Japan

• Kirin Holdings (2503 JP) bought a 33% stake from the founder and several others in August 2019. Five years later, they are coming back for the rest. 
• The price here is ¥2,690/share which is a 42.7% premium from yesterday’s close. Kirin paid 20+% more in 2019. Earnings fell, but they paid 37x NTM. This is 32x. 
• This is lightish… but…  this should get done. Activism would be difficult. There are enough shareholders who should be OK getting out. This should trade tight.

• Fancl Corp (4921 JP) recommended Kirin Holdings (2503 JP)’s tender offer of JPY2,690, a 42.7% premium to the undisturbed price. 
• The timing looks opportunistic as Fancl’s shares are down 20% YTD. The offer period is from 17 June to 29 July.
• While the offer is attractive vs peer multiples, it is light vs historical trading ranges. Securing the required acceptance rate could prove challenging as the offer price is light. 

• Today at noon JST, Rs Technologies (3445 JP) released an announcement on TDNet, “Our policy regarding the tender offer for Helios Techno Holding Co., Ltd. shares”
• In it, they indicated that the price offered – ¥825/share – is a price which “fully returns to general shareholders the increased enterprise value that will result from [transaction] synergies.”
• They acknowledge the market price is trading higher than the TOB Price, but say they have no plans to raise the Tender Offer Price. So now what? It depends.

• Today, according to public news, Kirin Holdings will launch a tender offer for Fancl Corp (4921 JP) at a likely 30% premium. 
• The beauty industry is historically ripe with M&A deals.  It is not hard to see why, as the global beauty sector trades at a hefty valuation multiple. 
• In this insight, we brainstorm for potential buyers of Shiseido Company (4911 JP) and analyze the viability of such. 

• Revenue increased by 9.2% YoY to JPY5.8bn, driven by economic recovery and increased inbound demand.
• Operating profit decreased by 52.5% YoY to JPY567mn due to higher advertising and promotional expenses.
• Financial business revenue rose 14.9% YoY to JPY2.5bn, with a 29.4% YoY decrease in operating profit to JPY371mn.

• Revenue for 1H FY10/24 was JPY85.9bn, up 35.5% YoY, with a business profit of JPY2.2bn, up 146.1% YoY.
• RENOSY Marketplace business revenue was JPY83.6bn, up 35.3% YoY, and ITANDI business revenue was JPY2.1bn, up 34.1% YoY.
• FY10/24 company forecast revised to JPY185.0bn in revenue and JPY3.7bn in business profit, with EPS unchanged at JPY45.90.

• Sales increased by 6.0% YoY to JPY11.4bn, but net income attributable to owners decreased by 54.1% YoY to JPY359mn.
• Wholesale Sales and Retail Sales segments saw YoY profit drops, while Real Estate Management posted YoY increases in both sales and profit.
• The company sold 15 condo buildings with 369 units (+11.5% YoY) and purchased nine condo buildings with 675 units (-61.2% YoY).

• Revenue increased by 6.9% YoY to JPY8.7bn, but operating profit decreased by 9.9% YoY to JPY802mn.
• Directly Managed Beauty Salon Operation revenue grew 6.3% YoY to JPY7.2bn, while operating profit dropped significantly to JPY20mn.
• Franchise segment revenue rose 19.0% YoY to JPY1.3bn, with operating profit increasing 27.7% YoY to JPY528mn.

• Revenue increased by 2.6% YoY to JPY2.2bn, while operating profit decreased by 57.3% YoY to JPY281mn.
• SG&A expenses rose by 29.4% YoY to JPY1.1bn, leading to an operating profit margin decline to 12.6%.
• Medical device sales grew by 35.6% YoY to JPY486mn, and cosmetics sales surged by 157.9% YoY to JPY286mn.

• Given the high number of pipeline dropouts, and the potentially disappointing $6 bn psoriasis drug acquisition, we question Takeda’s recent investment track record.
• A big restructuring, high expectations from new/recently launched drug portfolio, and punchy company guidance reduces the probability of upside surprises.
• Unless you are limited from investing outside Japan and you want exposure to an innovative pharma company, we believe that there are better and cheaper options elsewhere.

• Companies with the ROE over 15% have higher market capitalization, foreign ownership, and Tobin’s Q, and naturally higher ROA, while the opposite tends to be true companies with low ROE.
• Groups with ROE above 15% have generally improved their corporate governance practices, but they still need to address their use of cash in order to further improve return on capital.
• It’s clear that companies with low ROE have the form of board practices but not the substance, and that they don’t have a clear policy for increasing return on capital.

