Japan

• Mitsui Matsushima (1518 JP) was trading ¥2,800-3,200 earlier this year before Murakami-san bought a large stake. All the news of coal shut down and cash pile were in the price.
• After he bought, the stock popped. It fell back, went sideways in a range, and for 5 weeks has been falling in a straight line. 
• There’s a reason for that. But it may not be a great reason. And the stock is in a great place.

• Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
• In our earlier note, we talked about the placement and ran the deal through our ECM framework.
• In this note, we talk about the updates and share price performance since then.

• 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.   
• FineToday has four product categories: Hair care, Skin care, Body care, and others. Hair care is the largest category, accounting for 49.0% of 9M24 revenue. 
• The bull case rests on return to revenue growth, three-pronged growth strategy, top-quartile profitability and top-tier FCF generation. 

• 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 this note, we talk about the not-so-positive aspects of the deal.

• Even the companies with US type 3 committees, which is expected to have higher awareness of corporate governance, there’re differences in the status of nominating committee activities among the companies.
• While doubts about whether the nominating committee is fulfilling its function have not been dispelled, there have been cases of low approval rates for proposals for the election of directors.
• Since discussions in voluntary nominating committees are only advisory, more companies are expected to move to Company with US type 3 Committees, which have statutory nominating committees.

• Seven & I Holdings (3382 JP) did not dispute the NHK article’s claims that the founding family aims to raise buyout funds by the end of the fiscal year.
• Since 13 November, there have been conflicting press reports on the MBO offer price. The NHK article’s implied offer price of JPY3,082 seems the most credible. 
• The MBO’s aggressive completion timeline pressures Alimentation Couche-Tard (ATD CN) to respond by either overbidding, working with the founding family at the back-end or walking away.

• I wrote last when Exedy was at ¥3,900 and had just announced, good earnings, a sharp div hike, and a huge buyback. The stock reacted well, but not THAT well.
• Murakami-San had indeed lifted his stake, and the stock is now climbing again. Presumably, the company is in the market buying. At this price, it depends on what Murakami-san does.
• Fat div. Lots of volume to buy in the next several months, but the big story is future measures.

• Seven Eleven’s future usually gets outlined as: Japan ex-growth and only growth is overseas. This is wrong. While the CVS sector is saturated, Seven Eleven itself has not reached saturation.
• There are major areas of growth, both territorially and new offshoot businesses.  Seven is already 32% more efficient than Lawson but more to come.
• Here we take a deep dive into the state of CVS retailing in Japan and how Seven Eleven does, and will, fit into this – and how it will grow.

• Kadokawa Dwango (9468 JP) shares rose 16% after Reuters reported that Sony Corp (6758 JP) is in talks to acquire it. Kadokawa confirmed an initial letter of intent. 
• The privatisation interest is unsurprising as Kadokawa’s publishing arm, acclaimed intellectual properties, and positioning in the anime industry would be attractive to Sony.
• The upside is limited as the last close reflects a significant takeover premium. There is a risk if a binding proposal emerges, it could be takeunder like Bain/T-Gaia.

• 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 this note, we talk about the positive aspects of the deal.

• Honda Motor Co., Ltd.’s financial results for the first quarter of the fiscal year 2025 offer a complex picture of both achievements and challenges.
• The company reported its highest-ever quarterly operating profit of JPY 484.7 billion, marking a significant year-on-year increase by JPY 90.2 billion.
• This improvement was largely driven by increased unit sales in the motorcycle business in India and Brazil, as well as robust sales of hybrid automobile models in Japan and the United States.

• Freee KK (4478 JP) offers cloud-based online accounting and HR/Payroll software to small and medium businesses (SMBs) in Japan. The company operates a subscription-based revenue model.
• Freee reported its first-ever profits recently and we expect continued improvement in freee’s profitability driven by its strong business model vs MF whose business model has started to breakdown.
• Freee’s current valuation multiples are cheap and there is significant upside to the current share price, hence we recommend making an entry.

