In today’s briefing:
- Arteria Networks (4423) Tender Launches 5 July.
- Toyo Construction (1890) Plans Governance Review, Promises Neutrality on a YFO TOB Proposal Decision
- Rakuten: An Attractive Value Opportunity After 80% Value Decline in 8 Years
- Kao (4452) | Is It Time to Buy This Dividend Aristocrat?
- Yachiyo Industry (7298 JP): Honda’s Pre-Conditional Tender Offer
- EQD | Nikkei 225 (NKY) WEEKLY Rising but May Encounter Short-Term Resistance
- TRYT IPO: Margins on a Downward Trend
Arteria Networks (4423) Tender Launches 5 July.
- Seven weeks ago, Marubeni Corp (8002 JP) and Secom Co Ltd (9735 JP) announced a joint deal to acquire the rest of ARTERIA Networks Corp (4423 JP).
- As I wrote in the previous piece, the premium was good, but the price was not great. The Board rejected the price, then agreed when the bidders wouldn’t go further.
- Now we have a deal and the Tender Offer starts 5 July. It was cheap to start. It’s still too cheap. But this one is tough to block.
Toyo Construction (1890) Plans Governance Review, Promises Neutrality on a YFO TOB Proposal Decision
- The Nikkei has an article today with details of an interview with new Toyo Construction (1890 JP) Chairman Yoshida and President Obayashi. There will be a 2-3 month governance review.
- It will review decision-making process, “profit management” (利益管理), and business investment decisions (事業への投資判断). Chairman Yoshida had a quote on neutrality on a YFO proposal. My wording there was carefully chosen.
- The President also said they expect ongoing synergies with Infroneer, and will maintain MTMP/Mitsui OSK Partnership management plans. Their words were chosen carefully too.
Rakuten: An Attractive Value Opportunity After 80% Value Decline in 8 Years
- Rakuten Group (4755 JP), having experienced an 80% decline in value over the last 8 years, now emerges as an enticing prospect for value investors.
- The combined fair value of Rakuten’s Cards, Bank, and Mobile businesses now surpasses 100% of the company’s market capitalization.
- Rakuten Ichiba, valued at ¥600bn, appears significantly undervalued when compared to ZOZO Inc (3092 JP) and MonotaRO Co Ltd (3064 JP), which hold approximately 2.0x Rakuten Ichiba’s valuation.
Kao (4452) | Is It Time to Buy This Dividend Aristocrat?
- Kao has the lonest period of consecutive earnings growth in the Nikkei’s new “Consecutive Dividend Growth Stock Index”
- With a 2.8% yield and a long history of raising its dividend, Kao should definitely be on the income investor’s radar screen
- Despite the recent underperformance of the stock (-4% ytd), Kao does not represent compelling valuations
Yachiyo Industry (7298 JP): Honda’s Pre-Conditional Tender Offer
- Yachiyo Industry (7298 JP) has recommended Honda Motor (7267 JP)’s pre-conditional tender offer of JPY1,390 per share, a 17.5% premium to the undisturbed price.
- Post-Completion, Honda will transfer a 81% stake to Samvardhana Motherson Automotive Systems Group BV. The pre-conditions relate to various country approvals (China, the US, Brazil, and India).
- The offer is expected to open in October. Achieving the 66.67% minimum ownership ratio requires a 32.6% minority acceptance rate which is doable as the offer is reasonable.
EQD | Nikkei 225 (NKY) WEEKLY Rising but May Encounter Short-Term Resistance
- Good probability of reversal (>60%) for the Nikkei 225 (NKY INDEX)if closing this week up and/or if market price reaches => 34033 intra-week (better: => 34255).
- Index can go a bit higher but first will probably consolidate/digest the latest rally from April. Expect non-directionality. If WEEKLY rally lasts =>3 weeks, place high-probability SHORT trade.
- A pullbackbelow 33189.04 (last WEEKLY Close) seems unlikely this week. In case, buy-the-dips until the price reaches 32586 (Q2 barrier). Past that point the market could sink <= 31750.
TRYT IPO: Margins on a Downward Trend
- TRYT Group is engaged in job placement and temporary staffing in the medical and welfare fields. The company has filed for an IPO and plans to raise around $450m.
- The company’s top line has continued to expand; however, margins have continued to narrow down over the last 3-4 years.
- We remain concerned over the company’s growth prospects and would only recommend subscribing if the IPO is priced attractively.
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