) of equity-method affiliates are expected to increase, as in the case of Daiken Kogyo.

Initiating Coverage – Intloop (9556)

By Astris Advisory Japan

Business model transforming – INTLOOP is an upstream consulting services firm utilizing both freelance and in-house consultants primarily as a competitive ‘hybrid’ subcontractor offering
It has successfully sustained high double-digit sales growth and embarked on a strategic transformation to become a full-service consultancy.
This is being driven by bolt-on M&A starting with the 58.3% acquisition of DICS Holdings in September 2023 and accelerated recruitment to grow its in-house consultant resources.

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Oct 17

Daily Brief Japan: DISCO Corp, Amvis Holdings Inc, Lawson Inc and more

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
Amvis Holdings Inc (7071 JP): Strong Performance in 9MFY23; Business Expansion Continues
Lawson: Seijo Ishii Producing at Home to Beat Inflation and Weak Yen

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

Amvis Holdings Inc (7071 JP): Strong Performance in 9MFY23; Business Expansion Continues

By Tina Banerjee

Amvis Holdings Inc (7071 JP) reported 40% YoY increase in revenue to ¥23B in 9MFY23, driven by 27% YoY increase in bed capacity and 86.6% utilization rate at existing facilities.
Operating profit grew 40% YoY to ¥6.2 billion. However, operating margin declined 10 basis points to 26.9%, due to the impact of inflation and increase in wages for long-service employees.
Amvis announced plans to open 25 new facilities and expand 1 facility (1,308 beds) in FY24. The company plans to raise patient payments by about ¥4,000 per month in Oct’23.

Lawson: Seijo Ishii Producing at Home to Beat Inflation and Weak Yen

By Michael Causton

Seijo Ishii is Japan’s leading premium supermarket chain with some 200 stores and is being prepped for an IPO by its owner, Lawson.
After strong growth during Covid, sales have now flattened and the company’s large import business has suffered from higher costs due to the weak Yen and global crises.
To maintain its market position, it is reducing imports of packaged goods and increasing volumes of imported, high-end raw materials – and then manufacturing products itself.

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Oct 16

Daily Brief Japan: CyberAgent Inc, Tsi Holdings, Money Forward , Ushio Inc, Aeon Co Ltd, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Japan – Increase in Shorts on Some Interesting* Stocks
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
Ushio (6925 JP): Preparing for the Next Growth Cycle
Aeon Keeps Working After High Profit Growth
Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors

By Shifara Samsudeen, ACMA, CGMA

In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth

Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.

Ushio (6925 JP): Preparing for the Next Growth Cycle

By Scott Foster

Ushio is making substantial investments in it core light source technologies, sacrificing short term profit for long-term growth potential.
Geared to rising demand for EUV mask and IC package lithography, bio-medical equipment, and solid-state light sources. Digital cinema business rebounding from COVID.
Selling at 21x current EPS guidance, 12x management’s FY Mar-26 EPS target and 0.9x book value. Upside potential to book value while waiting for confirmation of forecast recovery.

Aeon Keeps Working After High Profit Growth

By Michael Causton

As outlined in previous reports, Aeon has been working hard to streamline its vast retail empire but also rethinking the fundamentals of retailing for each major format it operates.
The results are now coming through with a big increase in operating profits in 1H2023, up 23% on last year.
There is real momentum now, and the new online supermarket business is central to its ambitions to create the first true national FMCG business.

Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital

Cash usage and return targets should be presented to investors along with cost of capital, but few companies can successfully envision future design due to poor planning for growth investments.
Since there’s a significant positive correlation between ROE+DOE and TOPIX, the company should optimize its cash allocation by demonstrating enhanced shareholder returns until it can design a growth investment plan.
Ajinomoto, which provided cost of capital projections and ROIC targets by business segment, should be commended for its constant communication with investors seeking better disclosure in good times and bad.

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Oct 15

Daily Brief Japan: Japan Post Bank, Rakuten Group , Kokusai Electric and more

In today’s briefing:

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
ECM Weekly (15th Oct 2023) – Kokusai, J&T, Ecopro, Thai Credit, Lalatech, Barito, Rakuten, Zomato
Weekly Deals Digest (15 Oct) – Kokusai, EcoPro, Seoul Guarantee, J&T, Eoflow, NWS, Origin, Liontown

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

ECM Weekly (15th Oct 2023) – Kokusai, J&T, Ecopro, Thai Credit, Lalatech, Barito, Rakuten, Zomato

By Sumeet Singh

Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Kokusai Electric (6525 JP) managed to get strong support, even though we remain somewhat unconvinved.
In the placement space, we looked at the upcoming lockups for Rakuten Bank (5838 JP) and Zomato (ZOMATO IN), along with the Ingenia Communities (INA AU) placement.

