Japan

In today’s briefing:

J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic
Piolax (5988 JP): Murakami Becomes a Substantial Shareholder
Appier (4180) | The Hidden Gem in AI Marketing
Qb Net Holdings (6571 JP): Full-year FY06/24 flash update
Sun* (4053 JP): 1H FY12/24 flash update
FaithNetwork Co Ltd (3489 JP): Q1 FY03/25 flash update
Ferrotec Corp (6890 JP): Q1 FY03/25 flash update
Hikari Tsushin (9435 JP): Q1 FY03/25 flash update and dividend forecast revision
Impress Holdings (9479 JP): Q1 FY03/25 flash update

J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.

JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.

JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic

JTower (4485 JP) has recommended a tender offer from DigitalBridge Group (DBRG US) at JPY3,600, a 161.8% premium to the undisturbed price of JPY1,375 (13 August).
Despite the hefty takeover premium, the offer is light (compared to historical trading ranges and the recent placement) and opportunistically timed (the share price has fallen 61% since 9 May).
Nevertheless, barring a spurt of activism, the offer should succeed as the required 40.7% minority acceptance rate is not onerous and should be comfortably met by Japanese cross-holders.

Piolax (5988 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entities, City Index Eleventh and City Index Third, reported a 5.05% position in Piolax Inc (5988 JP). The purchases were from 11 June to 6 August over 60 days.
Murakami’s average buy-in price over the last 60 days was JPY2,286.61 per share, a 0.7% discount to the last close price.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. The former is likely as Piolax is cash-rich with a P/B less than 1x.

Appier (4180) | The Hidden Gem in AI Marketing

Appier achieved 32% YoY sales growth in Q2, driven by strong US market performance and balanced revenue from both new and existing customers.
The company’s EBITDA margin improved to 13%, reflecting strong operating leverage despite ongoing investments in growth initiatives.
Trading at a 2.9x EV/FY25 revenue multiple, Appier is undervalued relative to peers, with significant upside potential from sustained growth and strategic initiatives.

Qb Net Holdings (6571 JP): Full-year FY06/24 flash update

Full-year FY06/24 revenue increased 8.8% YoY to JPY24.8bn, driven by higher domestic revenue, despite a 1.1% YoY decline in operating profit.
FY06/25 earnings forecast projects revenue of JPY25.7bn (+3.8% YoY) and operating profit of JPY1.9bn (-10.2% YoY), prioritizing salon expansion.
The company opened 20 new salons and closed 30, resulting in a net decrease of 10 salons to 691.

Sun* (4053 JP): 1H FY12/24 flash update

Revenue: JPY6.5bn (+6.5% YoY), Operating profit: JPY727mn (-15.6% YoY), Recurring profit: JPY697mn (-31.7% YoY).
Number of recurring revenue customers at end-Q2: 127 companies (+9.5% YoY), Monthly ARPU in Q2: JPY5,080,000 (-4.5% YoY).
Revenue for Creative & Engineering service line: JPY5.7bn (+7.4% YoY), Talent Platform service line: JPY451mn (+3.2% YoY).

FaithNetwork Co Ltd (3489 JP): Q1 FY03/25 flash update

Sales increased to JPY2.0bn (+46.2% YoY), but operating loss widened to JPY425mn, with recurring loss at JPY1.8bn.
Real Estate Investment Support segment sales rose 50.6% YoY, but operating loss widened to JPY469mn.
Real Estate Management segment sales grew 18.7% YoY, with operating profit up 129.4% YoY to JPY44mn.

Ferrotec Corp (6890 JP): Q1 FY03/25 flash update

Q1 FY03/25 results: Sales JPY61.1bn (+16.9% YoY), Operating profit JPY7.0bn (-1.4% YoY), Recurring profit JPY8.2bn (+7.7% YoY), Net income JPY4.8bn (+11.6% YoY).
Segment sales: Semiconductor Equipment-related JPY39.9bn (+33.6% YoY), Electronic Device JPY10.0bn (+8.7% YoY), Automotive-related JPY5.8bn (-21.2% YoY), Others JPY5.4bn (-7.4% YoY).
Revised 1H FY03/25 forecast: Sales JPY120.0bn (+13.8% YoY), Operating profit JPY13.0bn (-0.3%), Recurring profit JPY14.5bn (-4.7% YoY), Net income JPY8.5bn (+1.3% YoY).

Hikari Tsushin (9435 JP): Q1 FY03/25 flash update and dividend forecast revision

The company reported revenue of JPY146.2bn (+4.3% YoY) and operating profit of JPY27.2bn (+13.6% YoY) in Q1 FY03/25.
Effective Q1 FY03/25, the company adopted a new segmentation with seven reportable segments, retroactively adjusted for Q1 FY03/24.
Financial income was JPY35.1bn (+68.8% YoY), and the company decided to pay a quarterly dividend of JPY156 per share.

Impress Holdings (9479 JP): Q1 FY03/25 flash update

Revenue: JPY3.2bn (-3.5% YoY), Operating loss: JPY185mn, Recurring loss: JPY161mn, Net loss: JPY175mn.
Content Business: Revenue from publishing and electronic publishing declined; Internet Media services revenue increased; Solutions business revenue increased.
Platform Business: Revenue rose due to robust sales of partner publishers’ electronic publications and books; operating profit decreased.

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Aug 14

Daily Brief Japan: Sun Corp, Softbank Group, ASICS Corp, LaKeel, TSE Tokyo Price Index TOPIX, AI Inside, Nitta Gelatin, Toyo Ink SC Holdings, Toyo Kanetsu K K, Nanocarrier and more

In today’s briefing:

To Tender Or Not – Gauging The Future of Sun Corp (6736)
Softbank (9984 JP): The NAV Discount High Offers an Investment Opportunity
Asics (7936) | Raceing Ahead—But Can They Keep Pace?
LaKeel (4074 JP): 1H FY12/24 flash update
Smaller PE Funds May Have Opportunities to Invest in MBOs of TSE Growth Market Companies
AI Inside (4488 JP): Q1 FY03/25 flash update
Nitta Gelatin (4977 JP): Q1 FY03/25 flash update
Toyo Ink SC Holdings (4634 JP): 1H FY12/24 flash update
Toyo Kanetsu K K (6369 JP): Q1 FY03/25 flash update
Nanocarrier (4571 JP): Q1 FY03/25 flash update

To Tender Or Not – Gauging The Future of Sun Corp (6736)

The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.

