In today’s briefing:
- [JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
- Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is
- Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- Kioxoa Pre-IPO – The Negatives – Still a Follower of the Cycle
- What Is Kioxia? And Should You Bother? Part 1: Why NAND Is so Hard (And Not Attractive)
- FineToday Holdings (289A JP) IPO: Valuation Insights
- EQD | Nikkei 225 : State Of The Odds (WEEKLY)
[JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
- 13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661).
- Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh.
- Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.
Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin.
- The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
- I think one could give this a pass, and even sell it if it opens down small.
Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is
- In October 2023 and then in early 2024, activist Palliser Capital demanded that Keisei Electric Railway Co (9009 JP) sell down its stake in Oriental Land (4661 JP) to sub-15%.
- Keisei in March sold 1% of OLC but in doing so, rejected the concept of removing equity affiliate status. They could go to a level just >15%, or just >20%.
- Today, OLC announced a ToSTNeT-3 buyback of 18mm shares – the total for the 2yrs to Mar-26 announced (p19) in April. Keisei will sell and will stay above 20%.
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
- There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
- However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.
Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio (8136 JP) has announced a secondary offering of up to 25.9 million shares (29.8 million including overallotment), worth around US$840 million (US$970 million including overallotment).
- Sanrio’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 13 December (likely 10 December).
Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- A group of domestic financial institutions and the firm’s executives are looking to raise US$840m from trimming their stakes in Sanrio (8136 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Kioxoa Pre-IPO – The Negatives – Still a Follower of the Cycle
- Kioxia Holdings (6600 JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO.
- It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
- In this note, we talk about the not-so-positive aspects of the deal.
What Is Kioxia? And Should You Bother? Part 1: Why NAND Is so Hard (And Not Attractive)
- Tier-2 commodity Memory is a lousy business, which requires high Capex and R&D, generates very low Free Cash Flows. DRAM is more sustainable than NAND as peak margins are higher.
- Kioxia only makes NAND, has a high market share (16%) but is a Tier-2 supplier with a roadmap lagging SK Hynix by ~2 years, and a high exposure to Consumer.
- The Memory cycle has recovered, probably close to peak earnings. That’s why stocks have been declining (Micron, Hynix). Part 2 will cover financials (there’s a bad surprise) and valuations.
FineToday Holdings (289A JP) IPO: Valuation Insights
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- We previously discussed the IPO in FineToday Holdings (289A JP) IPO: The Bull Case and FineToday Holdings (289A JP) IPO: The Bear Case.
- Our valuation analysis suggests that the IPO reference price of JPY2,150 per share is unattractive. Therefore, we would pass on the IPO.
EQD | Nikkei 225 : State Of The Odds (WEEKLY)
- The Nikkei 225‘s trend is uncertain at the moment: the new N225 WEEKLY QUANTCHART presented here (freely accessible 24/7 clicking here) shows us the current MRM models’ support and resistance.
- In the last few months the index stalled, currently it is stuck in a range roughly between 37650 and 40250, and it has closed down for 2 consecutive weeks (CC=-2).
- At the moment we expect the index to fall maybe another week (closing this week down) and then a LONG reversal the following week.
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