• Revenue was JPY954mn (+32.5% YoY), with subscription-based recurring revenue at JPY837mn (+23.6% YoY), accounting for 87.8% of total revenue.
• Operating profit was JPY315mn (+94.2% YoY), with operating expenses at JPY638mn (+14.5% YoY), and OPM at 33.1% (+10.5pp YoY).
• Companywide ARR totaled JPY3.4bn (+22.7% YoY), with user count at 1,292 companies (+6.2% YoY) and churn rate at 1.05% (+0.01pp YoY).

• Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
• Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM at 40.9%, and SG&A ratio down to 35.6%.
• KFC Holdings opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942, boosting system sales by 10.5% YoY.

• Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
• Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM up to 40.9%, and SG&A ratio down to 35.6%.
• KFC Holdings opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942 in FY03/24.

• Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and a 2.9% YoY increase in store numbers.
• Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM up 0.4pp to 40.9%, and SG&A ratio down 1.3pp to 35.6%.
• The company opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942, with system sales up 10.5% YoY.

• Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
• Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM up 0.4pp to 40.9%, and SG&A ratio down 1.3pp.
• System sales grew 10.5% YoY, with customer count down 2.5% YoY and average spend per customer up 10.8% YoY.

• Revenue increased by 10.6% YoY to JPY4.0bn, with cloud services revenue up 79.3% YoY due to subscription growth.
• Operating loss was JPY109mn, pre-tax loss JPY42mn, and loss attributable to owners JPY35mn, all improved from Q1 FY12/23.
• Revised 1H FY12/24 forecast: revenue JPY8.2bn, operating loss JPY500mn, pre-tax loss JPY500mn, and loss attributable to owners JPY400mn.

• Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
• Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3% and GPM up to 40.9%, despite rising costs.
• KFC Holdings opened 51 new stores in FY03/24, bringing the total to 1,232, and remodeled 183 stores.

• FY03/24 revenue was JPY174.9bn (-1.9% YoY), operating profit JPY5.5bn (-34.9% YoY), and net income JPY1.6bn (-70.9% YoY).
• FY03/25 forecast: revenue JPY185.0bn (+5.8% YoY), operating profit JPY7.2bn (+31.8% YoY), net income JPY4.5bn (+181.6% YoY).
• FY03/27 targets: revenue JPY220.0bn, operating profit JPY12.0bn, recurring profit JPY12.0bn, EBITDA JPY16.4bn, ROE at least 12.0%.

• Rs Technologies (3445 JP) announced a TOB on Helios Techno Holding (6927 JP) 12 days ago. At a 74% premium, but that was too cheap. I discussed it here.
• Shares went limit up for two days then traded huge volume the first full day last Wednesday. The lowest trade so far in open trading is 3% through terms.
• 57% of Shares Out Ex-Treasury have traded in five days. Anyone who bought 5% on Day 1 has to file a Large Shareholder Report today.

• ENEOS Holdings (5020 JP) announced a deal to buy out their affiliate Tatsuta Electric Wire & Cable (5809 JP) 18 months ago. The TOB was expected to start June 2023.
• June 2023 came around and China’s SAMR still hadn’t approved. ENEOS provided quarterly updates in Sep and Dec and monthly updates since. The May update was different. 
• The May update cut the “re-update” schedule to mid-month June. There are reasons to look at what has changed since the Dec 2022 announcement. 

• 18 months after announcing the offer, ENEOS Holdings (5020 JP) secured SAMR approval for the Tatsuta Electric Wire & Cable (5809 JP) tender offer at JPY720 per share.   
• The tender offer is expected to be launched on 21 June, subject to securing the recommendation from the special committee and the Board.
• A bump is required due to the material market rerating since 21 December 2022. An offer of JPY828, a 15.1% premium to the current offer, implies a P/B of 1x.  

• i-mobile reported cumulative Q3 FY07/24 revenue of JPY16.3bn (+14.3% YoY), operating profit of JPY3.7bn (+9.2% YoY).
• Consumer Service business cumulative Q3 revenue was JPY14.2bn (+19.4% YoY), with segment profit of JPY3.5bn (+18.9% YoY).
• Online Advertising business cumulative Q3 revenue was JPY2.1bn (-11.8% YoY), with segment profit of JPY316mn (-39.3% YoY).

