In today’s briefing:
- Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
- Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
- Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- Luxottica Buys Washin Optical, Paris Miki Next?
- Softbank (9984 JP): Has Group NAV Peaked?
- Shiseido (4911 JP): 1Q24 Results Beat; Recovery On Track
- I’rom Group (2372 JP): Blackstone-Sponsored Pre-Conditional MBO at JPY2,800
- Olympus Corp (7733 JP): ¥100B Buyback Plan Offers an Attractive Exit Opportunity Amid Bleak Outlook
- Raising ROE May Require Raising Proxy Voting Guidelines
- Screen Holdings (7735 JP): Guiding for Lower Profits in H2
Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
- Today SMO and CRO operator I’Rom Group (2372 JP) announced an MBO where Blackstone would be the sponsor.
- From outward appearances, it would seem to be an estate management exercise. It’s not particularly rich as a bid, but it isn’t awful.
- I expect this gets done as Mori-san and family and friends appear to have 58% going in. Expected to start in June.
Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
- Pre-Open on February 1 2024, Aozora Bank Ltd (8304 JP) announced writedowns and a forecast revision, lowering full-year net profit expectations from +¥24bn to -¥28bn.
- Shares which had been trading relatively richly (and heavily shorted) fell sharply over the following days, then noted activist Murakami-san started buying in. Then he bought more and went silent.
- Today, Aozora reported full-year earnings – much worse than expected and Mar25 guidance lower than already low Street estimates. And they are selling 15% stake to Daiwa Securities Group. Oof!
Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
- They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings.
- Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.
Luxottica Buys Washin Optical, Paris Miki Next?
- EssilorLuxottica has always played a long game in Japan but since 2018 the eyewear giant has been investing in local production and a growing store network.
- As reported by Mark Chadwick,Travis Lundy and myself, Luxottica has a stake in Paris Miki Holdings (7455 JP) and the Japanese firm is a key strategic interest for EssilorLuxottica.
- That Luxottica is increasing its investments in Japan retail through acquisition is evidenced by its takeover of Washin Optical, a 70-store eyewear chain, last month.
Softbank (9984 JP): Has Group NAV Peaked?
- Arm’s valuation has driven the group NAV to a new high at fiscal year-end in March; with Arm accounting for 45% of group equity value, NAV downside risk is high
- JPY depreciation has been NAV supportive, but this could reverse; SVF2 remains very exposed to financing costs, with 87% of its equity value in private companies
- Softbank shares trade at a 57% discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with SVF2 valuation headwinds, should keep the discount wide
Shiseido (4911 JP): 1Q24 Results Beat; Recovery On Track
- Shiseido Company (4911 JP) reported 1Q24 results last Friday. Core operating profit declined less than expected at -10% yoy, and exceeded the management’s target.
- The beat was driven by robust growth in Japan, Americas, and EMEA, while China steadily recovered. Overall sales growth was 4% yoy in the quarter.
- As a reminder, the investment thesis for Shiseido is twofold: a recovering China mainly due to one-off concerns (nuclear wastewater), and a margin recovery story in Japan.
I’rom Group (2372 JP): Blackstone-Sponsored Pre-Conditional MBO at JPY2,800
- I’Rom Group (2372 JP) recommended a Blackstone (BX US)-sponsored pre-conditional MBO at JPY2,800, a 49.5% premium to the undisturbed price.
- Approvals under the competition laws of Japan and Australia are a precondition. The tender offer is expected to start in mid-June.
- The offer is attractive and requires a 37% minority acceptance rate. While the timing of regulatory approvals is a risk, the transaction is a done deal.
Olympus Corp (7733 JP): ¥100B Buyback Plan Offers an Attractive Exit Opportunity Amid Bleak Outlook
- Olympus Corp (7733 JP) has announced a buyback plan for up to 60M shares, representing 5.15% of outstanding shares, by spending ¥100B from May 13 to December 31, 2024.
- The company has posted mixed FY24 results, with revenue beating and operating and net profits missing guidance. Olympus has guided for just 9% revenue growth for FY25.
- Overall business outlook of the company seems to be bleak. With limited upside potential expected, it will be wise to tender shares through the company’s buyback offer.
Raising ROE May Require Raising Proxy Voting Guidelines
- Although many institutional investors’ voting criteria apply the rule of “support the proposed appointment of top management director if one female director is nominated,” more in-depth examination should be conducted.
- Agenda based on TSE’s request isn’t easy to understand for all investors, and the current voting guidelines for domestic institutional investors make it unlikely that they will vote for it.
- The ISS ROE criteria will be raised next year, and companies may not raise ROE with bold shareholder returns until the voting guidelines for domestic institutional investors are also raised.
Screen Holdings (7735 JP): Guiding for Lower Profits in H2
- FY Mar-24 results were ahead of guidance, but management’s FY Mar-25 forecast has sales flat and profits down in the second half.
- The shares have dropped back 24% from their all-time high, bringing the forward P/E ratio down to 22X.
- China and foundry remain strong while North America and memory pick up. Guidance is probably conservative. Buy into the weakness.
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