In today’s briefing:
- Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder
- Kagome (2811) – Well-Flagged Slightly Dilutive Equity Financing for High ROIC Purchase
- Chiba Bank – Short Term Borrowing Surges, Just at the Wrong Time
- Miroku Jyoho Service (TSE:9928)
- Clues to Management Change Are % Independent Directors and …..
- Avant Group Corporation (TSE:3836)
- Quick Look – PCI Holdings (3918 JP)
- D. Western Therapeutics Institute (DWTI) (4576 JP) – New Fundraising Secured in June
- Geechs (7060 Jp) – Indispensable Company for Solving Japan’s Shortage of IT Human Resources
Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder
- Murakami’s entity, City Index Eleventh, and daughter reported a 5.46% position in Exedy Corp (7278 JP). The shares purchases began two days after the Aisin (7259 JP) secondary offering.
- Murakami’s average buy-in price is JPY2,607.30 per share, 2.3% higher than the recent secondary offering price of JPY2,549.
- Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. Recent precedents suggest the latter.
Kagome (2811) – Well-Flagged Slightly Dilutive Equity Financing for High ROIC Purchase
- In January, Kagome Co Ltd (2811 JP) announced an acquisition of an additional 50% stake in a US equity affiliate. It is transformational. Incremental ROIC is truly excellent.
- At the time, they said they’d finance the purchase with a bridge loan but would sell treasury shares for ¥25bn or less to cover it. They announced the shelf then.
- Friday they announced the Offering. Today shares fell 8+%. This is now cheap.
Chiba Bank – Short Term Borrowing Surges, Just at the Wrong Time
- Short term borrowing rose 2.3x in the past four quarters, alongside rising interest rates
- During this time, long term borrowings were actually down, so no locking in of low rates
- As such, Chiba is not fully, or hardly benefiting from BOJ policy changes, with NIM down
Miroku Jyoho Service (TSE:9928)
- Miroku Jyoho Service (TSE:9928) , which offers on-premises, hybrid (IaaS) and cloud accounting software to Japanese enterprises of various sizes.
- Our purchase is centred around the business achieving further transition to the cloud, allowing for substantial margin improvement through the accumulation of high gross margin SaaS revenue.
- This transition has impacted firm profitability in the short term due to the shift in revenue recognition as quoted below by the company
Clues to Management Change Are % Independent Directors and …..
- Companies with low valuations have lower ROE, ROA, and foreign ownership as well as inferior board practices and key actions. Conversely, companies with high valuations show the opposite relationship.
- Over the past year, companies that increased their valuations were those with already high valuations, return on capital and foreign ownership that further improved their earnings and increased their valuations.
- This suggests that companies that have begun to make progress in management reform by improving board operations and clarifying management policies through engagement by overseas investors have achieved positive results.
Avant Group Corporation (TSE:3836)
- Avant was founded in 1997 by the current CEO Tetsuji Morikawa and is a Japanese holding company of financial and non-financial software which have the collective goal of assisting its clientele to increase corporate value.
- This includes ‘Diva’ as Japan’s foremost (43% market share) consolidated accounting software and board meetings platform in addition to ‘Avant’, a management system for corporate value enhancement through consolidation of information (Avant Cruise) , charting (Avant Chart) , and corporate value enhancement (Avant Compass).
- Lastly, there is ‘Zeal’ which includes several non-financial platforms that help organise and integrate (with Avant Cruise) from external sources. And interestingly, Avant also owns and operates Internet Disclosure Co, which runs Kaijinet, a site I have frequently visited over the years.
Quick Look – PCI Holdings (3918 JP)
- PCI Holdings, Inc. (hereafter, the Company) is an IT provider of IT-related services and hardware, mainly focusing on embedded system technology such as embedded software, embedded computers, and the like.
- Though it is a relatively young company, born in 2005, it has grown up to be large enough to have net sales of ¥28,500 mn for FY2023/9 with approximately 1,600 employees along with organic growth and acquisition of many companies.
- Going forward, it will change the corporate structure and make it more profitable by investing its cashflow from its core businesses, the Engineering Business and the Product/Device Business, into the ICT Solutions Business, which has considerable potential growth fields such as solution development using AI, IoT platform and the like.
D. Western Therapeutics Institute (DWTI) (4576 JP) – New Fundraising Secured in June
- Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs (top-line data is expected in the 2H of 2024)
- 2) 2024 application/approval and 2025 launch of DW-1002 in Japan, 2023 application and 2024 approval/launch in China, as well as orphan drug designation for combination formula MembraneBlue-DualⓇ (DW-1002 + trypan blue) in the US
- 3) in Japan, start P2 clinical trials in 2024, P3 trials in late 2025 though 2026, and normal schedule application for approval for regenerative cell-therapy DWR-2206 in 2027
Geechs (7060 Jp) – Indispensable Company for Solving Japan’s Shortage of IT Human Resources
- Japan is expected to face a shortfall of up 790,000 IT workers in 2030.
- GEECHS views this shortage of IT human resources as a social issue that the Group should solve.
- The Company’s current core business is its IT freelance matching business (Japan) that matches companies that want to outsource work to outside workers with IT freelancers who want to do that work, and the Company receives a matching fee as the IT freelancer sharing agent.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