Softbank (9984 JP): The NAV Discount High Offers an Investment Opportunity

By Victor Galliano

The announcement of JPY500bn share buybacks is a positive for SoftBank group minority shareholders, and confirms the positive impact of the emergence of Elliott as an activist shareholder
The combination of the big weighting of Arm Holdings in the group’s equity value and the impact of the appreciating JPY has driven the NAV discount to very high levels
Much bad news seems priced in following the market turbulence; we remain positive on Softbank shares as they trade at a historically high 57%+ discount to the estimated NAV

Asics (7936) | Raceing Ahead—But Can They Keep Pace?

Strong Q2 performance: Asics delivered impressive profit growth and margin improvement, exceeding expectations with operating profit surging 119% YoY to 25 billion yen.
Market share gains: Asics continues outpacing Nike across key regions, with strong growth in Japan, Europe, China, and the US, driven by Sportstyle and Performance Running.
Bullish outlook, limited upside: Recent guidance revision and current FX rates cap near-term gains; stock trades at 19x NTM EV/EBIT with 15% upside to fair value.

LaKeel (4074 JP): 1H FY12/24 flash update

Revenue: JPY4.2bn (+12.3% YoY), EBITDA: JPY653mn (+39.5% YoY), Operating profit: JPY437mn (+49.8% YoY), Recurring profit: JPY424mn (+47.5% YoY), Net income: JPY287mn (+49.3% YoY).
Product Services revenue: JPY2.4bn (+12.9% YoY), Professional Services revenue: JPY1.8bn (+11.7% YoY), licenses: JPY233mn (+110.6% YoY), subscriptions (LaKeel products): JPY568mn (+22.4% YoY).
LaKeel product user companies: 344 (+15.8% YoY), ARPU: JPY291,000 (+9.0% YoY), one-time revenue: JPY193mn (+250.4% YoY), recurring revenue: JPY1.6bn (+3.0% YoY).

Smaller PE Funds May Have Opportunities to Invest in MBOs of TSE Growth Market Companies

TSE growth market, which institutional investors distance themselves from due to its low liquidity, is a market where gamblers who focus on price movements gobble up one IPO after another.
To convert users from gamblers to investors, companies with long-term growth potential should be listed. Raising the market capitalization criteria for Growth Market could improve the quality of IPOs.
Meanwhile, in order to improve the quality of the TSE Growth Market, existing listed companies should consider going private through an MBO.

AI Inside (4488 JP): Q1 FY03/25 flash update

Revenue in Q1 FY03/25 increased 3.7% YoY to JPY1.0bn, with DX Suite user licenses rising to 2,877.
Gross profit rose 6.4% YoY to JPY830mn, while SG&A expenses increased 9.3% YoY to JPY781mn, reducing operating profit by 25.2%.
Q1 progress rates for FY03/25 forecasts were 22.0% for revenue, 12.2% for operating profit, 11.2% for ordinary profit, and 0.3% for net income.

Nitta Gelatin (4977 JP): Q1 FY03/25 flash update

Revenue was JPY10.4bn (+10.4% YoY), operating profit JPY1.0bn (+111.2% YoY), recurring profit JPY1.4bn (+86.2% YoY), net income JPY616mn (+148.4% YoY).
Achievement rates against full-year forecast: 26.6% revenue, 34.4% operating profit, 46.0% recurring profit, 38.5% net income.
Revenue by category: Gelatin JPY7.7bn (+9.6% YoY), collagen peptides JPY1.7bn (+22.6% YoY), food materials JPY854mn (-4.3% YoY), biomedical JPY80mn (+33.3% YoY).

Toyo Ink SC Holdings (4634 JP): 1H FY12/24 flash update

1H FY12/24 results: Sales JPY172.3bn (+12.1% YoY), Operating profit JPY10.6bn (+122.0% YoY), Net income JPY9.4bn (+143.5% YoY).
Segment performance: Colorants & Functional Materials sales JPY43.8bn (+11.3% YoY), Polymers & Coatings sales JPY42.6bn (+17.3% YoY), Packaging Materials sales JPY44.3bn (+9.9% YoY).
Revised FY12/24 forecast: Sales JPY355.0bn, Operating profit JPY20.0bn, Net income JPY16.5bn, EPS JPY311.12, Annual dividend forecast JPY100.

Toyo Kanetsu K K (6369 JP): Q1 FY03/25 flash update

Revenue increased YoY in Logistics Solutions, declined in Plant Business; operating profit driven by Logistics Solutions’ strong performance.
Q1 FY03/24 extraordinary gains of JPY519mn included flood damage losses; Q1 FY03/25 extraordinary losses were JPY10mn.
Revised FY03/25 forecast: revenue JPY59.5bn, operating profit JPY3.9bn, recurring profit JPY4.1bn, net income JPY2.8bn.

Nanocarrier (4571 JP): Q1 FY03/25 flash update

The company reported no sales in Q2 FY03/23, with operating and recurring losses narrowing YoY due to decreased SG&A expenses.
The company shifted its focus to mRNA drug candidates and IP licensing, enhancing collaborations and research progress.
The company ended its fertility treatment support business in May 2024 and ceased sales of Depth products in December 2022.

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Aug 13

Daily Brief Japan: Recruit Holdings, Nippon Paint Holdings, Tokio Marine Holdings, Alfresa Holdings, MARUKA FURUSATO , Medinet Co Ltd, Minato Holdings, Kringle Pharma Inc, J Trust Co Ltd, Resorttrust Inc and more

By Shifara Samsudeen, ACMA, CGMA

In today’s briefing:

Recruit: Labour Markets Continue to Trend Down, but Recruit’s Efforts Pay Off in 1Q
Nippon Paint (4612 JP): Stable Execution in 2Q24; Outlook Unchanged
Tokio Marine Holdings – Net Profit +54% YoY, Non Life Premiums & Investment Income Are Drivers
Alfresa Holdings (2784 JP): Stellar Bottomline Growth in Q1FY25 Will Not Be Replicated in Near-Term
MARUKA FURUSATO (7128 JP): 1H FY12/24 flash update
Medinet Co Ltd (2370 JP): Q3 FY09/24 flash update
Minato Holdings (6862 JP): Q1 FY03/25 flash update
Kringle Pharma Inc (4884 JP): Q3 FY09/24 flash update
J Trust Co Ltd (8508 JP): 1H FY12/24 flash update
Resorttrust Inc (4681 JP): Q1 FY03/25 flash update

Recruit: Labour Markets Continue to Trend Down, but Recruit’s Efforts Pay Off in 1Q

Recruit Holdings (6098 JP) ’s share price has been up more than 40% YTD driven by better-than-expected earnings and an announcement to buy back ¥600bn worth shares.
The company’s 1Q earnings beat consensus and showed some recovery across all business segments, however, the labour markets are heading towards a decline.
It seems that the company has run out of investment options, and we would not rush to make an entry as worst is not over yet for the company.

