In today’s briefing:
- Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- Appier (4180) | Key Drivers Behind Strong Q3 Performance
- Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
- Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
- Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
- The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity
Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
- Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
- What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).
Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
- At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024.
- Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.
Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up.
- The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price.
- Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose.
StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
- Preceding my comments on Takara are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Appier (4180) | Key Drivers Behind Strong Q3 Performance
- Appier’s Q3 demonstrated a 39% YoY revenue increase, reaching a record JPY7.1B. This was driven by substantial growth in the US/EMEA markets (117% YoY), customer expansion, and Digital Content growth.
- Appier’s gross margin expanded from 51.3% to 52.6% and the operating margin reached a historical high of 4.4%. Despite ongoing investments, EBITDA margins hit12.1%, showcasing strong operating leverage.
- Appier’s revised full-year outlook, with increased revenue target (JPY 26.2B), operating income (JPY0.70B), and EBITDA (JPY2.6B), exceeds consensus expectations by 1%, 11%, and 8%, respectively.
Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
- Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
- Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium.
Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
- Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
- Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
- Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.
Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
- Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
- 2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
- We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.
The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity
- 30% female board member set by TSE isn’t surprising, as it’s level within reach, but the fact that TSE set explicit target that companies can’t excuses is a first step.
- To ensure that a female board member isn’t isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
- In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.
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