Japan

In today’s briefing:

The March BOJ Meeting, April Handover, the Japan Post Bank (7182) Offering, and Follow-On
Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs
Lasertec Corp (6920 JP) – Bullish ST Momentum Failures – 4 Month Correction May Be Done
Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback
Human Capital Measures Should Not Be a Case Of “Plowing the Field and Forgetting the Seeds”

The March BOJ Meeting, April Handover, the Japan Post Bank (7182) Offering, and Follow-On

Tomorrow is BOJ Governor Kuroda’s last Monetary Policy Meeting, capping a ten year run as one of the most dynamic central bankers in the world.
Tomorrow is also the day BEFORE the first day on which the Japan Post Bank (7182 JP) mega offering could price and the last day of bookbuild indications.
I am not saying this is not coincidence, but it is worth thinking about the interplay.

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs

Elliott Management was noted several weeks ago to have bought near 5% of Dai Nippon Printing (7912 JP). The stock popped when people found out.
Then the stock popped when the company said they’d announce the outline for their new Mid-Term Management Plan on 9 March, and that would include more capital allocation measures.
Today we got the Outline. There are more capital allocation measures. The numbers look big. Nuance is required to understand the impacts over time.

Lasertec Corp (6920 JP) – Bullish ST Momentum Failures – 4 Month Correction May Be Done

By David Coloretti, CMT

At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
The structure of the November / March decline is typical of a counter-trend correction with multiple crossovers and a lack of impulsive price action.
The past 3 weeks have seen declines quickly reversed as bullish ST momentum failures plague these attempted declines. A weekly close above 22299 will confirm a likely MT uptrend renewal.

Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback

Today after the close, Hosokawa Micron (6277 JP) – a company which is all about powders and particles – announced a ToSTNeT-3 buyback of 1.35mm shares (8.26% TSO) tomorrow AM.
Nisshin Seifun Group (2002 JP) and subsidiary Nisshin Engineering said they would offer some shares in. The HM announcement said financial institutions might sell.
Hosokawa Micron is cheap, and this is accretive. Worth a closer look.

Human Capital Measures Should Not Be a Case Of “Plowing the Field and Forgetting the Seeds”

More companies have made progress in the last 6 months as more companies have made only human capital policies. Specific measures will probably not become visible until April or later.
If companies are required to disclose their policies in a hasty manner, they may end up with a list of unrealistic measures in addition to policies that have no substance.
Companies are expected to spend the next year disseminating their human capital policies internally and implementing specific human capital measures to strengthen their own competitiveness.

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Mar 09

Daily Brief Japan: Sosei Group, Japan Post Bank and more

In today’s briefing:

Sosei Group (4565 JP) TSE Prime Promotion and TOPIX Inclusion… Finally
Japan Post Bank (7182 JP): The Current Playbook

Sosei Group (4565 JP) TSE Prime Promotion and TOPIX Inclusion… Finally

Sosei Group (4565 JP) is a Tokyo-based biopharma group which started small, got big and exciting, and hasn’t grown in market cap in years, while it has grown in ambition.
It has strategic relationships with AbbVie, Biohaven, Genentech, GSK, Takeda, Pfizer, AstraZeneca, and Takeda and a market cap near ¥200bn.
It has always had impressive shareholder support. Now after nearly 20 years on TSE Mothers/Growth (the limit was supposed to be 10yrs), it moves to TSE Prime and TOPIX.

Japan Post Bank (7182 JP): The Current Playbook

Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have risen by 4.4%. On 1 March, JPB completed the ToSTNeT-3 buyback by acquiring 59.5 million shares for JPY70 billion.
To understand JPB’s trading pattern, it is instructive to look at Japan Post Insurance (7181 JP)/JPI’s 2019 offering and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
JPB’s shares should follow the trading pattern playbook of JPI’s 2019 and JPH’s 2021 offerings and start trading below the pre-offer last trading price during the subscription period.

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Mar 08

Daily Brief Japan: Ana Holdings, CELSYS, Advantest Corp, Calbee Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

ANA and NYK to Trade NCA, So JAL/ANA GTG
TOPIX Inclusions: Who Is Ready (Mar 2023)
Advantest (6857) | Key Beneficiary of AI Tailwinds
Calbee: New CEO Seems Ready To Make Necessary Action
Companies that Adequately Disclose Human Capital Must Be Performing Well on Human Capital Investment

ANA and NYK to Trade NCA, So JAL/ANA GTG

ANA announced their FY23-25 Mid-Term Corporate Strategy last month. In it, a plan to increase cargo.
Today, Ana Holdings (9202 JP) and Nippon Yusen Kk (9101 JP) announced ANA would take over NYK sub Nippon Cargo Airlines 1 October 2023 – price and method TBD.
This would add ~45-50% to ANA’s cargo volume, and more to its capacity. But it means NYK sells cheap OR it means a chunk of ANA cash/stock. Overhang.

