In today’s briefing:
- Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang
- MUFG – What if No Yield Curve Control Relief?
- Sanken (6707)| Attractive for Activists and Growth Investors
- Rakuten’s Seiyu Sell off Will Boost Netsuper Business
- MARUKA FURUSATO Corporation (7128 JP) – 1Q Follow-Up
Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang
- On 1 June, Lifedrink (2585 JP), which listed in early 2022, announced it would move to TSE Prime in late June, leading to a TOPIX inclusion in late July.
- The offset to that was an announcement of an offering, whereby the PE Fund which brought the company to market would sell up to 3.87mm shares, effectively doubling float.
- The offering is larger than the TOPIX inclusion. The stock fell the next day, rebounded, then rebounded 11% Monday. Now it’s up more and hit a lifetime closing high.
MUFG – What if No Yield Curve Control Relief?
- There may be no imminent yield curve control relief in Japan
- MUFG market capitalization is up 2-3x and at a near decade peak level
- Without YCC relief maybe the bank’s 60% rise in NPLs in the past 4 years is better noticed
Sanken (6707)| Attractive for Activists and Growth Investors
- Sanken benefits from the structural growth in EVs, which should underpin revenue growth and margin accretion.
- DCF valuation suggests the stock is slightly undervalued. However, better-than-expected revenue trends could easily drive significant upside.
- Almost 30% of shares are held by activist investors – there is an attractive 57% upside to a SOTP valuation that could be realised over time.
Rakuten’s Seiyu Sell off Will Boost Netsuper Business
- Rakuten sold its 20% stake in Seiyu to KKR at the end of May, divesting from direct ownership in physical supermarkets.
- This provides a much needed injection of cash for Rakuten’s digital projects and should also help the online platform build trust with other supermarket chains interested in joining its platform.
- Both companies reaffirmed their commitment to build the largest online food retail platform within the next two years.
MARUKA FURUSATO Corporation (7128 JP) – 1Q Follow-Up
- In 1Q FY12/23, net sales rose 12.8%, and operating profit increased 20.3%; thus, MARUKA FURUSATO made good progress toward achieving 1H forecasts of 9.2% increase in net sales and 9.4% decline in operating profit.
- As a large percentage of the company’s earnings comes from business orders, short-term earnings are unlikely to change much.
- It appears, however, that the company is making greater than initially expected progress in reducing its order backlog as supply constraints, such as shortage of semiconductors, are eliminated.
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