Nippon Paint (4612 JP): Stable Execution in 2Q24; Outlook Unchanged

By Steve Zhou, CFA

Nippon Paint Holdings (4612 JP)‘s 2Q24 was largely uneventful, with sales up 5.4% yoy and net profit up 7.3% yoy.
Management maintained its full-year guidance of Y184bn operating profit target in 2024 (10% growth vs. 2023).
China was a bright spot with operating profit up 30% yoy and made up 35% of total operating profit of the company.

Tokio Marine Holdings – Net Profit +54% YoY, Non Life Premiums & Investment Income Are Drivers

By Daniel Tabbush

Giant Japan insurer reports staggering June 2024 quarter YoY growth, not only from securities gains, but also strong delta in core premiums written
Weak life insurance premiums is more than offset with well controlled costs, non-life premium income, investment income
Acceleration of cross-shareholding disposals can keep income high, with AFS totaling JPY13.8 trillion with unrealized gains of JPY2.8 trillion

Alfresa Holdings (2784 JP): Stellar Bottomline Growth in Q1FY25 Will Not Be Replicated in Near-Term

By Tina Banerjee

Alfresa Holdings (2784 JP) reported just 2% YoY revenue growth to ¥722B in Q1FY25. However, with 24bps gross profit margin expansion to 6.98%, operating and net profits outpaced revenue growth.
Alfresa reiterated H1FY25 and FY25 guidance. This calls for mixed financial performance in Q2FY25, with topline growth and bottomline deterioration. Decline in profit is mainly due to higher SG&A expenses.
Anticipating lower profit this fiscal, the company has guided for dividend of ¥63 per share, compared with ¥70 per share paid in FY24.

MARUKA FURUSATO (7128 JP): 1H FY12/24 flash update

Revenue decreased to JPY78.8bn (-7.4% YoY), operating profit fell to JPY1.7bn (-46.5% YoY), and recurring profit dropped to JPY2.2bn (-40.5% YoY).
Domestic machinery sales fell 18.9% YoY, overseas machinery sales declined 35.4% YoY, and equipment tools sales in Japan decreased 1.5% YoY.
Revenue in the Construction Products segment was JPY21.8bn (-1.6% YoY), with segment profit at JPY745mn (-26.0% YoY).

Medinet Co Ltd (2370 JP): Q3 FY09/24 flash update

Sales increased by 19.8% YoY to JPY589mn, while operating, recurring, and net losses narrowed compared to Q3 FY09/23.
Gross profit rose 52.4% YoY to JPY107mn; SG&A expenses decreased by 1.2% YoY to JPY1.1bn.
Specified Cell Products Manufacturing and CDMO businesses saw sales growth, but segment loss widened due to higher sales expenses.

Minato Holdings (6862 JP): Q1 FY03/25 flash update

Revenue: JPY4.7bn (-4.4% YoY), Operating profit: JPY53mn (-83.2% YoY), Recurring profit: JPY63mn (-81.5% YoY), Net income: JPY37mn (-95.9% YoY).
Digital Device Business revenue: JPY2.4bn (+21.4% YoY), Operating profit: JPY361mn (+61.2% YoY), OPM: 14.8%.
Digital Engineering Business revenue: JPY635mn (-21.0% YoY), Operating loss: JPY84mn, ICT Products Business revenue: JPY1.5bn (-7.7% YoY), Operating loss: JPY11mn.

Kringle Pharma Inc (4884 JP): Q3 FY09/24 flash update

**Q3 FY09/24 Financial Results:** Revenue JPY61mn (+19.3% YoY), operating loss JPY580mn, net loss JPY518mn, total assets JPY2.9bn.
**Revised FY09/24 Forecast:** Sales JPY79mn, operating loss JPY1.0bn, recurring loss JPY940mn, net loss JPY942mn, net loss per share JPY147.23.
**Financial Position Changes:** Current assets JPY2.9bn, current liabilities JPY84mn, fixed liabilities JPY517mn, net assets JPY2.3bn, capital stock JPY516mn.

J Trust Co Ltd (8508 JP): 1H FY12/24 flash update

Operating revenue increased by JPY11.9bn YoY to JPY65.4bn (+22.2% YoY), driven by growth in financial and real estate businesses.
Operating profit decreased by JPY7.5bn YoY to JPY2.1bn (-78.4% YoY), with significant declines in the Real Estate Business.
Profit attributable to owners of parent decreased by 83.6% to JPY2.8bn, impacted by deferred tax liabilities reversal and forex gains.

Resorttrust Inc (4681 JP): Q1 FY03/25 flash update

Q4 sees increased repair costs and reduced profits due to off-season and intensive facility repairs.
Sales and profits are higher in quarters when new hotels open, with deferred real estate value recorded as a lump sum.
Net income attributable to owners declined YoY due to a JPY1.8bn impairment loss, despite higher sales and operating profit.

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Aug 12

Daily Brief Japan: TSE Tokyo Price Index TOPIX and more

In today’s briefing:

To Be Selected by Global Investors as an Investment Target, Increasing Cash Flow Is Crucial

To Be Selected by Global Investors as an Investment Target, Increasing Cash Flow Is Crucial

The positive impact of increased dividends must be discounted because seniors, who receive most dividends, are non-working generations and are more vulnerable to the negative impact of rising consumer prices.
The high level of cash on hand should be used effectively for investments and shareholder returns. Looking at listed companies as a whole, both ROE and DOE are below FY2018.
Although the too-low dividend payout of Japanese companies have been corrected, the fact that ROE is still low means that few companies are chosen as investment targets by global investors.

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Aug 11

Daily Brief Japan: Trend Micro Inc, Toyota Motor, Fuji Soft Inc, IHI Corp, Toyota Motor Corp Spon Adr, Micronics Japan, Oat Agrio, Advance Create, Tkc Corp and more

In today’s briefing:

Trend Micro (4704 JP): Evaluating the Privatisation Rumours
Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric
IHI (7013 JP): Buy Back in for Post-Crash Recovery
Toyota Motor Corporation: Investment In Future Technologies & Geographic Optimization Driving Our Optimism! – Major Drivers
Micronics Japan (6871 JP): 1H FY12/24 flash update
Oat Agrio (4979 JP): 1H FY12/24 flash update
Advance Create (8798 JP): Q3 FY09/24 flash update
Tkc Corp (9746 JP): Q3 FY09/24 flash update

Trend Micro (4704 JP): Evaluating the Privatisation Rumours

Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.

Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente

The trade in Toyota Motor (7203 JP)‘s Tender offer Buyback is to understand what YOU can do in your particular position.
Despite Swire Properties (1972 HK)‘s recent share buyback, Swire Pacific (A) (19 HK) is still preferable on a look-through P/B of 0.34x.
Kirin bumps the Offer for Fancl (4921 JP). Given market gyration, it may represent enough of a switching opportunity to let those who still object in principle to re-allocate elsewhere.

(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals were discussed this week on Smartkarma: KKR’s tilt for Fuji Soft (9749 JP); and Itochu’s Tenders Offers for Descente (8114 JP) and C.I. TAKIRON Corporation (4215 JP).
Key updates took place on Pacific Smiles (PSQ AU), Greatview Aseptic Packaging (468 HK), L’Occitane (973 HK), Fancl Corp (4921 JP), Shinko Electric Industries (6967 JP), and Isetan Singapore (ISET SP).

IHI (7013 JP): Buy Back in for Post-Crash Recovery

By Scott Foster

1Q results supported management’s full-year sales and profit guidance, which remains unchanged. Operating profit was up 2.7x YoY on a 17% increase in sales.
Total new orders received increased by only 4.2% YoY and fell short of sales, but Aerospace & Defense orders were up 35.5% and slightly exceeded sales.
Our own forecast – above management’s guidance this year with further growth next year – and our share price target are unchanged. 21% potential upside.

Toyota Motor Corporation: Investment In Future Technologies & Geographic Optimization Driving Our Optimism! – Major Drivers

By Baptista Research

Toyota Motor Corporation has released its financial results for the fiscal year ended March 2024, providing a comprehensive overview that reflects both the company’s recent successes and its strategic investments towards future growth.
In fiscal year 2024, Toyota reported robust financial performance with total vehicle sales reaching 9.443 million units, marking a 7.0% increase from the previous fiscal year.
This growth was largely propelled by escalated sales outside Japan, counterbalancing the dip in domestic sales due to shipment suspensions from Daihatsu Motor Company and Toyota Industries Corporation.

Micronics Japan (6871 JP): 1H FY12/24 flash update

Consolidated financial results for 1H FY12/24: Sales JPY26.2bn (+54.1% YoY), Operating profit JPY5.8bn (+229.4% YoY), Net income JPY3.7bn (+222.4% YoY).
Segment sales in Q2: Memory probe card sales JPY12.4bn (+124.1% YoY), Non-memory probe card sales JPY1.3bn (+66.8% YoY).
Full-year FY12/24 forecast: Sales JPY55.0bn (+43.6% YoY), Operating profit JPY11.6bn (+118.4% YoY), Net income JPY8.3bn (+101.1% YoY).

Oat Agrio (4979 JP): 1H FY12/24 flash update

Revenue in 1H FY12/24 decreased 4.2% YoY to JPY15.7bn, driven by weak performance in the agrichemicals field.
Operating profit in 1H FY12/24 decreased 38.5% YoY to JPY2.0bn, impacted by lower revenue and increased expenses.
Recurring profit and net income attributable to owners of the parent fell over 30% YoY but exceeded forecasts.

Advance Create (8798 JP): Q3 FY09/24 flash update

Revenue decreased JPY2.2bn YoY (-26.0% YoY) to JPY6.4bn, with significant declines in the Insurance Agency and Media businesses.
Operating loss decreased JPY26mn YoY to JPY610mn, with notable improvements in the Insurance Agency and Media businesses.
Full-year forecast revised: Revenue JPY9.5bn, Operating profit JPY200mn, Recurring profit JPY100mn, Net income JPY70mn, EPS JPY3.19.

Tkc Corp (9746 JP): Q3 FY09/24 flash update

Sales grew 2.4% YoY to JPY55.2bn, with Accounting Firm segment up 3.4% YoY and Local Government segment up 0.5% YoY.
Operating profit increased 1.9% YoY to JPY13.6bn, with Accounting Firm segment up 2.1% YoY and Local Government segment up 6.4% YoY.
Net income attributable to owners of the parent decreased 0.7% YoY to JPY9.7bn, despite overall sales and operating profit growth.

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Aug 10

Daily Brief Japan: Trend Micro Inc, Tokyo Electron, Fast Retailing, TSE Tokyo Price Index TOPIX, Euglena Co Ltd, Hosokawa Micron, Visco Technologies Corp, Elecom Co Ltd, Cyberlinks, G Tekt Corp and more

In today’s briefing:

Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
Tokyo Electron (8035 JP): Q1 FY03/25 flash update
Struggles in China Hurt Uniqlo’s Bottom Line
A New Type Of “Deemed Shareholding” Has Emerged!
Euglena Co Ltd (2931 JP): 1H FY12/24 flash update
Hosokawa Micron (6277 JP): Q3 FY09/24 Flash Update
Visco Technologies Corp (6698 JP): Q1 FY03/25 flash update
Elecom Co Ltd (6750 JP): Q1 FY03/25 flash update
Cyberlinks (3683 JP): 1H FY12/24 flash update
G Tekt Corp (5970 JP): Q1 FY03/25 flash update

Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?

A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?

Tokyo Electron (8035 JP): Q1 FY03/25 flash update

FY03/25 forecast: Revenue JPY2.30tn (+25.6% YoY), Operating profit JPY627.0bn (+37.4% YoY), Recurring profit JPY630.0bn (+36.0% YoY).
R&D investment plan: JPY1.5tn over FY03/25–FY03/29, with JPY253.0bn in FY03/25 for new development buildings and equipment.
Shareholder returns: JPY319.8bn total, including JPY79.9bn for share buybacks and JPY239.8bn for dividends.

Struggles in China Hurt Uniqlo’s Bottom Line

By Caixin Global

Uniqlo Co. Ltd.’s strategy of raising prices in the face of rising costs has taken a toll on the Japanese clothing retailer’s bottom line in China due to growing competition and thriftier consumers.
The fast-fashion chain’s Greater China profit and revenue both fell in local currency terms during the March-May period, dragged down by poor performance on the Chinese mainland and in Hong Kong, according to earnings results released last month by its parent company, Fast Retailing Co. Ltd. The results did not provide specific earnings figures for the period.
Fast Retailing attributed the poor performance to lackluster consumer appetite, unseasonal weather and an insufficient product lineup to satisfy local customer needs.

