In today’s briefing:
- BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- Panasonic (6752) | Panic-Sonic
- Meaningful If “P/B Below 1x” Is a Change of Mindset that Makes Managers Decide to Take an MBO
- Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance
BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
- The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results.
- In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.
Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
- Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
- For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-October 2023.
Panasonic (6752) | Panic-Sonic
- Panasonic’s Q2 results showed flat consolidated sales of Y2,090 billion, with a 24% YoY increase in adjusted operating profit.
- FY3/24 outlook was revised down with sales and operating profit reductions across segments, notably in Lifestyle and Energy
- Our concerns include the company’s complex structure, low overall profitability, uncertainties about valuing IRA credits, and challenges stemming from economic conditions, leading to pessimism about Panasonic’s stock price
Meaningful If “P/B Below 1x” Is a Change of Mindset that Makes Managers Decide to Take an MBO
- Although it’s important that the quality of companies be maintained and improved through metabolism, the number of listed companies has consistently increased due to the many IPOs and few delistings.
- Many founders used IPOs as a tax-saving measure, and many managers were not thoughtful enough to increase shareholder profits, which is why there were many IPOs and few delistings.
- Delisting through MBO or TOB for parent and subsidiary listed subsidiaries is much more effective than “TSE request” in reducing the number of companies with P/B below 1x.
Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance
- Nihon M&A Center (2127 JP) ’s 2Q revenues decreased YoY while OP remained flat. However, both revenue and OP beat consensus estimates driven by improvement in revenue per M&A transaction.
- There was strong improvement in revenue per transaction driven by enhanced efforts and growth in no. of large deals, however, M&A revenues declined due to drop in no. of deals.
- Nihon has so far achieved only 36% of its OP target and it seems unlikely for the company to reach its full-year OP guidance, suggesting there is further downside.
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