In today’s briefing:
- Olympus Placement – Had Been Doing Well, till Recently
- Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
- Suzuken Buyback (9987 JP) – The Best News In Years
- Lax Governance Would Affects Not Only Occurrence of Scandals, but Also Areas Such as Competitiveness
- Freee: Earnings Beat and Losses Widen as Freee Focuses on Mid-To-Long Term Plan
- Daiei Kankyo Pre-IPO – Steady, at Best
- That’s a Wrap, Kura Exits 2022 on a High Note
Olympus Placement – Had Been Doing Well, till Recently
- MUFG aims to raise around US$255m via selling around 1% of Olympus Corp (7733 JP).
- The stock has been doing well recently and MUFG has sold before. Although, the recent earnings updates didn’t go down too well.
- In this note, we will run the deal through our ECM framework and comment on other deal dynamics.
Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
- It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
- Now they are letting go of the other half. Sale structure means ongoing pressure.
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
- Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
- Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
- The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.
Suzuken Buyback (9987 JP) – The Best News In Years
- Suzuken Co Ltd (9987 JP) last Friday announced earnings which beat expectations and raised forecasts well above consensus. But Implied H2 did not change, suggesting full-year is lowballed.
- The company announced a buyback over 5 months, but today (Tuesday) announced a ToSTNeT-3 buyback for the full size (6% or so) that morning.
- It looks like insider selling, which in addition to being accretive would be bullish on a governance basis.
Lax Governance Would Affects Not Only Occurrence of Scandals, but Also Areas Such as Competitiveness
- By nature, management is expected to establish an organizational structure that ensures compliance with laws and regulations, and to put in place a management system to ensure such compliance.
- This is a governance issue, but it goes beyond that. If a loose corporate culture permeates the company, it would have an impact on various areas, such as reduced competitiveness.
- Based on the analysis of Metrical Score, companies that have enhanced their corporate governance and performed stable earnings and high stock valuations would have minimized risk of falling into scandal.
Freee: Earnings Beat and Losses Widen as Freee Focuses on Mid-To-Long Term Plan
- freee (4478 JP) reported 1QFY06/2023 results yesterday. Revenue increased 34.5% YoY to JPY4.24bn (vs consensus JPY4.18) driven by 23.5% YoY growth in paying customers to 386,655 from 313,206 in 1QFY06/2022.
- As expected, operating losses widened to 24.6% of revenue, however, reported losses of JPY1.0bn was well below consensus estimate of JPY1.6bn.
- Freee’s share price has moved up by about 5% following earnings announcement which shows that the market is confident over freee’s ability to turn around its profitability.
Daiei Kankyo Pre-IPO – Steady, at Best
- Daiei Kankyo (9336 JP) (DK), a waste management company, aims to raise around US$280m in its Japan IPO.
- Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
- In this note, we talk about the company’s past performance.
That’s a Wrap, Kura Exits 2022 on a High Note
- Despite now being valued at ~$635 million (down ~32% from ATHs) Kura Sushi, the small-time restaurant operator with 40 stores across the United States, continues to boast an overzealous market valuation.
- Perhaps it’s their ability to consistently beat expectations. Perhaps it’s because they remain undercovered and somewhat illiquid for their size (the parent organisation owns a considerable amount of outstanding shares).
- I can’t be sure, nor do I really care. After reporting Q4 earnings last week, Kura rounded off the year in style, continuing to demonstrate a healthy recovery in demand for their service.
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