• H1 Results improved but did not raise guidance for the FY
• Insurance subsidiary surprised with a buyback of shares after strong results
• Bank subsidiary profits improved as expected as interest rates increase

• FY24 GUIDANCE WAS REVISED.
• POST FY24 GROWTH SCENARIO REMAIN UNCHANGED.

• During H1FY25, Eisai Co Ltd (4523 JP) reported 3% YoY growth in revenue, driven by mainstay drugs. However, operating profit declined 11% YoY and net profit decreased 6% YoY.
• Although Eisai kept its FY25 total revenue guidance unchanged, it has reduced Leqembi FY25 revenue guidance by ¥14B to ¥42.5B due to lower revenue expectation from Americas.
• Leqembi is expected to be approved in Europe for a narrower set of patients. Next year, the drug will face competition in the U.S.

• Days ago we got a dramatic headline about Ito family scion ITO Junro and his family company Ito Kogyo making a bid for Seven & I Holdings (3382 JP). 
• The stock popped, then fell. Details were not clear. Was the ¥9trln an EV number? A market cap? Was he serious? How would he get funding. Skepticism was rife. 
• Today we get more headlines from NHK. who says the family wants to raise ¥8trln to take 7&i private by end-Feb 2025.

• Integrated Design & Engineering Holdings (9161 JP) has recommended Tokio Marine Holdings (8766 JP)’s tender offer at JPY6,500 per share, a 63.3% premium to the last close.
• The offer is attractive as it represents an all-time high, above NAV (including latent real estate gains) and above the midpoint of the IFA DCF valuation range. 
• Despite the high required minority acceptance rate, an attractive offer facilitates deal completion. The tender runs from 20 November to 15 January 2025 (35 business days).

• In 2023, Integrated Design & Engineering Holdings (9161 JP) was created as a technical listing, succeeding Nippon Koei (1954 JP). It has been listed for decades. 
• On Tuesday 19 November, Tokio Marine Holdings (8766 JP) announced an agreed/supported deal to buy out Integrated Design & Engineering Holdings (9161 JP). The register is open. Should be easy. 
• It’s a nice high price for a boring stock, but it is cheap. They are NOT overpaying, but I don’t see who would want to run interference on this.

• ASICS has demonstrated exceptional brand rejuvenation and profitability improvements, with an ambitious 2026 plan that capitalizes on high-growth lifestyle categories
• However, the pivot toward fashion and luxury markets introduces heightened execution risk.
• While the upgraded MTP targets are commendable, much of the good news appears to be priced in.

• Santen Pharmaceutical (4536 JP) witnessed flat revenues while core operating profit and net profit declined in H1FY25. Overseas business grew 6% YoY and remained the main driver.
• Santen reiterated FY25 guidance as overseas markets are performing well, reviewed impact of generics in Japan, and continued progress in company-wide cost optimizations.
• Santen signed collaboration agreement for ARVN001 suprachoroidal injectable suspension, a treatment for uveitic macular oedema, for exclusive commercialization rights in China, excluding Hong Kong, Macau, and Taiwan.

• Ongoing growth and margin expansion – The company continues to display positive characteristics of a high-quality franchise business with growth opportunities, with Q1-2 FY3/25 results showing sustained double-digit sales (+17.0% YoY) and OP growth (+30.6% YoY).
• Maintenance contracts grew 13.8% YoY organically, and Modernization units remain on a positive trajectory with strong underlying demand given the company’s competitive advantage as an independent provider.
• The company has maintained FY3/25 guidance; we believe the earnings outlook for H2 FY3/25 remains positive given the increasing utilization at the JIK (JES Innovation Center Kansai) and geographic reach, and ongoing productivity enhancement of its engineers resulting in operating leverage.