TOPIX Inclusions: Who Is Ready (Mar 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
In February, names which appeared in our “B” list such as Amvis Holdings Inc (7071 JP) and AXXZIA Inc (4936 JP) announced they would be moving to the Prime Market.
In this insight, we take a look at updated lists, the price performance history of those baskets, and other interesting trades in the TOPIX index space.

Advantest (6857) | Key Beneficiary of AI Tailwinds

By Mark Chadwick

Advantest is a market leader in semiconductor testing and will be a major beneficiary of a multi-year AI tailwind
Catalyst: News flow around new AI applications, increased investment dollars flowing into the space and visible acceleration in Nvidia’s data centre GPU growth
Market concern over near-term correction in semiconductor market is giving investors an opportunity to buy Advantest at a 15% discount to its intrinsic value

Calbee: New CEO Seems Ready To Make Necessary Action

By Oshadhi Kumarasiri

After failing to take Calbee Inc (2229 JP) forward for 4+ years, CEO Mr. Shuji Ito is retiring at the end of the next quarter.
He is being replaced by the current COO and the former EVP of Calbee’s Overseas business Mr. Makoto Ehara.
From what he has done since he was appointed the COO and in the Overseas business, we are hopeful that he will turn Calbee’s fortunes around in the medium term.

Companies that Adequately Disclose Human Capital Must Be Performing Well on Human Capital Investment

There is concern that if the statements in Annual Securities Report, a legal document, are not questioned as misstatements, they will be left unwritten with no hope of being realized.
Most companies didn’t have human capital policy as of last July. It’s welcome that more companies will take this opportunity to shift to a strategy of adding value through growth-investments.
Companies are required to answer the alignment of management and human resource strategies, whether they can reasonably demonstrate path to future growth in corporate value while investing in human capital.

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Mar 07

Daily Brief Japan: SBI Sumishin Net Bank, Ihara Science, Japan Post Bank and more

In today’s briefing:

SBI Sumishin Net Bank Pre-IPO – Revised Forecast and Valuations – RoA or RoE?
Ihara Science (5999 JP) – Not Over But Not a Great Look
Japan Post Bank Placement – Misbehaving – Still Has Time to Correct – A Look at past Deals

SBI Sumishin Net Bank Pre-IPO – Revised Forecast and Valuations – RoA or RoE?

SBI Sumishin Net Bank (7163 JP) (SSNB) is now looking to raise around US$380m in its second listing attempt.
SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
In this note, we talk about our updated earnigns forecast and thoughts on valuations

Ihara Science (5999 JP) – Not Over But Not a Great Look

Today after the close, Ihara Science (5999 JP) reported on TDNet a forthcoming change in the Tender Offer Registration Statement by MBO bidder N.I.M.
N.I.M. and normally-known-as-deep-value-activist NAVF (a.k.a. Nippon Active Value Fund), Ihara Science’s #2 shareholder, signed a Tender Offer Agreement whereby NAVF agreed to tender.
It got a little more complicated 90mins later, but this was an announcement which did not need to be made. It begs the question of why. And what next.

Japan Post Bank Placement – Misbehaving – Still Has Time to Correct – A Look at past Deals

Japan Post Holdings (6178 JP) plans to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
We have looked at the deal in our past note, Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback.
In this note, we talk about the updates since our last note and have a look at some of the past deals.

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Mar 06

Daily Brief Japan: SBI Sumishin Net Bank, Japan Post Bank, NEC Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

SBI Sumishin Net Bank IPO: Valuation Insights
Weekly Deals Digest (05 Mar) – Japan Post Bank, SBI Sumishin, HKBN, Yashili, GK Goh, Golden Energy
NEC (6701 JP): Positive Orders Trend, Lagging Share Price
Need to Think About How to Make the Market a Place Where Young and Mature Generations Want to Invest

SBI Sumishin Net Bank IPO: Valuation Insights

SBI Sumishin Net Bank (7163 JP), an online bank in Japan, has revived its listing plans to raise up to US$440 million (vs the 2022 target of US$1 billion).
We previously discussed the IPO in SBI Sumishin Net Bank IPO: The Investment Case. The shares will be listed on 29 March.
In this note, we discuss valuation. Our analysis suggests that SBI Sumishin Net Bank is fairly valued at the IPO reference price of JPY1,260. We would participate in the IPO.