A New Type Of “Deemed Shareholding” Has Emerged!

For first time in 30 years, the fund is back, matching the demand of companies that want to reduce cross-holdings immediately and companies that want more time to sell cross-holdings.
If the voting rights of cross-shareholdings contributed to the fund are retained, corporate governance will remain an issue until the fund’s investment is terminated.
In reviewing recently filed annual securities reports, we often see cases where cross-held shares in more closely related companies are contributed to retirement benefit trusts instead of being sold.

Euglena Co Ltd (2931 JP): 1H FY12/24 flash update

Sales increased to JPY23.6bn (+3.7% YoY), operating profit reached JPY348mn, recurring profit JPY309mn, and net loss JPY267mn.
Biofuels segment sales dropped to JPY306mn (-66.0% YoY), with a segment loss of JPY251mn, reflecting the pilot plant’s closure.
Revised FY12/24 forecast: sales JPY48.0bn (+3.3% YoY), adjusted EBITDA JPY3.8bn (-71.0% YoY), sales forecast lowered by JPY2.0bn.

Hosokawa Micron (6277 JP): Q3 FY09/24 Flash Update

Orders decreased 8.4% YoY to JPY46.6bn, while order backlog declined 6.2% YoY to JPY41.9bn.
Powder Processing Equipment segment sales rose 11.1% YoY to JPY49.4bn, with segment profit up 5.5% YoY to JPY5.9bn.
Blown Film segment orders increased 46.1% YoY to JPY17.0bn, with segment profit up 141.4% YoY to JPY1.1bn.

Visco Technologies Corp (6698 JP): Q1 FY03/25 flash update

Q1 revenue increased by 27.4% YoY to JPY839mn, achieving an operating profit of JPY40mn and a recurring profit of JPY49mn.
Revised FY03/25 forecast: revenue JPY3.7bn (+16.1% YoY), operating profit JPY200mn, recurring profit JPY200mn, net income JPY13mn.
Company recorded JPY150mn in tender offer-related expenses in Q1 and will not distribute an annual dividend for FY03/25.

Elecom Co Ltd (6750 JP): Q1 FY03/25 flash update

Sales reached JPY27.6bn (+5.4% YoY), driven by mobile batteries, AC chargers, and beauty appliances from Tescom Denki Group.
Operating profit was JPY2.5bn (-25.2% YoY) due to a rise in SG&A expenses despite higher gross profit.
B2C sales were JPY18.8bn (+12.6% YoY), with e-commerce sales at JPY4.9bn (+21.5% YoY), and B2B sales at JPY8.8bn (-7.3% YoY).

Cyberlinks (3683 JP): 1H FY12/24 flash update

Revenue: JPY7.9bn (+3.4% YoY), recurring revenue: JPY3.9bn (+4.8% YoY), operating profit: JPY567mn (-0.9% YoY), net income: JPY333mn (+132.9% YoY).
Revenue: JPY2.3bn (+4.1% YoY), recurring profit: JPY341mn (-24.4% YoY), higher salaries and labor costs impacted profits.
Revenue: JPY2.1bn (+23.9% YoY), recurring profit: JPY161mn (+977.9% YoY), strong sales of high-priced handsets increased revenue and profit.

G Tekt Corp (5970 JP): Q1 FY03/25 flash update

Revenue increased 10.2% YoY to JPY86.8bn, with Japan leading at 31.9%, despite a 17.8% decline in China.
Operating profit rose 17.2% YoY to JPY3.1bn, driven by revenue growth, sales composition changes, and cost reductions.
Recurring profit and net income attributable to owners of the parent grew 9.4% and 11.5% YoY, respectively.

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Aug 09

Daily Brief Japan: Kyocera Corp, Fuji Soft Inc, Money Forward , Terumo Corp, en Japan Inc, Broadleaf, Epco Co Ltd, Neturen Co Ltd, Toyobo Co Ltd and more

In today’s briefing:

StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI
KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800
Money Forward (3994): A Must-Buy Amid Yen Volatility
Terumo Corp (4543 JP): Stellar Performance in Q1; Cost Control Measures Are Bearing Fruits
en Japan Inc (4849 JP): Q1 FY03/25 flash update
Broadleaf (3673 JP): 1H FY12/24 flash update
Epco Co Ltd (2311 JP): 1H FY12/24 flash update
Neturen Co Ltd (5976 JP): Q1 FY03/25 flash update
Toyobo Co Ltd (3101 JP): Q1 FY03/25 flash update

StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI

Barito Renewables Energy (BREN IJ) is down 19% in the past month. But still accounts for ~730% of parent Barito Pacific (BRPT IJ)‘s market cap. Still unsustainable.
Preceding my comments on the Barito complex AND the Kyocera Corp (6971 JP) / KDDI Corp (9433 JP) Holdco, are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation (sub/parent) >20%.

KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid

KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.

Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800

Following media reports, Fuji Soft Inc (9749 JP) announced a pre-conditional tender offer from KKR at JPY8,800 per share, a 1.0% discount to the last close price of JPY8,890 (8 August).
The pre-condition is approvals under competition laws of Japan, Vietnam and possibly Belgium. The offer is anticipated to commence in mid-September.
The offer is a knockout bid and the culmination of an auction process. The board’s recommendation and the irrevocables from activist shareholders ensure this deal is done.

Money Forward (3994): A Must-Buy Amid Yen Volatility

Amidst the volatility in the Japanese yen, companies like Money Forward, with a strong domestic revenue base and minimal exposure to forex risk, present an attractive investment opportunity.
Despite broader market uncertainties, Money Forward continues to demonstrate impressive growth, with its corporate ARR surging by 38% YoY in the most recent quarter, signaling sustained momentum.
The recent agreement to divest 49% of its non-core B2C segment, Money Forward ME, underscores the significant undervaluation of its core operations.

