Daily Brief Japan: Infocom Corp, Alps Logistics, CELSYS, Daikin Industries, Shofu Inc, Nitto Kogyo, Lippo Karawaci, TSE Tokyo Price Index TOPIX and more

• Bloomberg reports that Teijin Ltd (3401 JP) wants to sell its 55% stake in Infocom Corp (4348 JP). The rumoured bidders are Sony Corp (6758 JP), Blackstone and KKR. 
• Based on precedents, the offer structure will likely be structured such that Teijin provides an irrevocable NOT to accept but vote in favour of share consolidation at the EGM.
• Bloomberg suggests that Infocom could be valued at JPY200 billion. If this refers to market cap, the tender offer is JPY3,472, a 16.5% premium to the last close.

• In late February, a specialty media outlet noted Alps Logistics (9055 JP) was up for sale. I missed that. Yesterday pre-close, a headline crossed the wires. A deal was imminent.
• Nikkei overnight said “¥150bn+ market cap”. I thought KKR might slightly overpay the Hitachi Transport System (9086 JP) multiple paid. That meant +13% today was full-ish. I was wrong.
• KKR is paying ¥5,774 to minorities, and about ¥4,084-ish to the parent, who is reinvesting at ¥5,774. This is a total knock-out price paid. HUGE MINORITY WIN.

• Alps Logistics (9055 JP) recommended a pre-conditional tender offer from a KKR & Co (KKR US) subsidiary at JPY5,774, 32.7% and 69.8% premium to the last close and undisturbed price, respectively. 
• The pre-condition is approvals under competition laws of Japan, China, the EU, South Korea and Vietnam. The tender offer is expected to start in mid-August.
• The offer represents an all-time high and is a knockout bid. While the timing of regulatory approvals is a risk, the transaction is a done deal. 

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Dozens of companies have been able to meet the key Section Transfer requirements on paper for several months but there have been no TOPIX Inclusions announcements in 2024 so far. 
• However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

• FY2023 Success: Daikin achieved record-high sales and profit, driven by FX impacts. Despite challenges like reduced demand, the Air Conditioning business expanded in key markets.
• Ambitious Targets: FY3/25 targets include surpassing previous financial records, despite continued sluggish demand.
• Cautious Outlook: While optimistic about market share gains, reservations persist, particularly regarding heat pumps. Stock performance remains steady, trading in line with historical averages.

• Committing to raising production capacity –Shofu announced its fifth medium-term plan, covering the four years from FY3/25 to FY3/28.
• The core message is that the company has competitive products and high demand visibility in overseas markets, and is reaching the point of attaining annual sales volume of ¥50bn.
• The plan will involve significant capital allocation to raise production capacity and other business investments to meet its goals. zed.

• News: The Nikkei on April 25th reported, “A dark cloud is hovering over the future of the electric car (EV) market.
• The low prices of Chinese EV manufacturers, backed by Chinese government subsidies, are adversely affecting the performance of related companies such as motor giant Nidec Corporation (TSE Prime: 6594).
• The spread of low-cost EVs will substantially change the structure of the industry, and investors are beginning to look out for companies that will benefit from the commoditization of EVs.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Oil And Gas
• Lippo Karawaci
• SJM Holdings
• Softbank Group

• Profit margins boosted by cuts in personnel, R&D, CapEx, and corporate tax rates. Much of the improved free cash flow went onto the balance sheet instead of being invested.
• OP Margin’s sluggish growth indicates that the cost-cutting model is no longer working. Investments are needed to create products with higher gross margins.
• While the limitations of the cost-cutting model can be seen, ROE, which indicates the achievement of the management goal of increasing medium-to-long-term shareholder returns, is sluggish in many companies.