• In cumulative Q3 FY07/24, the company reported sales of JPY30.2bn (-30.0% YoY) and business profit of JPY1.3bn (-80.8% YoY).
• Sales from recurring revenue businesses declined 2.8% YoY to JPY18.3bn, with segment profit falling 7.3% YoY to JPY1.9bn.
• The company revised its FY07/24 year-end dividend forecast to JPY50.00 per share, including a special dividend of JPY24.00.

• Revenue: JPY13.0bn (-3.8% YoY); Operating profit: JPY185mn (+564.7% YoY); Recurring profit: JPY181mn (+449.7% YoY); Net income: JPY65mn (+67.6% YoY).
• Revenue: JPY5.5bn (-8.0% YoY); Operating profit: JPY475mn (+22.4% YoY); Segment profit margin: 8.7% (+2.2pp YoY).
• Revenue: JPY2.3bn (+19.9% YoY); Operating profit: JPY232mn (JPY104mn loss in 1H FY10/23); Segment profit margin: 9.9%.

• In Oct2023, activist Palliser Capital launched a campaign on well-known “stub trade” Keisei Electric Railway Co (9009 JP) (1.6% stake). The proposal? Monetise OLC, invest for growth, be shareholder friendly.
• Keisei responded 3+mos ago: buyback and 1% OLC stake sale but said OLC would remain an equity affiliate. Palliser re-engaged in late April (Japanese/English and two AGM agenda items). Keisei objected.
• Palliser made their case, Glass Lewis and ISS support Palliser. Palliser likely cannot win. The goal here isn’t to win though. It is to get enough to raise management consciousness. 

• Today after the close, SBI Holdings (8473 JP) – which currently owns 32.4% of Medical Data Vision (3902 JP) – announced it would buy another 1.91mm shares over 7mos.
• This market purchase would lift them to ~37.4% by year-end. Interestingly, they plan to go through the one-third level without a Tender Offer. But their buying history hasn’t been great. 
• SBI bought 20% in 2020. It fell by half. They bought another 5%. Then it dropped 50%, so they bought another 5%. Now -25% so they are buying another 5%.

• In February, Aozora Bank Ltd (8304 JP) extended its writedowns and the shares fell sharply. By end-Feb, we found out Japanese activist Murakami-san had bought shares. 
• I didn’t see the endgame. The pump worked, but he didn’t dump. Then Aozora got Daiwa to be a lead investor through a 3rd party share allotment, diluting Murakami-san.
• Last week we got news the FSA had approved the Daiwa transaction. Yesterday, we got news the Murakami Group would sell its whole stake to Daiwa. 

• Fast Retailing is due to report Q3 results on 11 July. We update our views on the outlook for the stock heading into the announcement.
• Uniqlo Japan has already released monthly sales data for the March to May quarter. Performance in May was again strong, slightly surpassing our estimates
• We maintain our full year earnings estimates. The stock has declined by around 6% since Q2 results, but remains fully valued.

• Rakuten Bank, in its present form, is positioned to benefit from rising interest rates in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio
• The proposed FinTech reorganization of the group around the bank should drive further potential shareholder benefits; higher ROE, lower customer acquisition costs, increased active account penetration and lower operating costs
• We believe that there will be effective governance checks and balances in place to ensure fair valuations of the FinTech segments pre-reorganization; we include our base valuations in this report

• Toyota Group and non-life insurances, which recently announced reductions in their policy shareholdings, are well-known for their large holdings, but a look at total asset ratios reveals a different aspect.
• Companies with high policy shareholdings relative to total assets have lower ROE and ROA as well as foreign ownership, market capitalization, and valuations.
• These companies with inconspicuously held policy shares are reluctant to take corporate governance initiatives and face many challenges in both board practices and key actions.

• M&A is now a core strategy for expansion among lifestyle retailers as depopulation shrinks the overall market. 
• Adastria is leading this trend, acquiring several businesses in the past year, and will now add variety stores from Welcome, the operator of Dean & Deluca, and a restaurant chain.
• It is also developing new product lines in categories as diverse as sexual wellbeing and home decor, all part of wider plans to become Japan’s “biggest general lifestyle retailer”.

