In today’s briefing:
- Big ¥500bn Honda (7267) Offering Is Small
- JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too
- Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion
- Honda (7267 JP): A US$3.3 Billion Secondary Offering
- Honda Motor Placement – Large in Size, Relatively Small in Other Terms
- Timee (215A JP) IPO: The Bear Case
- Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals
- Digital Arts: Decision to Deconsolidate DAC Business – A Positive Move
- Tsubakimoto Kogyo (8052 Jp) – Record Net Sales for Second Consecutive Year
- 4Q Follow-Up – Takamiya (2445 JP)
Big ¥500bn Honda (7267) Offering Is Small
- Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
- Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
- At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!
JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too
- Small cap Japanese manufacturer and purveyor of apparel Daidoh Ltd (3205 JP) has consistently been a target for value investors. In late 2022, Strategic Capital went over 5%.
- They have bought more, and as of end-March, they declared 24.85% of TSO (28% of voting rights), but they have 33%. They made proposals for the AGM. They won one.
- Now Murakami-san has bought in, going over 5%. This gets interesting. Together they have 39.4% as of last week, and probably more now. That should get them 50+% next AGM/EGM.
Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion
- On 2 July 2024, nursing care operator SUNWELS Co (9229 JP) announced a sale of Treasury shares and newly-issued shares, and with it, a move to TSE Prime (therefore TOPIX)
- The stock, of course, popped. The stock starts with VERY low float because the CEO and his company own 64% of shares out ex-treasury.
- The offering is much larger than the TOPIX inclusion, so this is really more about the growth story.
Honda (7267 JP): A US$3.3 Billion Secondary Offering
- Honda Motor (7267 JP) has announced a secondary offering of up to 298.9 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY535 billion (US$3.3 million).
- The offering is another sign that the unwinding of cross-shareholdings is catching pace as part of Japan’s corporate governance reforms.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 17 and 22 July (likely 17 July).
Honda Motor Placement – Large in Size, Relatively Small in Other Terms
- A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP) .
- The possibility of such a selldown was flagged earlier in the week by Reuters. Thus, the deal is well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Timee (215A JP) IPO: The Bear Case
- Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
- In Timee (215A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on rapidly slowing growth, an industry-low FCF profile, and a business model predicated on access to large funding and significant share option dilution.
Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals
- Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
- We have covered the background of the deal in our earlier note, Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO.
- In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.
Digital Arts: Decision to Deconsolidate DAC Business – A Positive Move
- Digital Arts (2326 JP) , based in Japan offers internet security software and appliances globally. The company also provides consulting services related to information security.
- The company’s share price has moved up by more than 30% over the last 30-days driven by DA’s decision to deconsolidate its DAC business.
- Given the high-cost nature, we welcome Digital Arts’ move to deconsolidate the DAC business as it should help improve the company’s profitability.
Tsubakimoto Kogyo (8052 Jp) – Record Net Sales for Second Consecutive Year
- Tsubakimoto Kogyo Co., Ltd., (hereafter, the Company) is an industrial equipment–related trading company with a history that goes back more than a century.
- While primarily handling power transmission products, such as motors and chains, the Company also handles factory automation (FA) equipment, including conveyors for automobiles and liquid crystals.
- Furthermore, the Company is expanding into other industrial equipment parts, including actuators, such as cylinders, for semiconductor-manufacturing equipment, and conveyor equipment in factories, inspection equipment, and various types of meters.
4Q Follow-Up – Takamiya (2445 JP)
- Takamiya (hereafter, the Company) announced its FY24/3 full-year earnings results on Friday, May 10, 2024 after the market closed.
- Sales, operating profit, and net profit were below its initial estimates, except for ordinary profit.
- However, a significant increase in profits were achieved thanks to the strong performance of its high-margin rental business.
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