• Seven & I Holdings (3382 JP) isn’t the only consumer-facing business Itochu wants more interest in. It has also been mopping up multiple fashion and sports brands recently.
• The latest is LeSportsac which Itochu already owned the global rights for but which didn’t really translate into success in Japan.. 
• It will now run the brand with Mash Holdings – Itochu is an increasingly important partner for Mash – which is likely to IPO in a few years.

• While good for small-cap stocks to disclose stock price improvement plans, which is the minimum to be eligible for TOPIX, few global investors can invest in company of this size.
• Since many Japanese small-cap companies have diversified businesses and compete with numerous companies for a market that is not large, forcing low profit margins, a market shakeout is necessary.
• The key is whether small cap companes that are beyond the reach of overseas investor engagement can execute a business portfolio review on its own initiative.

• DWTI announced topline results from its Phase 2B clinical trial of its H-1337 Ophthalmic Solution, for the treatment of elevated intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension.
• This study was a double-masked, active- controlled, dose-response study in 201 subjects with primary open-angle glaucoma or ocular hypertension, where subjects were dosed for 28 days during the period from August 2023 – August 2024.
• The study was designed to evaluate the ocular safety and hypotensive efficacy of three doses of multi-kinase inhibitor H-1337 Ophthalmic Solution: 0.6% twice-daily, 1.0% twice daily, and 1.0% once-daily. 

• Terumo Corp (4543 JP) reported better-than-expected H1FY25 result, with revenue, operating profit, and net profit all reached record highs for the first half. Profit margins continued to improve.
• Revenue from C&V business grew 15% YoY to ¥306B (~60% of total revenue). More than 60% of the growth came from TIS (catheter) division, which grew 14% YoY to ¥201B.
• Terumo has revised FY25 guidance upward, reflecting strong performance and changes in foreign exchange assumptions. Both revenue and profits are expected to reach record high in FY25.

• Orbis Japan Equity Fund recently wrote about auto supplier Koito Manufacturing (7276 JP) in their second-quarter 2024 letter.
• So, who is Koito? It’s the world’s largest manufacturer of automotive lighting products, serving primarily Japanese customers such as Toyota, Nissan and Honda.
• What stood out in Orbis’s second-quarter letter is that Koito plans to return JPY 350 billion to shareholders in the next five years, more than half the current market cap. Rational capital allocation is rare in Japan, so this number caught my attention.

Dentsu posted Q324 organic net revenue growth of 0.3%, making a decline of 1.1% over the nine-month period. This is slightly below expectations at the half-year and, as the market for larger, transformational projects is still stagnant, management has trimmed full year organic revenue growth guidance to 0% (was 1%) and that for adjusted operating profit by 7%. There are positive elements to these figures, in particular continuing progress in Japan and good new business boosted by the ‘one dentsu’ initiative. The unveiling of the mid-term management plan has been delayed to February 2025, with the FY24 figures. Post the reaction to the Q3 figures, the shares now trade at a 10% discount to peers on EV/EBITDA.

• FY09/24 revenue was JPY19.2bn, a decline of 8.1% YoY, with operating profit at JPY6.4bn, down 14.4%.
• FY09/24 net income attributable to owners increased 5.6% YoY to JPY4.5bn, with a 104.4% achievement rate.
• The company targets 376 deals and 405 consultants by FY09/27, with a CAGR of 19.4% and 31.0%.

• Improving sales mix lift gross margins – Gross margin increased to 65.9% in Q1 FY6/25 from 52.5% the previous year, demonstrating an improvement in the sales mix at the core Optical business segment which experienced demand for high-precision products with premium pricing.
• While operating losses remained relatively flat YoY, the company is investing in IT systems that will improve its production and sales management which we believe will improve the quality of earnings, as well as assist in new business development.
• Overall, we believe the company performed in line with guidance, with no change regarding expectations of the earnings profile to be concentrated in H2 FY6/25.

• Reforms transforming returns – Although the demand environment remains somewhat mixed, we believe that demand has bottomed for the key product Electronic Discharge Machines.
• Q1-3 FY12/24 results highlighted that definitive progress is being made in terms of raising returns through structural reforms.
• This focus on raising profitability can be seen through upselling activities and improved factory utilization.

