In today’s briefing:
- Pasona Is Up Bigly. More To Come
- KOSAIDO Holdings (7868) – Showcasing Growth Through Competitive Advantage
- Hamamatsu Photonics (6965 JP): Buy into Current Weakness
- Aercap (AER US, BUY, TP:US$81.45): Current Market Value Exceeds Book Value
Pasona Is Up Bigly. More To Come
- After M3 Inc (2413 JP) announced an intention to buy 51.16%-55.00% of Benefit One Inc (2412 JP) via a partial Tender Offer at ¥1,600, Pasona Group (2168 JP) took off.
- Now Dai Ichi Life Insurance (8750 JP) has countered with an unsolicited ¥1,800/share Offer of Equity Value; TOB followed by a Benefit One buyback to mop up Pasona’s stake.
- The big news is how tax would be applied under Dai Ichi’s deal structure, which should see Pasona’s net proceeds significantly exceed those under M3’s Offer.
KOSAIDO Holdings (7868) – Showcasing Growth Through Competitive Advantage
- Capitalizing on growth opportunities – Q1-2 FY3/2024 results were ahead of company guidance, driven by the Funeral Services segment, as attendee numbers and refreshment sales grew, and new funeral hall openings saw higher than expected utilization rates.
- We believe this indicates the strong competitive positioning the company has as the market-leading funeral services operator in the Tokyo metropolitan area.
- With effective cost control in the Information and HR segments, the company has high earnings visibility and raised FY3/2024 company guidance, as well as increasing the planned dividend payout ratio to 32.5% from 30%.
Hamamatsu Photonics (6965 JP): Buy into Current Weakness
- The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.
- Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that.
- Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.
Aercap (AER US, BUY, TP:US$81.45): Current Market Value Exceeds Book Value
- IBA (leading airline intelligence and appraisers) analysis suggests aircraft shortage will persist over the mid-term, pushing rates for newbuilds and especially mid-life assets much higher
- Our TP of US$81.45 is premised on 0.94x 2024 P/BV, but it is evident that accounting book value is significantly below current market values, implying a higher fair value
- Stay invested, the upcoming 4Q23 results will uncover earnings boost from off-hire aircraft extension at premium rates, elevating Aercap’s attractiveness
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