In today’s briefing:
- KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
- Fast Retailing: Earnings Preview
- Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit
- NTV’s Change of Policy Is a Positive Effect Of TSE’s Request, But Its Seriousness Will Be Tested Now
- Familymart Ties with Coca Cola on Logistics, Sells Laundromat Business
KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
- It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
- There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.
Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
- Lawson Inc (2651 JP) has announced that the pre-condition for the KDDI Corp (9433 JP) tender offer is satisfied. The offer terms are unchanged at JPY10,360 per share.
- The offer is arguably light due to the market re-rating, does not reflect significant synergies and is below the midpoint of the IFA DCF valuation range.
- Nevertheless, the offer will likely succeed as it represents an all-time high, with no vocal opposition, an achievable 30.2% minority acceptance rate, and the shares never trading through terms.
Fast Retailing: Earnings Preview
- While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
- Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
- Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.
Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
- A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
- The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored.
Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit
- The med-tech sector is ripe for consolidation. Smaller players like Hogy Medical (3593 JP) , and Eiken Chemical (4549 JP) exhibit sub-par growth and lagging valuations
- Activist investors like ValueAct Capital, Dalton and Asset Value have recognized an opportunity for growth and potential M&A
- Both Hogy and Eiken trades at a deep discount to larger domestic peers and stand to benefit the most from any consolidation
NTV’s Change of Policy Is a Positive Effect Of TSE’s Request, But Its Seriousness Will Be Tested Now
- Although unavoidable under the provisions of Broadcasting Act, the fact that the right to receive dividends as interest-bearing securities was inhibited was problematic in terms of fairness with other shareholders.
- NTV Holdings, which has ignored this issue, changes its policy, which is a positive impact of “TSE’s request,” but NTV’s seriousness can be measured by whether it raises its ROE.
- If the intention is to leave cross-shareholdings intact and attract overseas investor purchases through some share repurchases, there would be little prospect of a serious increase in ROE.
Familymart Ties with Coca Cola on Logistics, Sells Laundromat Business
- In one of many ventures in response to the 2024 logistics problem, Familymart began an experimental collaboration with Coca Cola Bottlers in February, seeking to reduce delivery frequency in Kanagawa.
- It is also streamlining its business, selling both its gyms and laundries recently.
- While unlisted, its ongoing innovations provide an insight into the wider convenience store sector.
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