• On Friday 15 November, KKR announced it would launch KKR Tender2 to buy the rest of FujiSoft not purchased in KKR Tender1. Their new price is ¥1 higher than Bain’s.
• Fuji Soft Inc (9749 JP) announced (J) it supported the KKR2 Tender and rejected the Bain TOB Proposal. KKR1 shareholders are “made whole” at ¥9,451/share. Minimum is 53.22%.
• The document, however, is a Governance Disaster – an absolute shambles, effectively gaslighting investors at every turn. And now investors can see it was problematic from the start.

• A lot of the talk around the news that Ito family scion Ito Junro had proposed to Seven & I Holdings (3382 JP) an MBO was about thwarting Alimentation Couche-Tard.
• Several mentioned that this bid – seemingly uncompetitive at the moment – would make ACT back down. I discussed the bid and its repercussions here. 
• Here I suggest an alternate solution which might get everyone what they want.

• 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, the usual year end deal flow appears to be picking up with US elections now out of the way.
• On the placements front, Kansai Electric Power (9503 JP) launched a large primary offering, while Varun Beverages (VBL IN) did the same in India.

• Listing criteria for TSE Growth Market will be raised to over 4 billion yen in market capitalization after 10 years of listing, but the details are left for further discussion.
• It is necessary to provide opportunities for founders to exit and recover their capital without relying on an IPO, for example by creating a market for unlisted shares.
• Switching to a policy of using cash for shareholder returns because of the inability to comply with TSE Growth Market listing maintenance standards is not a fundamental solution.

• 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: S.F. Holding (002352 CH) is premarketing an H Share listing to raise US$1.0-1.5 billion, Kansai Electric Power (9503 JP)‘s US$3.5 billion placement.  
• Event-Driven developments: Seven & I Holdings (3382 JP), Fuji Soft Inc (9749 JP), Nishimoto (9260 JP), Macromill, Inc (3978 JP), Agro Kanesho (4955 JP), Renewable Japan (9522 JP), CPMC.

• KKR & Co (KKR US) has secured the Fuji Soft Inc (9749 JP) Board’s unanimous support by bumping its second tender offer to JPY9,451, a JPY1 premium to Bain’s JPY9,450 offer. 
• The Board is claiming a “fiduciary duty” win as it has secured a higher offer from KKR but paradoxically signalling that it will not negotiate a bump from Bain.  
• Bain will likely walk rather than try to win the Board’s support by revising terms. At the last close, the gross spread to KKR’s offer is 3.7%.

• 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.
• Six new deals this week! TOs for Agro Kanesho (4955 JP), Nishimoto (9260 JP), Chita Kogyo (5993 JP), Macromill (3978 JP). Also Silk Logistics (SLH AU) and Avarga (AVARGA SP).
• Key updates took place on: Pacific Smiles (PSQ AU), ASMPT (522 HK), Nec Networks & System Integr (1973 JP), Seven & I (3382 JP), and Malaysia Airports Holdings (MAHB MK).

• There are people who’ll take profit in Seven & I (3382 JP) because of path dependency til year-end. It will drag out a while: buy the dips, trim on pops.
• Just like in Lufax Holding (6623 HK)‘s special dividend, expect Ping An to boost its holding in Ping An Healthcare and Technology (1833 HK) via the stealthy scrip dividend option. 
• The landscape for Nec Networks & System Integr (1973 JP) has FULLY changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable.  

• Asahi Intecc (7747 JP) recorded 9% YoY revenue growth to ¥31B in Q1FY25. Revenue growth is attributable to the continued strong trajectory of medical division, which reported 10% YoY growth.
• Strong rebound in China is key highlight for medical division performance. Revenue from China increased by a whopping 36% YoY and 44% QoQ to a record high of ¥9.3B.
• Despite a better-than-expected Q1FY25, the company maintains full-year FY25 guidance, due to external factors such as currency movements as well as uncertainties in trends for net sales, productivity, and expenditure.

