In today’s briefing:
- JIP Tender Offer for Toshiba (6502) Finally Here
- Toshiba – The Tender Arrives
- Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
- TRYT IPO: Down 25% and Upside Is Limited
- Nexteel IPO Book Building Results Analysis
- Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin
- Bots In The Backroom
- Southwest Airlines Company: 4 Key Factors Driving Their Future Growth – Financial Forecasts
- Enphase Energy Inc.: Expanded Distribution In Germany & Other Drivers
JIP Tender Offer for Toshiba (6502) Finally Here
- The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
- But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
- That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.
Toshiba – The Tender Arrives
- At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
- With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
- The question is whether there is any room for a small hike in the price as alluded to by the Chairman.
Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
- Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
- The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
- The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks.
TRYT IPO: Down 25% and Upside Is Limited
- TRYT’s shares started trading on TSE on 24th July. The IPO was priced at ¥1,200 per share and closed at ¥876 per share at the end of first day trading.
- The company’s shares are currently trading at around ¥900 per share, at a 25% discount to TRYT (9164 JP) ‘s IPO price.
- We recommended staying on the sidelines as the company’s IPO was overvalued and our DCF valuation suggests that shares are fairly valued at the current price.
Nexteel IPO Book Building Results Analysis
- Nexteel reported disappointing IPO book building results from institutional investors. The IPO price has been confirmed at 11,500 won which is at the low end of the IPO valuation range.
- A total of 700 institutions participated, with a demand ratio of 236 to 1. It is scheduled to be listed on the KOSPI exchange on 21 August.
- Despite the weak IPO book building results, we maintain our positive view of the Nexteel IPO. Our base case valuation of Nexteel is implied market cap of 485.8 billion won.
Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin
- 1Q sales growth was strong, but the operating margin was squeezed by the cost of overseas expansion.
- The company’s finances remains very strong, but balance sheet ratios reflect the loss of earnings momentum and the dividend payout remains low.
- Shares sold off on margin contraction, but valuations still high. A quick rebound cannot be taken for granted.
Bots In The Backroom
- In the aftermath of a stellar third-quarter earnings release, Symbotic, a warehouse automation company, exceeded the expectations of even the most bullish earnings forecasts.
- Propelled by the encouraging financial performance, the company’s stock value skyrocketed to over $62 per share, catapulting the company’s market cap to over $35 billion.
- There are several reasons to be optimistic, given that the company is riding multiple tailwinds.
Southwest Airlines Company: 4 Key Factors Driving Their Future Growth – Financial Forecasts
- Southwest Airlines managed to exceed analyst expectations in terms of revenue as well as earnings.
- The demand environment, particularly for leisure travel, is resilient as it sees solid bookings all over this busy summer travel season.
- We give Southwest Airlines a ‘Hold’ rating with a revised target price.
Enphase Energy Inc.: Expanded Distribution In Germany & Other Drivers
- Enphase delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus in earnings.
- Enphase shipped 50,000 microinverters in the quarter from two of its contract manufacturers, Foxconn in Wisconsin and Flex in South Carolina.
- This was a solid quarter for the company’s international revenue mainly due to the growth in Australia and Europe.
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