In today’s briefing:
- Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Adways (2489 JP) – Really, Really Big News for a SmallCap
- Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Rakuten Bank IPO Early Look – The Negatives – Is Already Slowing Down
- Toyo Construction (1890 JP): The Board Uses the Smokescreen of a Special Committee
- Asics (7936) | It’s a Marathon, Not a Sprint
Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Ito En Ltd (2593 JP) is a slightly strange stock in the grand scheme of things.
- It is expensive for its growth, and the shareholder register is such that it is subject to the whims and vagaries of forces over which investors may have no control.
- This time, it is MSCI. Stock prices go up, stocks go in the indices. Stock prices fall, they come out. It’s coming out this month. So who buys?
Adways (2489 JP) – Really, Really Big News for a SmallCap
- Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches.
- They released earnings last Friday, but today released other – follow-on information.
- Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.
Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
- Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
- What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.
Rakuten Bank IPO Early Look – The Negatives – Is Already Slowing Down
- Rakuten Bank, the online banking arm of Rakuten Inc (4755 JP), aims to raise around US$500m (estimated) in its Japan listing in April 2023.
- RB is the largest internet bank in Japan, by number of accounts. As of Mar 2023, it had 13.39m deposit accounts with a total deposit base of JPY8.6tn.
- In this note we take an early look at the IPO and talk about the not-so-positive aspects of its past performance.
Toyo Construction (1890 JP): The Board Uses the Smokescreen of a Special Committee
- Toyo Construction (1890 JP) will set up a special committee to evaluate YFO’s JPY1,100 offer. The Board will decide “after respecting the content of the decision of the special committee.”
- YFO rightly points out the special committee is a ruse and is an attempt by the Board to demonstrate ‘a fair process’ for the predictable decision to reject its proposal.
- The Board’s anxious move shows that protracted conflict is shifting in favour of YFO. At the last close, the gross spread to the tender offer is 10.3%.
Asics (7936) | It’s a Marathon, Not a Sprint
- We were too early to turn bearish on Asics. Recent stock price performance has been strong
- Although rising inventories have yet to impact on margins, they are a potential red flag
- The stock is not cheap at 29x PE. The long-term financial model suggests limited upside from here
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