Weekly Deals Digest (15 Oct) – Kokusai, EcoPro, Seoul Guarantee, J&T, Eoflow, NWS, Origin, Liontown

By Arun George

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 – Kokusai Electric (6525 JP), EcoPro Materials (ECO123 KS), Seoul Guarantee Insurance (031210 KS), Cainiao Smart Logistics (1437124D HK), J&T Global Express (1936374D CH) IPOs.
Event-Driven developments – Eoflow (294090 KS), Nws Holdings (659 HK), Origin Energy (ORG AU), Liontown Resources (LTR AU), Estia Health (EHE AU), Pact Group Holdings (PGH AU).

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Oct 14

Daily Brief Japan: Seven & I Holdings, Suruga Bank Ltd, LIFULL, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation
Suruga Bank – Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ
Quick Look – Lifull (2120 JP)
Whether or Not to Promote Diversity in the Company Depends on Management Leadership

Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP)‘s FQ2 OP exceeded consensus by ¥2.0bn (1.3%), but with FH2 revenue guidance lowered by ¥95bn, the overall outlook appears discouraging.
The company’s shares fell by 5%, underperforming Topix by 3.8%, indicating investor concern about US growth and departing from activist proposals despite a ¥2.0bn earnings outperformance.
If overseas investors who supported ValueAct’s proposals begin to exit, Seven & I could face substantial downside risks in the near term.

Suruga Bank – Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ

By Daniel Tabbush

The bank is seeing high growth in cash and deposits, with loans in decline, and the composition moving more toward government and corporate loans
ALM does not appear strong, and without any easy way to reduce operating costs, the bank is now seeing cost/income surge to 74%
Credit metrics on surface may appear fine, but the 47% QoQ rise in provision costs, suggests to us provisions were cut too much last year, and now there is normalization

Quick Look – Lifull (2120 JP)

By Sessa Investment Research

Company Profile: LIFULL runs the LIFULL Home’s real estate website.
Compared to its main rival, whose strategy is focused mainly on the quantity of listings, LIFULL’s aim is to achieve greater quality, as measured by the percentage of inquiries that lead to sales for professional real estate clients.
While others primarily charge a fixed fee for listings, LIFULL charges a combination of fixed fees and incentive fees based on the number of inquiries received for a listing.

Whether or Not to Promote Diversity in the Company Depends on Management Leadership

Given that embedding diversity within company is essential for the company’s growth and resilience, it’ll be up to management leadership to decide whether this should be promoted as management strategy.
Companies with more women in the workforce tend to have higher stock prices. It can be assumed that the company is hiring talented, skilled, and necessary personnel regardless of gender.
Analysis shows that companies with a higher percentage of female board members contribute more to value creation. Companies that promote board diversity are also keen on diversity throughout the company.

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Oct 13

Daily Brief Japan: Shinko Electric Industries, Fast Retailing, Shift Inc, Shimamura, Saizeriya, Suzuken Co Ltd and more

In today’s briefing:

Shinko Electric (6967) – Waiting for a Package
Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem
High Conviction Shift: Another Upbeat Quarter; Wipes Off Concerns Over an Earnings Slowdown
Low Cost Apparel Sales Keep Rising: Shimamura Aims for ¥800 Billion
Saizeriya (7581 JP): Japanese Company + Fast Casual Italian Food = China Growth Story?
Suzuken Co Ltd (9987 JP): Better-Than-Expected Q1FY24 Result; Full Year Guidance Reiterated

Shinko Electric (6967) – Waiting for a Package

Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
A “split price” takeover seems reasonable as a structure. I expect upside. Still.

Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem

By Shifara Samsudeen, ACMA, CGMA

Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell.

High Conviction Shift: Another Upbeat Quarter; Wipes Off Concerns Over an Earnings Slowdown

Shift Inc (3697 JP) reported 4Q and full-year FY08/2023 results today. 4Q revenue increased 38.2% YoY while OP more than doubled during the quarter. Both revenue and OP beat consensus estimates.
Full-Year revenues and OP increased 35.7% and 67.4% respectively beating consensus estimates by 1.2% and 67.4% respectively. Both revenue and OP were above the company’s own guidance.
Shift’s share price has dropped by about 17% since August as market became concerned over the growth prospects, however, share price has started to move up.

Low Cost Apparel Sales Keep Rising: Shimamura Aims for ¥800 Billion

By Michael Causton

Price consciousness remains high among most Japanese consumers at present, a boost to low-cost apparel retailers.
Shimamura, which has posted three straight years of growth But when price is the main driver, competition from the likes of Shein and Temu becomes a growing problem.
So even Shimamura is trying to add value through branding, collaborations and Shein-like supply chains and the outlook is promising, suggesting significant upward gains for the stock.

