In today’s briefing:
- Fuji Soft (9749 JP): The Board’s Unchanged Recommendation Caps the Upside
- Fujikura (5803 JP): Positioning & Potential Passive Buying
- Merger Arb Mondays (21 Oct) – Seven & I, Fuji Soft, Henlius, Canvest, GA Pack, Dyna-Mac
- [JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run
- ECM Weekly (21st Oct 2024) – Tokyo Metro, China Resources, Horizon Robotics, Hyundai India, Waaree
- EQD | Nikkei 225 Option Implied Volatility Analysis – Focus on Bank of Japan Rate Decision Catalyst
- Japan Value | Sanwa, Nikon, Nihon Kohden, Maruichi Steel
- Unloved Japan Roundup: Bracing for Q3
Fuji Soft (9749 JP): The Board’s Unchanged Recommendation Caps the Upside
- The Fuji Soft Inc (9749 JP) Board has maintained its recommendation of KKR’s first-stage tender offer. However, the recommendation was not unanimous, with four dissenting directors.
- Bain’s likely next move is to waive the precondition and launch its offer. To bring KKR to the negotiating table, Bain will want to acquire as many shares as possible.
- KKR’s first stage closes on 21 October. Success requires KKR to either work with Bain or match terms. As shares trade through Bain’s terms, there is little or no upside.
Fujikura (5803 JP): Positioning & Potential Passive Buying
- Fujikura Ltd (5803 JP) could be added to a global index at the end of November and there will be a lot of buying in the stock.
- Following the rally in the stock, Fujikura Ltd (5803 JP) trades expensive to the average and median of its peers on most valuation metrics.
- The increase in cumulative excess volume in Fujikura Ltd (5803 JP) over the last 3 months far outpaces the increase in its peers.
Merger Arb Mondays (21 Oct) – Seven & I, Fuji Soft, Henlius, Canvest, GA Pack, Dyna-Mac
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP),Canvest Environmental Protection Group (1381 HK), Arcadium Lithium (LTM AU).
- Lowest spreads: Trancom Co Ltd (9058 JP), Fuji Soft Inc (9749 JP), Silverlake Axis (SILV SP), T Gaia Corp (3738 JP), Descente Ltd (8114 JP), Pasco Corp (9232 JP).
[JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run
- This past week, activist Murakami-san’s City Index Eleventh announced that the companies which jointly report now own 20.3%, which translates to 23.5% of voting rights. Average in-price? ¥2,928/share.
- The 2030 Plan from April saw 8% ROE by 2030, 6% by 2026. They’ve since bought back 11% of shares out. Better, but 1/4 of market cap is net cash+securities.
- If one assumes they spend the net cash+securities to buy back stock 10% higher than here, pro-forma PBR is <0.6x. ROE would be 7+%. There’s room to run here, still.
ECM Weekly (21st Oct 2024) – Tokyo Metro, China Resources, Horizon Robotics, Hyundai India, Waaree
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the live IPOs front, the coming week will see a whole lot of listings across the region.
- On the placements front, there were mainly deals in Australia this week.
EQD | Nikkei 225 Option Implied Volatility Analysis – Focus on Bank of Japan Rate Decision Catalyst
- Nikkei 225 (NKY INDEX) option implied volatility is stabilizing at an elevated level. This Insight analyses term structure, skew, open interest, and more.
- We identify a tactical option opportunity that profits from the current volatility structure.
- Are Consumer Price Index and Bank of Japan interest rate decision announcements systematically followed by unusually large market moves? We run the numbers.
Japan Value | Sanwa, Nikon, Nihon Kohden, Maruichi Steel
- Sanwa Holdings revised its first-half (1H) forecasts, increasing sales estimates from ¥293 billion to ¥313 billion, and operating profit (OP) from ¥25.6 billion to ¥32 billion
- Essilor’s growing investment in Nikon, with the optical giant increasing its stake from 5.1% to 7.38% in just a few weeks, underscores our bullish view on the name.
- Nihon Kohden recently revised its first-half (1H24) guidance, raising sales expectations by ¥700 million to ¥102.7 billion and operating profit by ¥2 billion to ¥5 billion.
Unloved Japan Roundup: Bracing for Q3
- Mazda’s domestic unit volume was up 24% in September, compared to an industrywide total of only 1.1%.
- Meanwhile, Q2 consensus EBIT estimates have come down by 32% since the release of Q1 results.
- But the yield is over 6%, and the Payout ratio is only 17% even on the new estimates.
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