Terumo Corp (4543 JP): Stellar Performance in Q1; Cost Control Measures Are Bearing Fruits

By Tina Banerjee

Terumo Corp (4543 JP) has reported record high quarterly revenue and profit in Q1FY25, thanks to strong demand across all the business segments, effects of pricing measures, and favorable Fx.
With the steady progress in profit improvement measures, Q1FY25 gross profit margin (53.3%) reached to its highest level since Q2FY22. Operating and net profit growth outpaced that of revenue.
Amid currency uncertainties and inflation, Terumo has maintained its full-year FY25 guidance issued in May. Growth will be driven by US and Europe owing to the sustained increase in demand.

en Japan Inc (4849 JP): Q1 FY03/25 flash update

Sales decreased 1.5% YoY to JPY16.2bn, while operating profit increased 124.2% YoY to JPY1.7bn.
Cost of sales decreased 9.2% YoY to JPY3.2bn, and SG&A expenses declined 7.1% YoY to JPY11.3bn.
Overseas segment sales declined due to external factors, with a 43.8% YoY drop in operating profit to JPY135mn.

Broadleaf (3673 JP): 1H FY12/24 flash update

Revenue for 1H FY12/24 was JPY8.4bn, with an operating loss of JPY44mn and pre-tax profit of JPY16mn.
Cloud services revenue increased 63.4% YoY, while packaged systems revenue decreased 6.2% YoY.
Full-year FY12/24 earnings forecast revised: pre-tax profit to JPY100mn and profit attributable to owners of the parent to JPY90mn.

Epco Co Ltd (2311 JP): 1H FY12/24 flash update

Revenue for 1H FY12/24 was JPY2.8bn (+16.2% YoY), with operating profit at JPY173mn (+216.5% YoY).
Renewable Energy Service business revenue was JPY688mn (+27.2% YoY), with a recurring loss of JPY25mn.
Design Service business revenue was JPY1.1bn (+14.7% YoY), with recurring profit at JPY174mn (+33.3% YoY).

Neturen Co Ltd (5976 JP): Q1 FY03/25 flash update

Revenue increased by JPY13mn (+0.1% YoY), with Specialty Steel and Wire Products up JPY171mn (+1.9%) and Induction Heating down JPY158mn (-3.1%).
Operating profit rose by JPY124mn (+45.9% YoY), with Specialty Steel and Wire Products up JPY104mn and Induction Heating up JPY21mn (+7.3%).
Full-year FY03/25 forecast progress rates: 22.5% for revenue, 19.7% for operating profit, 26.1% for recurring profit, 23.4% for net income.

Toyobo Co Ltd (3101 JP): Q1 FY03/25 flash update

Sales increased JPY8.1bn (+8.4% YoY) due to higher sales in Films, Environment and Functional Materials, and Functional Textiles.
Operating profit rose JPY3.2bn, with increased profit in Films, Environment and Functional Materials, Functional Textiles, and Real Estate segments.
Biotechnology business sales and segment profit details are missing; pharmaceuticals contract manufacturing improved profitability after FDA warning letter close-out.

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Aug 08

Daily Brief Japan: Softbank Group, Fuji Soft Inc, T Gaia Corp, Resona Holdings, Beenos Inc, TSE Tokyo Price Index TOPIX, H2O Retailing, Ebara Foods Industry, Harmonic Drive Systems and more

In today’s briefing:

JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade
Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO
JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade
[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
Japanese Big Five Banks – Opportunity in the Face of Market Turmoil; Focus on Resona and Mizuho
Beenos Inc (3328 JP): Q3 FY09/24 flash update
If We Don’t Change the Way We Used to Do Things, We Cannot Embrace Diverse Values
H2O Retailing (8242 JP): Q1 FY03/25 flash update
Ebara Foods Industry (2819 JP): Q1 FY03/25 flash update
Harmonic Drive Systems (6324 JP): Q1 FY03/25 flash update

JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade

By Brian Freitas

There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).
The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.

Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO

Nikkei and Bloomberg report that Fuji Soft Inc (9749 JP) will be privatised through a KKR-sponsored MBO at a price just below JPY9,000, a 21.8% premium to the last close.
The rumoured privatisation proposal is the culmination of a sale process initiated by 3D Investment Partners, the largest shareholder, in September 2023.
The Board will meet tomorrow to discuss the proposal. The rumoured offer represents an all-time high and a knockout bid, suggesting a done deal if a binding proposal materialises.

JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade

Janaghan Jeyakumar, CFA who does the predictions for this index got 10/10 of his high conviction names, 8/10 of his medium conviction, and 50% of low conviction ADDs.
This year, there are fewer caps but some big ones. Nearly ¥500bn of capping flow to sell.
I see just over $6.3bn in buying and selling to be done. A half dozen names with both high ADV impact to buy and decent size.

[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure

Last year into early 2024, Fuji Soft Inc (9749 JP) – partially at the prodding of 3D Investment Partners – took in 4 subs and conducted a strategic review.
In January, I explored the situation here suggesting the stock had run, FujiSoft needed to liquidate more assets, but a PE firm would look at a valuation of ¥600bn.
Last night, the Nikkei reported that US PE Firm KKR planned to take Fuji Soft private with a TOB valued at ¥600bn. Limit up will take us to ¥560bn+.

Japanese Big Five Banks – Opportunity in the Face of Market Turmoil; Focus on Resona and Mizuho

By Victor Galliano

The sharp Japanese market correction has hit the banks hard, and heightened market volatility is likely to remain a feature, at least in the very near term
Nonetheless, the big five’s results in the first quarter to June-end paint a reassuring picture, and we see that BoJ is pausing on rate rises in these unsettled markets
Among the big five Japanese bank shares, we highlight Resona and Mizuho in particular for their strong gearing to higher interest rates; we are also positive on SMFG and Concordia

Beenos Inc (3328 JP): Q3 FY09/24 flash update

GMV increased 21.4% YoY to JPY85.7bn, while revenue decreased 7.7% YoY to JPY20.4bn, and operating profit fell 46.6% YoY to JPY1.4bn.
In Q3 FY09/24, GMV grew 21.4% YoY, with Global Commerce revenue up 21.3% YoY and Entertainment revenue up 6.8% YoY.
The company recorded an extraordinary gain of JPY1.0bn from the Value Cycle segment share transfer, impacting FY09/24 results.

If We Don’t Change the Way We Used to Do Things, We Cannot Embrace Diverse Values

The government only considers foreign personnel as labor force and accepts them in industries where labor is in short supply and places restrictions on their transfer to other industries.
Imposing a Japanese language test on long-term residents who are eligible to stay in Japan may result in the loss of opportunities to recruit talented foreign personnel.
The government has been unable to step forward to “respect human rights and share diverse values.” If Japanese people do not change, we will never be able to embrace diversity.

