In today’s briefing:
- Japan Post Bank (7182 JP) Announces Its Re-IPO – Big Offering, Complicated but Big Index Flows
- Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback
- Japan Post Bank (7182 JP): BIG Offering Supported by Buybacks & Passive Flow
- Japan Post Bank (7182 JP): Japan Post Holdings to Sell Down a Third of Its Stake
- Softbank (9984 JP): Focus on Vision Fund II (SVF2) And Masa’s Massive IOUs
- Quiddity Leaderboard JPX-Nikkei 400: End-Feb 2023
- Descente Puts on Some Pace
- More Important to Keep Prime Market Quality High, Not to Give to Listed Companies a Grace Period
Japan Post Bank (7182 JP) Announces Its Re-IPO – Big Offering, Complicated but Big Index Flows
- Japan Post Bank (7182 JP) has announced the mooted offering by Japan Post Holdings (6178 JP) whereby they will sell 29% of the bank to go from 89% to 60%.
- There are two buybacks – one pre offering and one after – which is an attempt to mitigate impact. This creates interesting but complicated strategy possibilities. Lots of details here.
- Big picture, this is a Very Big Offering at ¥1.236trln at today’s close including greenshoe. 80/20 dom/international. A TOUGH sell. 1.089bn shares is 4x current float.
Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback
- Japan Post Holdings (6178 JP) plans to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
- Initial news of the deal broke last week, and we had a look in, Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang.
- In this note, we talk about the deal structure and impact.
Japan Post Bank (7182 JP): BIG Offering Supported by Buybacks & Passive Flow
- Japan Post Holdings (6178 JP) is looking to reduce its stake in Japan Post Bank (7182 JP) from 89% to 60%. That is over US$9bn at the last close.
- The placement is supported by buybacks (ToSTNeT-3 and on-market) that will absorb some of the offering. Then there is the passive buying that will absorb a third of the offering.
- One of the key short-term supports will be the exercise of the over-allotment of the Japan offering. But that will require persuading retail investors to buy into the offering.
Japan Post Bank (7182 JP): Japan Post Holdings to Sell Down a Third of Its Stake
- Japan Post Holdings (6178 JP)/JPH has announced the offering of up to 1.1 billion shares in Japan Post Bank (7182 JP)/JPB to reduce its stake from 89.00% to 59.95%.
- JPB will carry out a ToSTNeT-3 buyback (maximum of JPY70 billion) and an on-market buyback (maximum of JPY80 billion). JPH can sell additional shares into the ToSTNeT-3 buyback.
- For long-term investors, JPB’s forward P/B of 0.47x and yield of 4.41% are attractive to peers. JPB’s current price ratio is undemanding vs TOPIX Banks ETF and JPH.
Softbank (9984 JP): Focus on Vision Fund II (SVF2) And Masa’s Massive IOUs
- Vision Fund II private companies accounted for 87% of the fund’s 3QFY22 fair value; versus investment cost, private companies’ downward valuation revisions have been more modest than the public companies
- Vision Fund II accounted for 22% of the group’s 3QFY22 equity value of holdings, so any further downward valuation revisions would hurt group NAV and add to Masa’s Softbank liabilities
- Softbank currently trades at a 42% discount to its stated NAV; we believe that the stated NAV is likely to be overstated, with private company valuations needing further scrutiny
Quiddity Leaderboard JPX-Nikkei 400: End-Feb 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-February 2023.
Descente Puts on Some Pace
- Descente has improved profitability since being taken over by Itochu three years ago but much of the growth has come from overseas.
- The Descente brand remains weak in Japan but Itochu has plans to rebuild the eponymous label by splitting it into two while creating several new brands.
- The plans should help recover momentum in Japan and drive further expansion in China and even into Europe and the US.
More Important to Keep Prime Market Quality High, Not to Give to Listed Companies a Grace Period
- The “transitional measures” were set to expire in 3 years. For companies currently subject to the transitional measures, this will end in March 2025 for companies with March fiscal year-end.
- Many companies applying the transitional measures that are currently allowed to list on the Prime Market are expected to move to the Standard Market.
- Listed companies should take the opportunity to carefully consider these listing costs and benefits, as higher practices in corporate governance and disclosure will be required in the future.
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