• Sun Corp (6736 JP) for years has been a play on its investment holding in Cellebrite DI (CLBT US), brought to market in a $2.4bn SPAC deal announced 30Aug2021.  
• The SPAC entity was an entity called TWC Tech Holdings II Corp (TWC = “True Wind Capital”). The next day, Cellebrite DI (CLBT US) was born, trading up to US$11.00+.
• Sun Corp (6736 JP)‘s value realisation path had begun. Today, a True Winds entity announced a Partial Tender Offer – unsolicited, unannounced previously – on Sun Corp, for 19.0%.

• True Wind has launched a hostile partial tender offer for Sun Corp (6736 JP) for a minimum (3.8m) and maximum (4.2m) shares at JPY4,400, 19.2% premium to the undisturbed price.
• The offer was prompted by frustration with the Board’s lack of urgency in closing the disparity between Sun Corp’s market cap and the value of its Cellebrite DI (CLBT US) stake.
• The Board has three options: do nothing (low probability), find a white knight bidder (high probability), or commit to selling/distributing its Cellebrite stake (medium probability).

• While Marui’s credit card business now has in excess of ¥4 trillion in GTVs, its shopping buildings are also doing outperforming the mall sector.
• Sales for all 22 buildings rose 14.5% last year but as much as 24% at some buildings.
• This is the result of new tenants, more services and better marketing based on vast in-house data sources. This data-mining capability will get better and is unique to Marui.

• AViC upwardly revised its full-year FY24/9 earnings forecast at the time of its 1H earnings announcement, demonstrating renewed and accelerated growth after recovering from the temporary slowdown in growth caused by business conditions and funding difficulties among startups and other emerging companies in FY23/9.
• While many of its competitors are showing sluggish business performance, the Company has been able to pursue growth on its own by committing to improving both client advertising efficiency and in-house productivity through meticulous and data-driven business operations as well as executing its fast-paced Plan-Do-Check-Act (PDCA) cycle.
• Meanwhile, its share price has not risen in line with the boost in EPS, with the latest P/E ratio hovering around 20x based on the revised earnings forecast.

• Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. 
• Rohm’s operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.
• 1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.

• The “30% female board member goal” appears to be more about matching numbers with results rather than discussing the positive impact of diversity on the board.
• Over the past year, corporate governance improved only modestly for all listed companies, but few that improved their corporate governance raised the percentages of female board members and independent directors.
• Given the strong influence between improvements in governance and return on capital and foreign ownership, it’s difficult for a company to transform itself without the reach of overseas investor engagement.

• 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: MMG (1208 HK) US$1.2 billion rights issue. Shift Up (462870 KS) seeks to raise up to US$320 million.
• Event-Driven developments: Asia Cement China (743 HK), CPMC Holdings (906 HK), Chilled & Frozen Logistics Holdings (9099 JP),  Nagatanien Holdings (2899 JP), Teijin Ltd (3401 JP), Altium Ltd (ALU AU). 

• KANTSU Co., Ltd. (hereafter, “Kantsu”) is a warehouse logistics specialist providing comprehensive logistics services, including warehousing, inventory management, and delivery of products sold by e-commerce (EC) and catalog businesses, handling approximately 12 million shipments per year.
• The Company has also created a highly profitable business by selling its in-house developed IT systems that streamline operations to external customers.
• In terms of sales and profits, the Company’s two main drivers are its Logistics Services Business and IT Automation Business.

• Article discusses anchoring and insufficient adjustment in behavioral finance using Long Kansai Paint as an example
• Despite profits increasing, stock price remains low leading to valuation at an 8-year low
• Comparisons to global paint industry benchmarks show potential for KP to improve performance and valuation

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.

• Even with the 9% increase in share repurchases, the high level of cash on hand will likely be further built up, given the increase in cash flow.
• Companies that have increased their valuations over the past year have further increased their valuations by growing their traditionally high valuations and ROE and ROA.
• Cash allocation is a major challenge for all companies. Many companies have a payout ratio of 30%, and they have too much cash on hand relative to sales.