Weekly Deals Digest (05 Mar) – Japan Post Bank, SBI Sumishin, HKBN, Yashili, GK Goh, Golden Energy

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 – Japan Post Holdings (6178 JP)‘s large offering of Japan Post Bank (7182 JP) shares, SBI Sumishin Net Bank (7163 JP) aims to raise up to US$440 million.
Event-Driven developments – HKBN Ltd (1310 HK), Yashili International Holdings (1230 HK), GK Goh Holdings (GKG SP), Golden Energy & Resources (GER SP), Pushpay Holdings (PPH NZ), OZ Minerals.

NEC (6701 JP): Positive Orders Trend, Lagging Share Price

By Scott Foster

Upward trend in new orders suggest that guidance is conservative.
Long-Term prospects good with digitalization, 5G and optical-electronic technology for 6G.
Lagging share price offers attractive valuations and 42% potential upside to previous high.

Need to Think About How to Make the Market a Place Where Young and Mature Generations Want to Invest

The demand for high-dividend stocks is due to the fact that financial assets are skewed toward the elderly and that the elderly have high demand for high-dividend stocks.
The under-40s generation, which seeks growth rather than dividends, focus on U.S. equities. Even if the tax deferral allowance is expanded, they are likely to pass through Japanese equities.
For asset building, investing in markets with higher returns is good idea. However, considering the market as source of risk money, Japanese equities and Tokyo market aren’t in good condition.

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Mar 05

Daily Brief Japan: Japan Airlines, Nitori Holdings, Japan Post Bank, Japan Post Holdings and more

In today’s briefing:

Index Rebalance & ETF Flow Recap: NKY, HSCEI, HSTECH, STAR50, MVIS, Japan Post Bank, Adani, KRX BBIG
Nikkei 225 Sep 2023 PREVIEW – Lasertec, Toshiba, Nitori, Maybe Zozo
Last Week in Event SPACE: Japan Post/Japan Post Bank, Downer, HKBN, Golden Energy
ECM Weekly (5th Mar 2023) – Japan Post Bank, Kansai, Vanke, Otsuka, SBI Sumishin, Lu DaoPei, NST, JF

Index Rebalance & ETF Flow Recap: NKY, HSCEI, HSTECH, STAR50, MVIS, Japan Post Bank, Adani, KRX BBIG

By Brian Freitas

The MSCI Feb QCIR was implemented on Tuesday and there were a bunch of announcements for other indices from Wednesday to Friday.
The implementation of the March rebalance for the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) take place at the close on Friday.
Redemptions continue on IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) and KraneShares CSI China Internet ETF (KWEB US).

Nikkei 225 Sep 2023 PREVIEW – Lasertec, Toshiba, Nitori, Maybe Zozo

The March 2023 Nikkei 225 Review was announced Friday. Discussion is in Nikkei 225 March 2023 Review – OLC, JAL, Renesas IN.
That means a Sep-2023 preview. ADDs: Lasertec (6920), Toshiba (6502), and Nitori (9843). DELETEs: Nippon Sheet Glass (5202), Mitsui E&S (7003), and Matsui Securities (8628).
Zozo (3092) is a possible alternate add to Toshiba on a sector balance basis if Toshiba’s disposition changes in the interim.

Last Week in Event SPACE: Japan Post/Japan Post Bank, Downer, HKBN, Golden Energy

By David Blennerhassett

Big picture: Japan Post (6178 JP) selling 29% of Japan Post Bank (7182 JP) is a Very Big Offering at ¥1.236trln. 80/20 dom/international. A TOUGH sell. 1.089bn shares is 4x float.
Downer EDI (DOW AU)‘s CEO resigned ahead of announcing accounting irregularities last December. The CFO resigned this week after Downer announced another profit downgrade. Now the chairman is exiting.
Hong Kong broadband play HKBN Ltd (1310 HK)said it has been approached by I Squares’ HGC. No pricing announced, but talks continue.