Saizeriya (7581 JP): Japanese Company + Fast Casual Italian Food = China Growth Story?

By Steve Zhou, CFA

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.
The Asia segment, which is primarily restaurants in China, nearly doubled operating profit in FY23 (year ending August) from pre-COVID FY19.
The company is trading at 27x FY24E PE, with more than 80% expected growth in operating profit in FY24.

Suzuken Co Ltd (9987 JP): Better-Than-Expected Q1FY24 Result; Full Year Guidance Reiterated

By Tina Banerjee

Suzuken Co Ltd (9987 JP) reported better-than-expected Q1FY24 result, due to an increase in specialty drug distribution contracts and a larger than expected contribution from products related to COVID-19.
In Q1FY24, revenue increased 4% to ¥573.6B, driven by 4% YoY growth in pharmaceutical distribution business, due to increased sales of new drugs such as specialty drugs and COVID-19 therapeutics.
The company guided for FY24 revenue of ¥2,231.9B, down 4% YoY. Operating profit is expected to decline 48% YoY to ¥17B. Net profit is guided at ¥13B, down 36% YoY.

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Oct 12

Daily Brief Japan: JMDC , Kokusai Electric , Ryohin Keikaku, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)
Kokusai Electric IPO: Lower Price Range Is Reasonable
Ryohin Keikaku: Expecting FY24 OP Guidance of ¥55.0bn
Board Diversity Also Confuses Ends with Means

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)

Results for the Omron Corp (6645 JP) Partial Tender Offer for JMDC (4483 JP) are out.
The Pro-Ration was 51.63%, at the lower end of my initial estimate of 50-58% range, and at the higher end of my revised range (42-56%).
The pro-ration, the nature of the shapes (technical term) tendered, and what that suggests for Noritsu Koki’s position suggests the back end could be more squeezy than not.

Kokusai Electric IPO: Lower Price Range Is Reasonable

By Arun George

Kokusai Electric (6525 JP) has trimmed its IPO price from JPY1,890 to JPY1,830-1,840 per share to raise up to US$727 million. The IPO price will be determined on 16 October.
We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Valuation Insights.
Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO’s attractiveness.

Ryohin Keikaku: Expecting FY24 OP Guidance of ¥55.0bn

By Oshadhi Kumarasiri

Ryohin Keikaku (7453 JP) will announce FQ4 results on October 13th; we expect earnings to beat consensus by ¥2-3bn, potentially boosting stock performance.
FY24 OP guidance at around ¥55bn could be a catalyst for significant upside potential in the short term.
The current share price of approximately ¥1,800 per share supports an annual OP of roughly ¥30bn, indicating nearly 100% upside potential with FY24 guidance.

Board Diversity Also Confuses Ends with Means

With few women in managerial positions, the reality is that for the time being female directors are forced to appoint candidates from outside the company.
Two companies is the limit for a monthly board meeting with agenda preliminarily reviewed; investors should oppose proposals to elect candidates who hold board positions at three or more companies.
The main idea is to promote board diversity for making strategic decisions based on diverse values, but it has become a numbers matching exercise to achieve % of female board members.

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Oct 11

Daily Brief Japan: Kokusai Electric , Japan Post Bank, Kenedix Office Investment Co, Rakuten Bank and more

In today’s briefing:

Kokusai Electric IPO – Weaker Demand Than We Expected
Kokusai Electric IPO – Not Wholly Convinced, One Needs to Look past the Cycle
TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights
Kenedix Merger: Significant Passive Inflows Expected in Three Weeks
Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup

Kokusai Electric IPO – Weaker Demand Than We Expected

By Mio Kato

Kokusai Electric announced its pricing range today, setting it rather tightly at ¥1,830-1,840.
This is slightly below the initial indicative price of ¥1,890 pointing to modest demand.
That is a rather more tepid response than we initially expected given that this is the first sizable offering in some time.

Kokusai Electric IPO – Not Wholly Convinced, One Needs to Look past the Cycle

By Sumeet Singh

KKR is looking to raise around US$730m via selling a stake in Kokusai Electric (6525 JP) (KE) in its Japan IPO.
KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
In our previous notes we have looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuations.

TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights

At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.
Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.
Over the last 6 months, the stocks with inflows (>US$25m) have outperformed the stocks with outflows (>US$25m) with most of the outperformance coming in the last three months.

Kenedix Merger: Significant Passive Inflows Expected in Three Weeks