In today’s briefing:
- Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower
- Tokyo Metro (9023 JP): IPO Listing & Fast-Entry Approved
- Japan System Techniques (4323 JP) – Full Report
- SanBio Co Ltd (4592 JP): Conditional Approval for First Drug; Still a Long Way to Go
- Geo Holdings (2681 Jp) – Q1 FY3/25 Results Update
- Will the Challenges that Have Taken a Decade to Make Progress Finally Be Resolved?
Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower
- Yesterday, KKR amended its plans to take over Fuji Soft Inc (9749 JP) by creating a Two-Tender Scheme, effectively lowering the threshold for eventual success through clearly coercive tactics.
- 3D (23.46%) and Farallon (9.22%) had already tendered. Contractual terms make it difficult (not impossible) to withdraw. Assuming it goes through, KKR has 32.68%, quasi-negative control.
- This revised structure is clearly abusive of minorities and NOT the deal Fuji Soft signed. This should cause Fuji Soft to Change their Opinion. Shareholder (and Bain) Pressure would help.
Tokyo Metro (9023 JP): IPO Listing & Fast-Entry Approved
- Tokyo Metro (TKYMETRO JP) is scheduled to go public on 23 October 2024 with an IPO valuation of ~$4.4bn and a float market cap of ~$2.2bn.
- Fast-Entry for the one Global Index is expected at the close of 29 October 2024 with forecasted demand of ~17.4m shares and ~$133m.
- Quarterly inclusion at the May 2025 review has a higher probability with a slight price rally or an elevated IPO offering price. Forecasted demand is ~23.2m shares and ~$177m.
Japan System Techniques (4323 JP) – Full Report
- Japan System Techniques Co., Ltd. (hereafter, JAST or the Company) is an independent system integrator that celebrated its 50th anniversary in March 2023.
- The Company develops systems for customers across a wide range of industries in a variety of fields, including finance, manufacturing, distribution, services, public services, telecommunications, transportation, and science and technology.
- It also offers four in-house JAST branded services, including the GAKUEN series of strategic university management systems for the education industry as well as the BankNeo integrated information system for financial institutions.
SanBio Co Ltd (4592 JP): Conditional Approval for First Drug; Still a Long Way to Go
- SanBio Co Ltd (4592 JP) received conditional and time-limited marketing approval for Akuugo suspension for intracranial implantation in Japan, for improving chronic motor paralysis resulting from traumatic brain injury.
- The company will run two or so rounds of commercial production to accumulate inventories in preparation for launch. The earliest possible timing for shipment is assumed to be Q1FY26.
- SanBio has a cash runway through H1FY26. However, operating expenses will decrease and Akuugo will start generating revenue by H1FY26, thereby providing some more cushion to cash runway.
Geo Holdings (2681 Jp) – Q1 FY3/25 Results Update
- Q1 FY3/25 earnings look negative at first glance, with both sales and operating profit falling. However, the details show strong demand for GEO HOLDINGS’ core second-hand fashion business and smartphone sales, helping gross profit increase.
- The key earnings drivers were a fall in sales (-6.2% YoY to ¥100.15bn) due to difficult annual comps from new games sales.
- However, GEO HOLDINGS’ core second-hand fashion business and smartphones enjoyed robust demand, thanks to new store openings at home and overseas.
Will the Challenges that Have Taken a Decade to Make Progress Finally Be Resolved?
- Without the driving force to generate cash flow in excess of the discount rate (cost of capital), there is not enough power to push stock valuations higher and higher.
- The fact that 8% ROE is the threshold at which valuations change means that investors consider the cost of capital for Japanese equities to be roughly 8% on average.
- Little progress has been made since 10 years ago, when the Ito Report advocated “shift to corporate value management with an awareness of capital efficiency” and “engagement of institutional investors.”
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