Daily Brief Japan: Nec Networks & System Integr, Macromill, Inc, Renewable Japan, Appier Group, TSE Tokyo Price Index TOPIX, Freee KK, Sankyo Co Ltd, Cyber Security Cloud Inc, MarketEnterprise Co Ltd and more

• On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
• On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
• The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.

• Today, CVC announced a deal to buy out Macromill, Inc (3978 JP). It is agreed and supported by management and the Board. 
• The shareholder register on this stock is wide open. It is not burdened by crossholders. It IS burdened by 7 large active holders who have 55%. 
• Those holders may complain about the process, the transparency, and the low price. This could be a target for an activist or a strategic overbidder.

• Macromill, Inc (3978 JP) has recommended CVC’s tender offer at JPY1,150, a 40.1% premium to the last close.
• While the offer is attractive compared to historical trading ranges, it is 41% below the IPO price and 11% below the midpoint IFA DCF valuation range. 
• The lack of an irrevocable, open shareholder register and large foreign institutions’ shareholding increases the odds of activism to force a bump.  

• Renewable Japan (9522 JP) has recommended a Tokyu Fudosan Holdings (3289 JP)-sponsored MBO at JPY1,250 per share, a 132.3% premium to the last close.
• The high takeover premium reflects the 55% YTD decline in the share price. While the timing is opportunistic, the offer is attractive compared to peer multiples. 
• The irrevocables and low required minority acceptance rate ensure that this is a done deal. The tender runs from 15 November to 8 January 2025 (34 business days).

• In Q3 FY24, Appier achieved record-breaking revenue, reaching JPY 9.1 billion, marking a 28% year-over-year growth.
• Operating income for Q3 surged by 2.5 times YoY to JPY 788 million, with the operating margin improving by 4.3 percentage points to 8.7%.
• At less than 4x EV/Sales and 16x FY25 EBITDA the stock does not appear expensive.

• Observing implied volatility across 16 markets plus gold provides a picture of falling implied volatility, despite dispersion in market performance.
• Several, but not all, markets display moderation from unusual volatility levels to a more balanced implied volatility structure.
• The realignment of implied volatility across markets presents potential relative value opportunities.

• Freee KK (4478 JP) reported 1QFY06/2025 results which saw the company generating its first-ever Adj. operating profit, earlier than we expected.
• The company has begun capitalising its software assets (decline in R&D costs as % of revenue) and this coupled with fall in S&M costs have contributed to profits.
• The corporate paying customers surpassed more than 200k for the first time and we expect freee’s earnings to continue to improve going forward.

• Sankyo, a Japanese company previously seen as a value trap, has made changes to enhance shareholder value
• The company has implemented share buybacks, acquiring 24% of shares in the last year and leading to a higher valuation
• The focus on capital efficiency and returning value to shareholders has revitalized Sankyo, leading to increased investor confidence and potential future growth opportunities

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Revenue reached JPY2.8bn (+26.2% YoY), with operating profit at JPY697mn (+48.7% YoY) and recurring profit at JPY699mn (+40.4% YoY).
• Companywide ARR was JPY3.8bn (+25.3% YoY), with subscription-based recurring revenue accounting for 93.8% of total revenue.
• User count for Shadankun, WafCharm, and SIDfm increased, with low churn rates and varying revenue per user growth.

• Revenue reached JPY5.5bn (+33.7% YoY), driven by growth in Second-hand Online and Mobile & Telecommunications segments.
• Operating profit turned positive at JPY69mn, with a 1.3% margin, despite JPY68mn in relocation expenses.
• The company recorded a JPY32mn derivatives valuation loss due to a stock price decline in a CFD contract.