ECM Weekly (5th Mar 2023) – Japan Post Bank, Kansai, Vanke, Otsuka, SBI Sumishin, Lu DaoPei, NST, JF

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, there were two deals launched this week.
For placements, Japan Post Bank (7182 JP)‘s planned selldown by Japan Post Holdings (6178 JP) came earlier than expected.

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Mar 04

Daily Brief Japan: Oriental Land, Japan Airlines, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Nikkei 225 Index Rebalance: Oriental Land, Renesas, JAL IN; Toyobo, Nippon LightMetal, Toho Zinc OUT
Nikkei 225 March 2023 Review – OLC, JAL, Renesas IN.
What Should a Japanese Company Do to Raise Profit Margin, a Prerequisite for Higher ROE?

Nikkei 225 Index Rebalance: Oriental Land, Renesas, JAL IN; Toyobo, Nippon LightMetal, Toho Zinc OUT

By Brian Freitas

Oriental Land (4661), Renesas Electronics (6723) and Japan Airlines (9201) will replace Toyobo (3101), Nippon Light Metal (5703) and Toho Zinc (5707) in the Nikkei 225 (NKY INDEX).
Oriental Land (4661 JP) has been added at a post-split PAF of 1. This reduces the passive buying on the stock by around a third.
Passive trackers need to buy between 2.2-6.7 days of ADV on the adds while selling between 5-12 days of ADV on the deletes. There’s a big funding trade too.

Nikkei 225 March 2023 Review – OLC, JAL, Renesas IN.

As expected, Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) IN, and Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) OUT.
The Nikkei implemented the “Tricky Twist” discussed. This lowers the total amount to buy on Oriental Land vs what many would have expected.
That’s “disappointing” BUT… the behavioural aspects here are really interesting, and the timetable for the event is worth thinking about.

What Should a Japanese Company Do to Raise Profit Margin, a Prerequisite for Higher ROE?

TSE, as market operator, should focus on stimulating the market, not informally meddling in the management of listed companies on matters that are not explicitly stated in the listing criteria.
Much of the reason ROE has not increased is that OP Margin has not increased. Despite gradual unwinding of cross-shareholdings, Total Asset Turnover slide and Financial Leverage remained unchanged.
Increasing OP Margin is prerequisite for ROE to rise. It confirms that the root of the problem is the challenge of using cash for growth investments to create competitive products.

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Mar 03

Daily Brief Japan: Otsuka Holdings, SHL Japan Ltd, Appier Group, SBI Sumishin Net Bank, Yakult Honsha and more

In today’s briefing:

Otsuka Holdings – Family Co Selldown for ¥56bn – Take It Vs Peers
Otsuka Holdings Placement – While Enticing Discount, Management Selling Will Raise Eyebrows
SHL Japan (4327 JP) Takeover – Illiquid, Easy, Non-Transparent, but a Done Deal
Appier (4180) | It’s Doubled, so What’s Next
SBI Sumishin Net Bank IPO: The Investment Case
Japan Consumer Staples Sector : Inflation Looks a Blessing in Disguise for Those with Pricing Power

Otsuka Holdings – Family Co Selldown for ¥56bn – Take It Vs Peers

Today after the close, one of the very large brokers in Japan (N_m_r_) has a block for sale of Otsuka Holdings (4578 JP).
It is only 2.4% of total shares out, and as such, it looks small. But it isn’t that small. The shareholder structure is crowded with non-Real World Float holders.
The discount offered is large compared to absolute and sector-relative volatility.

Otsuka Holdings Placement – While Enticing Discount, Management Selling Will Raise Eyebrows

By Clarence Chu

Otsuka Estate is looking to raise US$389m via trimming its stake in Otsuka Holdings (4578 JP).
The deal is a relatively large one on an ADV basis, at 14.6 days of three month ADV.
In this note, we will talk about the firm’s track record and run the deal through our ECM framework.

SHL Japan (4327 JP) Takeover – Illiquid, Easy, Non-Transparent, but a Done Deal

The parent company of SHL Japan Ltd (4327 JP)‘s largest shareholder is buying out its main customer in Japan.
This is an LBO/MBO situation, and friends and family get it to 63% or so. A tiny sliver from others gets it over the hump.
Should get done easily, but the corporate governance here is not encouraging. Yes, a premium, but no explanation, and it’s a bit low.

Appier (4180) | It’s Doubled, so What’s Next

By Mark Chadwick

ChatGPT has focused the investment community on the potential of AI to drive business performance and investment returns.
Forbes picked Adobe as its top AI pick in 2023. We pick Appier, which is a faster-growing alternative in the digital marketing space.
Appier’s revenue grew by over 50% last year and unlike many SaaS companies, it is profitable.