• Toyota Motor Corporation has announced its fiscal year 2025 second-quarter financial results.
• The company achieved an operating income of JPY 2.4642 trillion for the first half of the fiscal year, which was maintained close to the previous year despite some setbacks in production and increases in expenses.
• While sales revenue touched JPY 23.2824 trillion, the net income of JPY 1.9071 trillion saw a significant decrease from the prior year, primarily due to exchange rate fluctuations which caused valuation losses in foreign currency assets.

• With external female board member resources under pressure, it will be extremely difficult to raise the percentage of female board members steadily at this rate.
• The trump card for this is matching numbers. Increasingly, female board members with no management background or outside talent are being recruited to female managerial positions.
• It is expected that fewer companies will move to Company with US type 3 Statutory Committees in order to avoid increasing the number of statutory executive officers.

• Sales increased by 3.6% YoY to JPY26.1bn, but operating profit decreased by 25.3% YoY to JPY1.2bn.
• Paris Miki Inc. sales rose 4.2% YoY to JPY23.2bn, with 13 store openings and nine closures.
• China subsidiary faced a sales decline of 0.9% YoY to JPY3.0bn, resulting in an operating loss.

• The company restructured its business segments in FY09/24, renaming Inventory Management Solution to Solution and Merchandise Distribution Platform to Platform.
• Overall sales decreased by 5.9% YoY, while net income attributable to owners increased by 997.7% YoY.
• NETSEA’s sales and operating profit increased YoY due to reduced advertising expenses, despite a decline in GMV.

• Revenue increased by 20.1% YoY to JPY6.8bn, with Digital Marketing contributing JPY3.1bn, Data Marketing JPY2.3bn, and Insight JPY1.4bn.
• Operating profit reached JPY356mn, a significant improvement from a loss of JPY17mn in Q1 FY06/24, driven by higher gross profit.
• Overseas operations revenue grew 16% YoY to JPY1.2bn, with forex negatively impacting by JPY30mn, excluding effects, growth was 24% YoY.

• Q1 FY06/25 revenue declined 6.7% YoY due to subsidiary exclusion, with operating profit falling 27.9% from increased costs.
• FY06/25 forecast projects revenue of JPY21.0bn (+0.4% YoY) and operating profit of JPY2.5bn (+1.8% YoY).
• Company focuses on expressway projects, sales in building maintenance, and R&D investment to enhance technical capabilities.

• Consolidated sales declined to JPY32.5bn (-1.7% YoY), while net income attributable to owners reached JPY5.2bn (+570.2% YoY).
• HR-Tech engage segment reported sales of JPY4.4bn (+45.3% YoY) with an operating loss of JPY1.6bn.
• Human Resource Platform segment achieved JPY4.1bn in sales (+17.8% YoY) and an operating profit of JPY601mn.

• The company achieved 112.6% of its sales target, leading to a revision of the full-year forecast.
• Semiconductor Equipment-related business saw increased sales in vacuum products and semiconductor manufacturing materials, boosting segment performance.
• The company raised its sales forecast by JPY30.0bn, anticipating strong demand from Chinese manufacturers in 2H FY03/25.

• Revenue increased by 10.4% YoY to JPY8.6bn, with directly operated clubs contributing JPY5.3bn and franchise revenue JPY3.1bn.
• Operating profit decreased by 28.2% YoY to JPY1.4bn, impacted by higher costs and growth investments, especially overseas.
• Membership count rose to 935,000, with 33 new clubs opened and three closed, totaling 1,163 clubs.

• Group sales were JPY45.8bn (-31.7% YoY), with net income attributable to owners of the parent at JPY2.8bn (-31.5% YoY).
• Content and Digital business sales reached JPY8.0bn (+7.9% YoY), driven by Tsuburaya Productions’ overseas revenue growth of 34.0% YoY.
• PS business reported sales of JPY37.2bn (-37.0% YoY), with 48,636 amusement machines sold, down 77,389 units YoY.

• Revenue decreased YoY across BPO and CRM businesses, but operating profit increased due to cost reduction efforts.
• New partnerships with seven local governments expanded client base to 177, focusing on economic stimulus projects.
• Revenue rose in food processing and manufacturing, driven by strong orders and efficient SG&A expense management.

• On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
• On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
• The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.

• Today, CVC announced a deal to buy out Macromill, Inc (3978 JP). It is agreed and supported by management and the Board. 
• The shareholder register on this stock is wide open. It is not burdened by crossholders. It IS burdened by 7 large active holders who have 55%. 
• Those holders may complain about the process, the transparency, and the low price. This could be a target for an activist or a strategic overbidder.

• Macromill, Inc (3978 JP) has recommended CVC’s tender offer at JPY1,150, a 40.1% premium to the last close.
• While the offer is attractive compared to historical trading ranges, it is 41% below the IPO price and 11% below the midpoint IFA DCF valuation range. 
• The lack of an irrevocable, open shareholder register and large foreign institutions’ shareholding increases the odds of activism to force a bump.  

• Renewable Japan (9522 JP) has recommended a Tokyu Fudosan Holdings (3289 JP)-sponsored MBO at JPY1,250 per share, a 132.3% premium to the last close.
• The high takeover premium reflects the 55% YTD decline in the share price. While the timing is opportunistic, the offer is attractive compared to peer multiples. 
• The irrevocables and low required minority acceptance rate ensure that this is a done deal. The tender runs from 15 November to 8 January 2025 (34 business days).

• In Q3 FY24, Appier achieved record-breaking revenue, reaching JPY 9.1 billion, marking a 28% year-over-year growth.
• Operating income for Q3 surged by 2.5 times YoY to JPY 788 million, with the operating margin improving by 4.3 percentage points to 8.7%.
• At less than 4x EV/Sales and 16x FY25 EBITDA the stock does not appear expensive.

• Observing implied volatility across 16 markets plus gold provides a picture of falling implied volatility, despite dispersion in market performance.
• Several, but not all, markets display moderation from unusual volatility levels to a more balanced implied volatility structure.
• The realignment of implied volatility across markets presents potential relative value opportunities.

• Freee KK (4478 JP) reported 1QFY06/2025 results which saw the company generating its first-ever Adj. operating profit, earlier than we expected.
• The company has begun capitalising its software assets (decline in R&D costs as % of revenue) and this coupled with fall in S&M costs have contributed to profits.
• The corporate paying customers surpassed more than 200k for the first time and we expect freee’s earnings to continue to improve going forward.

• Sankyo, a Japanese company previously seen as a value trap, has made changes to enhance shareholder value
• The company has implemented share buybacks, acquiring 24% of shares in the last year and leading to a higher valuation
• The focus on capital efficiency and returning value to shareholders has revitalized Sankyo, leading to increased investor confidence and potential future growth opportunities

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.

• Revenue reached JPY2.8bn (+26.2% YoY), with operating profit at JPY697mn (+48.7% YoY) and recurring profit at JPY699mn (+40.4% YoY).
• Companywide ARR was JPY3.8bn (+25.3% YoY), with subscription-based recurring revenue accounting for 93.8% of total revenue.
• User count for Shadankun, WafCharm, and SIDfm increased, with low churn rates and varying revenue per user growth.

• Revenue reached JPY5.5bn (+33.7% YoY), driven by growth in Second-hand Online and Mobile & Telecommunications segments.
• Operating profit turned positive at JPY69mn, with a 1.3% margin, despite JPY68mn in relocation expenses.
• The company recorded a JPY32mn derivatives valuation loss due to a stock price decline in a CFD contract.

• In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
• Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
• The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.

• The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP). 
• This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
• Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.

• Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
• This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
• Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
• There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.

• Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
• JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
• Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).

• Nexon’s 3Q24 earnings report saw its stock dip -17% as revenue missed guidance and foreign exchange losses weighed on the bottom line.
• Nexon’s operating profit rose +11% y/y to ¥51 billion, with an operating margin of 38%
• The stock is trading at 8.5x EBITDA, which makes it very attractive versus the sector

• In 1H FY03/25, the company reported revenue of JPY1.12tn, operating profit of JPY313.9bn, and net income of JPY243.9bn.
• The revised full-year forecast for FY03/25 includes revenue of JPY2.40tn and operating profit of JPY680.0bn.
• The company announced a JPY70.0bn share buyback plan, acquiring up to 3.5mn shares, representing 0.8% of outstanding shares.

• Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
• The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
• There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.

• Sales increased by 27.4% YoY, with the Idle Asset Utilization segment driving growth, achieving JPY10.0bn in sales.
• The company forecasts FY09/25 sales of JPY12.5bn, operating profit of JPY2.5bn, and net income of JPY1.6bn.
• Visualization segment reported full-year sales of JPY214mn, focusing on technical skill improvement and expanding the sales team.

• Listed subsidiaries decrease but increase if equity method listed companies are included. Many companies haven’t fully exercised treatment of subsidiaries, selling only a little of their shares to below 50%.
• Many parent companies that own listed subsidiaries and equity-method listed companies have placed cash in subsidiaries or equity-method companies without increasing their own stock prices.
• Although companies have changed their mindset somewhat, they haven’t changed their management to effectively use cash to create value, which is the reason for the low valuations of Japanese stocks.

• Tokyo Metro (9023 JP) had a blockbuster listing yesterday, finishing the day 45% higher. That took the estimated div yield down from 3.33% (at the IPO price) to 2.3%.
• One expected index inclusion will not take place due to insufficient information on IPO allocations and that leads to a much lower free float than expected.
• That inclusion will now be deferred to June; BUT there could be two other (bigger) index inclusions on the cards prior to that.

• Rigaku Holdings (268A JP) priced its IPO at JPY1,260 per share to raise gross proceeds of US$856 million. The shares will start trading on 25 October.
• We previously discussed the IPO in Rigaku Holdings (268A JP) IPO: The Bull Case, Rigaku Holdings (268A JP) IPO: The Bear Case, Rigaku Holdings (268A JP) IPO: Valuation Insights.
• The peers have modestly derated since the prospectus was released on 20 September. The IPO price remains attractive.

• Nidec’s Q2 operating income beat my estimates, driven by strong small motors and appliance segments, though automotive profits underperformed
• The automotive division is shifting focus from e-axles to broader auto parts, while improving operational efficiency through partnerships and streamlined logistics
• Despite macro risks, Nidec remains well-positioned for long-term growth in digitalization, decarbonization, and automation, with a price target of ¥4,350

• Goldwin has big plans for both The North Face in the Japanese and Korean markets and for its own brand globally.
• But there are worries about saturation for the former in Japan, slowing brand development, and lack of expertise in overseas markets to build its own brand.
• Goldwin has had an amazing run but can it build a global brand? If it can, it will feed into high levels of demand for Japan-tech sports brands.

• Unlike the transfer of personnel rights, which is resisted by management, equity compensation that can be used to retain talent is attractive to management and is likely to accelerate.
• If equity compensation plans are introduced for employees with a low ratio of female managers, the gap in compensation between men and women is expected to widen.
• The introduction of equity compensation for employees is anticipated to provide an opportunity for management “kaizen” tips to emerge from individual workplaces.

• Revenue reached JPY3.1bn, an 8.3% YoY increase, achieving 48.7% of the full-year forecast, with strong AI demand.
• Operating profit increased by 173.2% YoY to JPY149mn, driven by robust sales in plating chemicals for AI applications.
• Net income forecast revised to JPY1.6bn due to gains from the sale of investment securities announced in August 2024.