In today’s briefing:
- JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected
- Oriental Land: Approaching the Tipping Point
- Asagami Corporation – Example of Widespread Undervaluation of Land on Japanese Balance Sheets
- Japanese Banks – No Change to Our Bullish View on the Back of the BoJ’s Pause on Interest Rates
- Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value
- Is the Rise in TOPIX Anticipating the Actual Rise in ROE+DOE?
- Tsuruha: What Next: Go Private or Aeon?
JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected
- Today after the close, JSR Corp (4185 JP) announced that the expected “end-December” commencement of JIC’s Tender Offer to take the company private would be delayed.
- This was somewhat expected to widely expected based on initial FUD which then gave way to “specialised reporting” a couple of weeks ago which indicated as much.
- Here I look at potential implications, spreads, and risks. And it still looks like one has to let it run (and buy a dip).
Oriental Land: Approaching the Tipping Point
- Google Search trends for Tokyo Disneyland and DisneySea in recent months point to potential vulnerabilities in Oriental Land’s FQ3 performance.
- Tokyo Disneyland’s rising ticket prices have narrowed the cost gap with Shanghai and Hong Kong Disneyland, potentially leading to a loss of customers to its counterparts.
- Should Oriental Land (4661 JP) shares fail to surpass its recent peak in January next year, we think shares could undergo a rather substantial correction.
Asagami Corporation – Example of Widespread Undervaluation of Land on Japanese Balance Sheets
- Asagami Corporation (TYO 9311) owns 3 warehouses on Tokyo Harbor with land carried on its books at ¥7.9 billion.
- These properties alone are likely worth closer to ¥29.5 billion.
- These assets account for less than half of the company’s land assets, but are worth multiples of the current market cap of just ¥7.16B.
Japanese Banks – No Change to Our Bullish View on the Back of the BoJ’s Pause on Interest Rates
- We see Ueda’s pause on lifting its negative rates policy as temporary, and we expect that this policy change could occur as early as January
- Despite this monetary pause in tightening and the fall in 10Y JGB yields, we are encouraged by the rise in long term loan yields in the BoJ data to October-end
- We reiterate our positive views on Resona, Mizuho, MUFG and Concordia
Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value
- Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders.
- The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
- The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move.
Is the Rise in TOPIX Anticipating the Actual Rise in ROE+DOE?
- While OP Margin did not improve much, companies did execute a certain degree of shareholder return in the previous fiscal year, but it did not significantly increase ROE.
- Since companies with lower profits are also increasing shareholder returns, the dividend payout is likely to rise a bit more. It will be interesting to see how much ROE improves.
- There is a correlation between ROE+DOE and TOPIX. Since TOPIX has risen significantly this year, it will be interesting to see if ROE+DOE actually increases in the future.
Tsuruha: What Next: Go Private or Aeon?
- Tsuruha sees itself as another recent victim of activist fund pressure.
- The No. 2 drugstore chain has grown successfully over the past decade and today has the widest store coverage of any chain in its sector.
- This summer Aeon supported activists’ demand for strategic change. Tsuruha thinks the only way it can keep its independence may be to take the company private – Aeon probably agrees.
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