In today’s briefing:
- Fujitec (6406) Activism Levelling Up – A Board Spill to Come?
- 2022 High Conviction Recruit: More Room for Shares to Fall
- Oriental Land: Fantasy Springs, No Longer Enticing Investors, It’s Likely The Start Of The Breakdown
- Softbank Group – Requiem for WeWork’s Premium Valuation
- IPet Holdings (7339 JP) – Tender Offer Extended But No Biggie
- Dream Incubator (4310 JP) – An Interesting Exit and Attractive Valuation for Future Growth
- The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders
Fujitec (6406) Activism Levelling Up – A Board Spill to Come?
- Two years ago, I wrote about the history of activist attention on what was then the 8th largest elevator maker in the world Fujitec Co Ltd (6406 JP).
- In Activist Pressure FINALLY Works on Fujitec (6406)- Going Up? (Albeit Slowly) I discussed what were still nascent efforts by Oasis to trigger change at the top.
- On 30 November 2022, Oasis – which officially went above 5% only this past March but on 30 November reported 16.52% – called an EGM. It’s worth a look.
2022 High Conviction Recruit: More Room for Shares to Fall
- It is time we review our 2022 high conviction call. Our conviction short Recruit has fallen 41.5% since we made our call on the stock on 01st December 2022.
- Though Staffing and Matching & Solutions businesses have bounced back post-Covid, HR Tech biz’s earnings have started to fall with weakening of labour markets.
- With global recruitment markets facing challenges with weakening of global economies, we think Recruit Holdings (6098 JP) ‘s shares have further room to fall in 2023E.
Oriental Land: Fantasy Springs, No Longer Enticing Investors, It’s Likely The Start Of The Breakdown
- As earnings recovered following the COVID drop, Oriental Land (4661 JP)’s FY+2 EV/OP returned to around 40-60x range, which in our opinion is too expensive, especially in current market conditions.
- The positivity surrounding the opening of Fantasy Springs got investors to pay huge multiples but Fantasy Springs is no longer looking enticing to investors.
- With a miss and a downgrade to FY23 guidance on the horizon, we are expecting OLC’s share-price to break the long-term trend to the downside in the next few months.
Softbank Group – Requiem for WeWork’s Premium Valuation
- The market cap of Vision Fund portfolio company The We Company (WeWork) (WE US) has fallen decisively below that of rival IWG PLC (IWG LN) for the first time
- Still despite WeWork’s constant drag on portfolio returns including c. $500mn this quarter, Vision Fund remains on track to end the quarter in the black (+$2bn QTD)
- The holding company discount appears to have stabilized at 35% but this seems a bit steep with markets volatile again and a move to 40% would not surprise
IPet Holdings (7339 JP) – Tender Offer Extended But No Biggie
- On 8 November, major Japanese life insurer Dai Ichi Life Insurance (8750 JP) announced it would buy out leading pet insurer ipet Holdings (7339 JP). Yes, you read that right.
- Japanese listed VC/PE firm and incubator Dream Incubator Inc (4310 JP) owns 55% and agreed to tender. Tender success is dependent on getting 66.7%.
- Today the buyer extended for 10 days because it had received approval under Article 271-22 Para 1 of the Insurance Business Act, triggering a requirement to refile/extend.
Dream Incubator (4310 JP) – An Interesting Exit and Attractive Valuation for Future Growth
- In early November, Dai Ichi Life Insurance (8750 JP) announced it would buy ipet Holdings (7339 JP), of which listed VC/PE/incubator Dream Incubator (4310 JP) owned 55%. DI agreed.
- Dream Incubator’s exit is worth ¥21.54bn in cash and ¥18.2bn in extraordinary gains on the consolidated financial statements for March 2023.
- That is nice. They have promised to deliver ¥10bn of proceeds to shareholders and reinvest the other ¥5bn to grow their consulting business. It’s a nice little asset.
The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders
- Both Kappa Kreate and ATOM are almost completely controlled by their parent company, ColoWide, and we cannot expect corporate governance practices that would actually be a relief to minority shareholders.
- With the parent company in full control, the subsidiary’s minority shareholders are likely to be aware that the interests of the parent take precedence over those of the minority shareholders.
- Parent company shareholders shouldn’t tolerate continuing to own subsidiaries that damage their interests. The problem isn’t a problem of the interests of the subsidiary’s shareholders, but of the parent’s shareholders.
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