• Elliott Management has emerged as a 2%+ shareholder in SoftBank group and is driving for share buybacks of upto USD15bn; we see this as a game changer for minority shareholders
• Recent moves to enhance corporate governance in Japan have taken root, yet we see Softbank group as a laggard on corporate governance which been targeted by an experienced activist
• Softbank shares trade at a 54% discount to the estimated NAV; an activist like Elliott on board could meaningfully drive shareholder value creation and a narrowing of the NAV discount

• Last September, Toyota Motor (7203 JP) Group affiliate Aisin (7259 JP) said they would get rid of ALL their cross-holdings. That signalled a future sea change in Toyota intra-group relations.
• It meant all Toyota group companies could do that. The big moves started with a multi-party offering of Denso Corp (6902 JP) shares – Toyota, Toyota Industries, and Aisin sold.
• Then others. Then in March, Denso announced a 2.5yr selldown of ~¥460bn of Toyota Industries shares. That meant a TI buyback was likely. We got one. Now we have details.

• Activist short seller Scorpion alleges Lasertec is a “colossal fraud” and “ticking time bomb”
• Most of their allegations relate to problems with Lasertec’s EUV mask inspection tools
• Lasertec achieved Intel’s distinguished supplier ward for the past six years and last December landed an award from TSMC for  “Distinguished EUV Mask Inspection and Metrology Collaboration”. What gives?

• 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.
• There have been no TOPIX Inclusions in 2024 so far although dozens of companies have been able to meet the key Section Transfer requirements on paper for several months.
• However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

• After a strong 68% increase in share price in 2023, Saizeriya (7581 JP) has been trading range bound, and up 8% year-to-date in 2024. 
• Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.
• Japan’s operating profit is set to improve in the second half of the current fiscal year (ending August), and China’s strength will continue on the back of accelerating store openings. 

• Earnings rebound for FY3/25 – Q1-4 FY3/24 results missed guidance, with underperformance experienced in the Overseas and Marketing SaaS businesses.
• The core domestic Ad Platform business maintained a stable growth profile with its competitive technology and market position, and we believe will continue to act as the core earnings driver for the medium term.
• FY3/25 guidance points to a recovery profile YoY with high double-digit sales and earnings growth, with sustained growth in the domestic online ad market, customer acquisition in Marketing SaaS, and a recovery in the Overseas business through a combination of cross-selling activities and cost reductions.

• Food Group driving earnings – Q1-4 FY3/24 results were ahead of revised guidance for earnings, driven by solid growth at the Food Group with ‘Mister Donut’ chain restaurant experiencing increasing footfall and price hikes YoY.
• Profits were also boosted by lower- than-planned investment costs at the Direct Selling Group (due in part to delays), although this highlights the challenges of raising sales volume in this mature business.
• With the RFID investment project mostly complete, the company is in a position to benefit from cost savings YoY. 

• Following up on our earlier cross-shareholding notes, in this note we look at Sumitomo Mitsui Financial Group (8316 JP) cross-shareholding.
• SMFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$17bn.
• In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

• Sakura internet (3778 JP) is looking to raise US$127m from its primary follow-on. Proceeds will be used towards purchasing GPU servers, and constructing new data center facilities.
• While 11% of total shares outstanding are offered here, the deal would be easily digested by the market, representing just 0.8 days of its three month ADV.
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• Today, Maxell Ltd (6810 JP) announced its new MTMP “MEX26 – Commit to Value (CorporateValue,ProfitGrowth)” with lots of consultant-speak and corporate homily.
• But they present a capital investment plan, and a capital return plan. These may interest investors. The buyback is the same size as 2019 and 2022. They popped and faded.
• Todays tidbits were all announced during the lunch break today, and the stock popped 6% in the PM session on the news.

• Lasertec shares dropped nearly 8% following a scathing 53-page report by Scorpion Capital, accusing management of “colossal fraud.” 
• The SC report is shrill, in our view, and therefore, we think we add value by contributing a second opinion. 
• In our view, Lasertec is due for a correction even if SC’s report is inundated by hyperbole.

• Companies in the 0% to 8% ROE group have low stock valuations and are in trouble because they are unable to step into value-creating management.
• Companies in this group, which includes many prime market listed companies, have done what is required by Corporate Governance Code, but could not take action to increase their ROE.
• The lack of significant differences in corporate governance practices for group with ROEs above 10% is due to foreign ownership not being significantly differentiated from other groups.

• Registering record sales and earnings – Q1 FY12/24 results recorded the highest quarterly operating profit to date, demonstrating a brisk start to the FY.
• The core earnings driver was Wealth Consulting, chiefly in Business Succession which closed a large M&A transaction.
• The Real Estate Solutions business also saw strong sales growth (+24.2% YoY), driven by rental income and other real estate transactions, while the core ADVANTAGE CLUB (real estate fractional ownership product) saw flat sales YoY.