In today’s briefing:
- Gree (3632 JP) – Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out
- Itoki (7972 JP) – Worth Thinking About Post Mega ToSTNeT-3 Buyback
- Trial Holdings Pre-IPO – Updated Peer Comparison and Valuation
- Asahi Kagaku Kogyo
- Sweet Honeys: A Profit Machine
- Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers
- Sodick (6143) – Aiming to Revitalize the Business Model
- Takara Bio (4974 JP): Limited Upside Potential Amid Poor Financial Result and Bleak Outlook
Gree (3632 JP) – Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out
- Today after the close, KDDI Corp (9433 JP) and Gree Inc (3632 JP) announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.
- The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.
- The problem is that too much of revenue isn’t earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.
Itoki (7972 JP) – Worth Thinking About Post Mega ToSTNeT-3 Buyback
- As discussed in Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump, the company was going to do a mega ToSTNeT-3 buyback between then and end-Feb. That happened this morning.
- The company bought back 7.966mm shares (13.96%) for ¥15.9bn. That should have cleared out the bulk of the risk of the original warrant holders who bought in 2020. But…
- The dilution/accretion don’t offset perfectly, and there is a clause suggesting how this might play out from here. But we can infer things from other data we now have.
Trial Holdings Pre-IPO – Updated Peer Comparison and Valuation
- Trial Holdings (5882 JP) (TH) is now looking to raise around US$234m in its Japan IPO, after having canceled its prior listing attempt last year.
- TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
- We have looked at the company’s past performance in our previous notes. In this note, we provide our updated thoughts on valuation.
Asahi Kagaku Kogyo
- Asahi Kagaku Kogyo’s Facility in Kunshan, China Asahi Kagaku Kogyo (TYO 7928) is a $12m market cap net-net industrial plastics manufacturer that over the last 10 years mostly operates around breakeven.
- The business itself isn’t interesting, but it’s a positive that they aren’t losing money.
- There also isn’t a single writeup on this company or any mentions of it on X/Twitter, so it’s definitely under the radar.
Sweet Honeys: A Profit Machine
- Low cost apparel retailers have enjoyed a significant uptick in the past few years as consumers look to polarise their spending further between cheaper basics and luxury treats.
- But the real change is in improving profitability. One the biggest beneficiaries has been Honeys, a low cost womenswear retailer that has seen a revival in the past few years.
- Operating profit has tripled since 2018. Can it last? Work on creating its own low cost manufacturing base suggests it can.
Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers
- In 2023, % Woman Board Members increased progressively even in companies with lower corporate governance scores. Many companies are unanimous in their commitment to appointing women board members.
- Together with the fact that business challenges have not been solved by only having people who think alike, 90% of institutional investors said that information on women’s activities is important.
- Companies with over 25% women on their boards have superior values in profitability and stock valuation. Managers should implement the promotion of women in order to transition to value-creating management.
Sodick (6143) – Aiming to Revitalize the Business Model
- Q1-4 FY12/23 results were weaker than our estimates with the company revising down FY guidance.
- Orders for the mainstay electric discharge machines fell 24% YoY in Q4 FY12/23 with China demand remaining sluggish.
- However, there are positive indications that the company aims to transform its business model by conducting cost reductions, streamlining the balance sheet, and bringing greater focus to its business strategy.
Takara Bio (4974 JP): Limited Upside Potential Amid Poor Financial Result and Bleak Outlook
- Takara Bio Inc (4974 JP) reported massive decline of 50%, 98%, and 99%, YoY, in revenue, operating profit, and net profit, respectively during the first nine months of FY24.
- Reagents revenue decline 56% YoY to ¥23 billion, due to decrease of sales of COVID-19 test-related reagents. Japan, which contributed 23% of reagents revenue, reported revenue decline of 83% YoY.
- Takara Bio anticipates a sluggish life science R&D market globally. FY24 revenue, operating profit, and net profit are expected to decline 42%, 85%, and 88%, YoY, respectively.
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