In today’s briefing:
- IJTT (7315) – Last Trading Day for Still Truly Offensive Tender Offer
- Taisho Pharmaceutical (4581 JP): Calm as Offer Heads for the 15 January Close
- Fast Retailing: 1QFY24 Earnings
- Fast Retailing (9983) | Another Stylish Quarter
- Fujitsu (6702 JP): Horizon Scandal Blows Up
- If Multi-Stakeholder Is Equally Important, a Company Should Make Sufficient Profit First
IJTT (7315) – Last Trading Day for Still Truly Offensive Tender Offer
- In IJTT (7315 JP) – A Truly Offensive Takeover Price and Process To Buy Out Minorities at 0.46x Book I laid it out like it was. It needed a bump.
- It got a bump (IJTT (7315 JP) – Truly Offensive Takeover Price Gets Bumped, Offensively) to ¥850/share. From 0.46x PBR it got bumped to 0.48x PBR. For a cash-rich company.
- Taking out net cash and securities, paying off deferred tax assets and UPBOs the deal is at 0.41x operating asset book for minorities. Still offensive. Beyond negligent.
Taisho Pharmaceutical (4581 JP): Calm as Offer Heads for the 15 January Close
- Taisho Pharmaceutical Holdin (4581 JP)’s MBO JPY8,620 offer closes on 15 January. Since announcing the offer, the shares have traded above terms for 21 out of the 30 trading days.
- Japan Catalyst has called the offer’s P/B of 0.85x too low. While shares trading above terms does not guarantee that the tender fails, it does increase the risk of failure.
- The offeror has no compelling reason to bump as other activists have not publicly supported Japan Catalyst, the high 55.5% premium to undisturbed price and an achievable minority acceptance rate.
Fast Retailing: 1QFY24 Earnings
- Fast Retailing (9983 JP) announced its 1QFY24 results today, surpassing the consensus OP estimate by approximately 7%.
- Notably, Uniqlo International demonstrated robust growth, even from regions (North America & Europe) that were anticipated to underperform in this quarter.
- The domestic business OP also managed to top consensus expectations as they managed to improve the gross margin by 2.7% YoY.
Fast Retailing (9983) | Another Stylish Quarter
- We had thought that Fast Retailing may just miss Q1 numbers due to the warm weather; it beat on strong November and 270bps improvement in gross margin.
- Following the slightly better results, we maintain our sales forecast at 3.1 trillion yen, but revise our operating profit estimate from 439 billion yen to 455 billion yen.
- Overall, we do not think the market will be overly surprised by the results and we maintain our view that the stock is over priced.
Fujitsu (6702 JP): Horizon Scandal Blows Up
- The UK Post Office “Horizon Scandal” has blown up, putting Fujitsu’s computer system failure on the front pages and on the agenda of Parliament and Prime Minister Sunak.
- Fujitsu UK has been awarded £6.8bn in public contracts since 2012. The Justice Secretary is now talking about compensation for the enormous financial and personal damage caused.
- Fujitsu’s share price is coming off a new all-time high reached in December. The amount of compensation and loss of potential future contracts is substantial but uncertain.
If Multi-Stakeholder Is Equally Important, a Company Should Make Sufficient Profit First
- It is desirable for stakeholders other than shareholders for the company to be profitable. The problem lies in holding excess cash without making sufficient returns from the business.
- Cash flow should be used for reinvestment and shareholder returns, but in fact many companies didn’t grow their allocations to investment and shareholder returns, but instead accumulated cash on hand.
- There is a big difference in corporate value between a company with growing cash flow and increasing shareholder returns and a company with stagnant cash flow but raising shareholder returns.
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