In today’s briefing:
- [JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?
- Medical Data Vision (3902) – SBI Upping Their Stake AGAIN In The Market
- Daiwa to Buy More Aozora (8304) Shares – Murakami-San Escapes
- Fast Retailing (9983) | Positive Q3 Outlook, but Priced In
- Rakuten Bank (5838 JP) – The Bank in Current Form and the Promise of FinTech Reorganization
- Looking at Policy Shareholdings as a Percentage of Total Assets Reveals a Different Aspect
- Adastria Bets on Diversification for Future Growth
[JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?
- In Oct2023, activist Palliser Capital launched a campaign on well-known “stub trade” Keisei Electric Railway Co (9009 JP) (1.6% stake). The proposal? Monetise OLC, invest for growth, be shareholder friendly.
- Keisei responded 3+mos ago: buyback and 1% OLC stake sale but said OLC would remain an equity affiliate. Palliser re-engaged in late April (Japanese/English and two AGM agenda items). Keisei objected.
- Palliser made their case, Glass Lewis and ISS support Palliser. Palliser likely cannot win. The goal here isn’t to win though. It is to get enough to raise management consciousness.
Medical Data Vision (3902) – SBI Upping Their Stake AGAIN In The Market
- Today after the close, SBI Holdings (8473 JP) – which currently owns 32.4% of Medical Data Vision (3902 JP) – announced it would buy another 1.91mm shares over 7mos.
- This market purchase would lift them to ~37.4% by year-end. Interestingly, they plan to go through the one-third level without a Tender Offer. But their buying history hasn’t been great.
- SBI bought 20% in 2020. It fell by half. They bought another 5%. Then it dropped 50%, so they bought another 5%. Now -25% so they are buying another 5%.
Daiwa to Buy More Aozora (8304) Shares – Murakami-San Escapes
- In February, Aozora Bank Ltd (8304 JP) extended its writedowns and the shares fell sharply. By end-Feb, we found out Japanese activist Murakami-san had bought shares.
- I didn’t see the endgame. The pump worked, but he didn’t dump. Then Aozora got Daiwa to be a lead investor through a 3rd party share allotment, diluting Murakami-san.
- Last week we got news the FSA had approved the Daiwa transaction. Yesterday, we got news the Murakami Group would sell its whole stake to Daiwa.
Fast Retailing (9983) | Positive Q3 Outlook, but Priced In
- Fast Retailing is due to report Q3 results on 11 July. We update our views on the outlook for the stock heading into the announcement.
- Uniqlo Japan has already released monthly sales data for the March to May quarter. Performance in May was again strong, slightly surpassing our estimates
- We maintain our full year earnings estimates. The stock has declined by around 6% since Q2 results, but remains fully valued.
Rakuten Bank (5838 JP) – The Bank in Current Form and the Promise of FinTech Reorganization
- Rakuten Bank, in its present form, is positioned to benefit from rising interest rates in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio
- The proposed FinTech reorganization of the group around the bank should drive further potential shareholder benefits; higher ROE, lower customer acquisition costs, increased active account penetration and lower operating costs
- We believe that there will be effective governance checks and balances in place to ensure fair valuations of the FinTech segments pre-reorganization; we include our base valuations in this report
Looking at Policy Shareholdings as a Percentage of Total Assets Reveals a Different Aspect
- Toyota Group and non-life insurances, which recently announced reductions in their policy shareholdings, are well-known for their large holdings, but a look at total asset ratios reveals a different aspect.
- Companies with high policy shareholdings relative to total assets have lower ROE and ROA as well as foreign ownership, market capitalization, and valuations.
- These companies with inconspicuously held policy shares are reluctant to take corporate governance initiatives and face many challenges in both board practices and key actions.
Adastria Bets on Diversification for Future Growth
- M&A is now a core strategy for expansion among lifestyle retailers as depopulation shrinks the overall market.
- Adastria is leading this trend, acquiring several businesses in the past year, and will now add variety stores from Welcome, the operator of Dean & Deluca, and a restaurant chain.
- It is also developing new product lines in categories as diverse as sexual wellbeing and home decor, all part of wider plans to become Japan’s “biggest general lifestyle retailer”.
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