H2O Retailing (8242 JP): Q1 FY03/25 flash update

The company applied ASBJ Statement No. 29 in FY03/22, affecting revenue recognition and sales commissions, impacting financial metrics.
Department Store business saw increased gross sales and operating profit YoY, driven by domestic sales and inbound tourist expansion.
Supermarket business experienced flat sales YoY but a decline in operating profit due to higher personnel expenses.

Ebara Foods Industry (2819 JP): Q1 FY03/25 flash update

Q1 FY03/25 revenue was JPY11.9bn (+9.6% YoY); operating profit JPY725mn (-2.4% YoY); recurring profit JPY813mn (-0.7% YoY).
Food business revenue JPY10.0bn (+10.4% YoY); household-use products JPY7.2bn (+4.1% YoY); commercial-use products JPY2.8bn (+30.7% YoY).
Distribution business revenue JPY1.8bn (+5.2% YoY); segment profit JPY8mn (-65.2% YoY); Other businesses revenue JPY134mn (+13.6% YoY).

Harmonic Drive Systems (6324 JP): Q1 FY03/25 flash update

Q1 FY03/24 sales declined 13.4% YoY to JPY13.0bn, with an operating loss of JPY238mn and net loss of JPY283mn.
Orders increased 38.6% YoY to JPY7.4bn, driven by industrial robots and semiconductor production equipment, particularly in the Chinese market.
The company targets FY03/27 sales of JPY90.0bn and operating profit of JPY15.0bn, with significant capital investment and R&D expenditure planned.

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Aug 07

Daily Brief Japan: Toyota Motor, Alps Logistics, Fancl Corp, Nikkei 225, Daikin Industries, Sapporo Holdings, Wacom Co Ltd, TSE Tokyo Price Index TOPIX, AZ-Com Maruwa Holdings, Axell Corp and more

In today’s briefing:

Thinking About The Toyota Tender Offer Buyback
Go-To Arbs Amid Market Carnage
Fancl (4921 JP): Kirin (2503 JP) Relents and Bumps to JPY2,800
How Has the Index Rebalance Strategy Performed During Market Turmoil?
Daikin (6367) | Q1 Earnings: Frozen in Uncertainty
Sapporo Holdings: Investor Activism Sparks Short-Term Gains, Tax Reforms Ensure Long-Term Success
Wacom (6727 JP) – Preparing to Transition to a New Stage of Growth
The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though
AZ-Com Maruwa Holdings (9090 JP): Q1 FY03/25 flash update
Axell Corp (6730 JP): Q1 FY03/25 flash update

Thinking About The Toyota Tender Offer Buyback

In May when shares were trading near ¥3,500-3,600, Toyota announced a ¥1trln buyback. When shares fell, they announced a Tender Offer Buyback at a large discount (¥2,781/share).
Subsequently, the shares fell very sharply on Thursday 1 August, then again Friday and yesterday. That put shares WELL below the Tender Offer Price. That creates possible opportunity.
This insight discusses modalities (talk to your advisor for specific advice/info) who might do what and why. It sets parameters. But I think Toyota is cheap here.

Go-To Arbs Amid Market Carnage

As global market roil, clean M&A deals come into focus.
This insight briefly summarises those transactions in Asia/Oceania which are expected to comfortably complete, irrespective of the background noise.
Standout deals include APM Human Services (APM AU), Huafa Property Services Group (982 HK), Alps Logistics (9055 JP), I’Rom Group (2372 JP), and Arvida (ARV NZ).

Fancl (4921 JP): Kirin (2503 JP) Relents and Bumps to JPY2,800

Kirin Holdings (2503 JP) has increased the Fancl Corp (4921 JP) tender offer price by 4.1% to JPY2,800 and extended the offer period to 28 August. The price is final.
Kirin tried to get the required acceptances by refusing to bump and extending the offer period. However, these tactics failed, as the shares continued to trade above terms.
The Board twice asked Kirin to raise its offer higher than JPY2,800, but eventually recommended the revised offer. Nevertheless, the bump should be sufficient for Kirin to succeed.

How Has the Index Rebalance Strategy Performed During Market Turmoil?

By Brian Freitas

The market turmoil over the last few trading sessions has not been kind to a simple index rebalance strategy of buying the forecast adds and selling the forecast deletes.
The overall returns and stock specific returns indicate that trades are more crowded in some indices as compared to others and traders should consider that when position sizing.
Anecdotally, periods of negative returns are followed by periods of strong returns for the strategy as weak hands are shaken out of their positions.

Daikin (6367) | Q1 Earnings: Frozen in Uncertainty

Q1 Operating Profit -2% YoY; weaker than analyst consensus; Full year guidance unchanged but risk to the downside
Key concerns around EU and China remain in Q1. Both regions seeing zero top line growth and heat pumps have cratered
The stock price has declined 16% since our last note, underperforming Topix by around 6%. Valuation more supportive

Sapporo Holdings: Investor Activism Sparks Short-Term Gains, Tax Reforms Ensure Long-Term Success

By Oshadhi Kumarasiri

Sapporo Holdings (2501 JP)‘s strategic position in the domestic market, coupled with untapped potential in international markets, makes the company an interesting prospect for the long-term.
3D Investment Partners’ July 2024 letter praising Sapporo’s intention to divest its real estate business has reignited investor interest in Sapporo as a play focusing on Japan’s investor activism.
Therefore, Sapporo seems interesting both in the short term and long term, as we think shares could break out to a new high with trading volumes showing signs of improvement.

Wacom (6727 JP) – Preparing to Transition to a New Stage of Growth

By Astris Advisory Japan

Wacom is a technology company specializing in the development of graphic tablets (pen tablet products), pen displays (display products), and related digital interface solutions.
Leveraging its high reputation for its branded products, it is expanding in the OEM solutions market.
Due to changes in market structure driven by demand shifting towards general-purpose tablets and lengthening replacement cycles, Wacom is focused on improving its sales mix and earnings quality by developing a service-centric growth engine.

The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though

The cost is somewhat reduced for the user because of the higher weighting of more liquid stocks. Meanwhile, selling pressure is inevitable for less liquid companies whose weights are reduced.
Even if the number of stocks decreases, 1,200 stocks isn’t small number. Also, even though the market capitalization of the components has increased, approximately 73 billion yen isn’t sufficiently liquid.
With calls for increased engagement, the number of issues remains too large for domestic asset managers, where passive funds account for a high percentage of AUM.