SBI Sumishin Net Bank IPO: The Investment Case

SBI Sumishin Net Bank (7163 JP), an online bank in Japan, has revived its listing plans to raise up to US$440 million (vs the 2022 target of US$1 billion).
Founded in 2007, SBI Sumishin Net Bank is owned 50% by SBI Holdings (8473 JP) and 50% by Sumitomo Mitsui Trust Holdings (8309 JP).
The investment case rests on market share gains, the rude health of the digital bank segment, the nascent BaaS segment turning profitable and ambitious medium-term goals.

Japan Consumer Staples Sector : Inflation Looks a Blessing in Disguise for Those with Pricing Power

By Oshadhi Kumarasiri

Having reached a 30 year high of 4% in December 2022, which is two times the BOJ’s target, Japanese companies are finding it hard to absorb cost inflation.
This macro environment presents an opportunity to appreciate the few Japanese Food and Beverages companies that have managed to maintain average pricing growth even in a deflationary environment.
With a lasting pricing-power and a relatively inelastic demand than competitors, we think Yakult Honsha (2267 JP) and Nissin Foods Holdings (2897 JP) are in a great position to outperform competition.

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Mar 02

Daily Brief Japan: SBI Sumishin Net Bank, SHL Japan Ltd, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

SBI Sumishin NetBank (7163 JP) Re-IPO Details, Fundamentals Tearsheet, Likely Index Treatment
SHL-Japan (4327 JP): JPY3,550 Tender Offer from SHL Group
SBI Sumishin Net Bank Pre-IPO – Refiling Updates – Growth Picks Up
Is the Challenge of Raising the Stock Price Valuations Ultimately the Quality of Management?

SBI Sumishin NetBank (7163 JP) Re-IPO Details, Fundamentals Tearsheet, Likely Index Treatment

In February 2022, SBI Holdings (8473 JP) and Sumitomo Mitsui Trust Holdings (8309 JP) announced they would IPO SBI Sumishin Net Bank (7163 JP) but that got cancelled by Ukraine.
Yesterday, they announced they were going to try again. This time, with a reduced price and reduced aspirations. Given the way banks have performed in the last year… 👀
That changes – completely – the picture of index demand. But it also changes the fundamental picture.

SHL-Japan (4327 JP): JPY3,550 Tender Offer from SHL Group

SHL Japan Ltd (4327 JP) has recommended SHL Group’s tender offer of JPY3,550 per share, a 32.2% premium to the undisturbed price (1 March).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 36.62% ownership ratio.
Achieving the minimum 36.62% ownership ratio requires a 32% acceptance rate from minorities excluding irrevocables. This is not onerous as the tender price represents an all-time share price.

SBI Sumishin Net Bank Pre-IPO – Refiling Updates – Growth Picks Up

SBI Sumishin Net Bank (SSNB) is now looking to raise around US$380m in its second listing attempt.
SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
In this note, we talk about the updates from the latest filings.

Is the Challenge of Raising the Stock Price Valuations Ultimately the Quality of Management?

Increasing numbers of companies with P/Bs below 1x suggest that they failed to deliver to investors plan that would have increased their corporate value, or that such plan didn’t materialize.
While P/B has remained mostly in range, the increase in the number of companies with low P/Bs can be attributed to the widening gap in profitability among companies.
If the difference in profitability depends on the development and execution of management strategies, it depends on the quality of management. The appointment of directors will be very important.

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Mar 01

Daily Brief Japan: Japan Post Bank, Kansai Paint, Appier Group, Mitsubishi Chemical, Lawson Inc and more

In today’s briefing:

Japan Post Bank (7182 JP) ¥70bn ToSTNeT-3 Buyback
Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows
TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside
Kansai Paint Placement – Hardly an Outstanding First Offering Since Listing
Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead

Japan Post Bank (7182 JP) ¥70bn ToSTNeT-3 Buyback

As expected, Japan Post Bank (7182 JP) has announced their ToSTNeT-3 buyback of ¥70 billion on Day 1 of the potential TN-3 Buyback period.
Also as somewhat expected, investors and traders pushed up the stock price today after the news there would be a buyback, hoping to buy then sell, or short today’s close.
Japan Post Holdings (6178 JP) will offer shares. Others obviously will too. How this works and what you have to watch out for discussed below.

Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows