Daily Brief Japan: Intage Holdings, Kenedix Office Investment Co, Aisin Seiki, Ryohin Keikaku, NEC Corp, Abc Mart Inc, Hopson Development and more

• Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end). 
• In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration. 
• So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

• In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
• All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back. 
• It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

• Toyota Group autoparts maker Aisin Seiki (7259 JP) today announced a new Medium-Term Plan. They plan to shift their business away from “entrusted” business, towards BEV, Brakes, and “Safe/Comfort Entry”
• They aim to grow revenues 25% from 2021 to 2025 and an additional 10-20% by 2030. 
• They also aim to improve investment and capital efficiency, and that’s where we can look at the interesting possibilities.

• Aisin’s stock price rose by +8% today after the company held its MTP strategy briefing
• Aisin to restructure its business portfolio and focus on new growth areas for EV’s – eAxle, battery frames, and braking technologies
• Aisin aims to generate ¥400b from balance sheet reform – asset sales, inventory management and sale of cross-shareholding.

• Ryohin Keikaku (7453 JP) experienced a 45% leap in its share price since its last earnings announcement, primarily fueled by a positive OP surprise of nearly ¥3.0bn.
• Our analysis indicates the potential for another big earnings beat in FQ4, primarily because the consensus remains conservative in its cost assumptions.
• Additionally, we anticipate that the company will provide FY24 OP guidance in the range of ¥45-50bn. This would constitute a significant upside surprise compared to the current FY24 consensus.

• NEC’ is up almost 90% year-to-date to 16X EPS guidance for this fiscal year and 12x targeted EPS three years out. It now looks fairly valued.
• Profit growth is led by IT Services for the private and public sectors, with strength in finance and system integration. 
• Social Infrastructure is growing, but in the red. Aerospace and national security are profitable, but margins are low.

• Japan has a solid if stagnant footwear market, yet it only has one compelling nationwide footwear retailer.
• ABC Mart continues to outperform its smaller rivals, with little competition as its main rivals decline further.
• The real competition is coming from brands selling directly to customers via their own stores and online – and low-cost retailers nipping at its heels from below.

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 SCE
• Hopson Development
• Sino-Ocean Service
• Softbank Group