AZ-Com Maruwa Holdings (9090 JP): Q1 FY03/25 flash update

Revenue increased by 4.5% YoY to JPY49.7bn, while operating profit decreased by 50.5% YoY to JPY1.9bn.
Logistics segment revenue was JPY49.0bn (+4.4% YoY) with operating profit of JPY2.4bn (-36.4% YoY).
Other segment revenue was JPY689mn (+14.1% YoY) with operating profit of JPY94mn (+32.4% YoY).

Axell Corp (6730 JP): Q1 FY03/25 flash update

Sales decreased to JPY4.1bn (-9.3% YoY), operating profit to JPY528mn (-32.0% YoY), and recurring profit to JPY521mn (-34.3% YoY).
Q1 FY03/25 results achieved 62.5% of 1H sales forecast, 88.0% of operating profit, and 86.8% of recurring profit.
Sales of products for pachinko and pachislot machines decreased YoY, with graphics LSI sales dropping by 20,000 units.

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Aug 06

Daily Brief Japan: Descente Ltd, Kokusai Electric , C.I. TAKIRON Corporation, CELSYS, Nikkei 225, Macnica Holdings Inc, Shofu Inc, I Net Corp and more

In today’s briefing:

Itochu (8001 JP) Launches Lowball TOB for Descente (8114) – Buying China on the Cheap
Kokusai Electric (6525): Global Index Inclusion Highly Dependent on Free Float
Itochu Buying Out Sub CI Takiron (4215) Below Book – Too Cheap And Weak Process/Transparency
Descente (8114 JP): Itochu’s (8001 JP) Light Pre-Conditional Offer
C.I.TAKIRON (4215 JP): Itochu’s (8001 JP) Light Tender Offer at JPY870
TOPIX Inclusions: Who Is Ready (August 2024)
Time to Buy Japan?
Macnica Holdings (3132 JP) – Q1 FY25 Results Update
Shofu (7979) – Solid Execution of Overseas Growth and Profitability Expansion
I Net Corp (9600 JP): Initial Coverage

Itochu (8001 JP) Launches Lowball TOB for Descente (8114) – Buying China on the Cheap

Today, Itochu Corp (8001 JP) announced it would launch a Tender Offer when approvals were received, to buy out minorities in Descente Ltd (8114 JP) at ¥4,350/share.
Itochu was buying at that price or higher, in the market, in October 2023. Earnings and book are up since then. Outlook for the Descente China Holdings affiliate? Great.
The valuation transparency is disappointing. Activists would have 3mos or so to push for more. But with friendly holders, they get very close to the minimum anyway.

Kokusai Electric (6525): Global Index Inclusion Highly Dependent on Free Float

By Dimitris Ioannidis

IPO lock-up expiry of Kokusai Electric (6525 JP) results in a forecasted increase in free float to 35% and fcap of $2.9bn for the August 2024 review.
Secondary offering of Kokusai Electric (6525 JP) results in a forecasted increase in free float to 60-65% and latest fcap of $3.4bn- $3.7bn for the November 2024 review.
Inclusion will be determined based on fcap against the fcap threshold. Fcap uncertainty for November is largely driven by stock price fluctuations and the Greenshoe Option.

Itochu Buying Out Sub CI Takiron (4215) Below Book – Too Cheap And Weak Process/Transparency

Itochu Corp (8001 JP) today announced another TOB to buy out minorities of a sub other than Descente Ltd (8114 JP). C.I. TAKIRON Corporation (4215 JP) at ¥870. A takeunder.
The stock was up a lot today I assume on news I didn’t see. Slightly lower than the close. Low EV/EBITDA multiple. Lacking transparency.
The Board is OK selling at below book, but if one takes out net cash, securities, net receivables, and inventory/materials of one quarter of sales, the rest is 0.54x book.

Descente (8114 JP): Itochu’s (8001 JP) Light Pre-Conditional Offer

Descente Ltd (8114 JP) has recommended a pre-conditional tender offer from Itochu Corp (8001 JP) at JPY4,350, 16.6% premium to the undisturbed price.
The pre-condition is approval under the competition laws of Japan and China. The offer is anticipated to commence in early November. In January 2019, Itochu completed a hostile partial offer.
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 price is light.

C.I.TAKIRON (4215 JP): Itochu’s (8001 JP) Light Tender Offer at JPY870

C.I. TAKIRON Corporation (4215 JP) has recommended a tender offer from Itochu Corp (8001 JP) at JPY870, a 9.7% premium to the undisturbed price of JPY793 (2 August).
The lower limit of the tender offer is set at a 10.97% ownership ratio. The tender offer runs from 6 August to 18 September, with payment from 26 September.
While attractive vs peer multiples, the offer is light due to a skinny takeover premium, an implied P/B below 1x, and 9% below the mid-point IFA DCF valuation.

TOPIX Inclusions: Who Is Ready (August 2024)

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.
SUNWELS Co (9229 JP) and Macbee Planet (7095 JP) moved to the Prime market in July 2024 which means there will TOPIX Inclusions at the end of August 2024.
Our pre-event pick CELSYS (3663 JP) has seen its price fall by more than 20% during the recent market sell-off and it is close to a key share price threshold.

Time to Buy Japan?

By Douglas Busch

Nikkei looking oversold on all daily, WEEKLY, and MONTHLY timeframes.
KWEB records strong bullish engulfing candle on weak overall tape Monday.
MELI versus AMZN ratio chart favoring the former. Technical complexion change.

Macnica Holdings (3132 JP) – Q1 FY25 Results Update

By Astris Advisory Japan

In line with the company’s plan –Semiconductors saw a lower segment OP margin (7.3% Q1 FY3/24, 4.0% Q1 FY3/25) with a revenue decline in profitable Industrial (-34.8 YoY) due to weakness in the semiconductor market.
Compared to the previous quarter, the segment OP margin declined (5.4% Q1 FY3/24, 4.0% Q1 FY3/25) with poorer sales due to a higher contribution from less-profitable Memory.
However, the revenue decline in Industrial was less pronounced (-2.7% QoQ), a sign of bottoming out.

Shofu (7979) – Solid Execution of Overseas Growth and Profitability Expansion

By Astris Advisory Japan

Q1 FY3/25 results were ahead of our expectations, with Shofu’s solid execution overseas, with overseas sales growth of 20.2% YoY, and making up 60.5% of the total.
Its competitive and high-margin Chemical products (CAD/CAM resin materials and restorative filling materials) grew 27.9% YoY and made up 32.6% of total sales (29.1% in Q1 FY3/24).
This combination of overseas growth and sales mix improvement resulted in a record-high quarterly OPM of 16.4%.

I Net Corp (9600 JP): Initial Coverage