In today’s briefing:
- Pasona: The Wrong Price
- Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns
- Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Asahi Group (2502 JP): US$1.3bn Secondary Placement
- Nippon Paint (4612 JP): Results Beat On Resilient China 2C Business
- SPARX – Sharply Expanding ROE, 1H24 Profit Annualized Surges YoY, FUM Strongly Up, Costs Contained
- Takara Bio (4974 JP): Smaller-Than-Expected Decline in H1FY24 Profit; FY24 Guidance Revised Downward
- Geniee (6562 JP) – Resilient Ad Growth and Marketing SaaS Driving Momentum
- Ohba |(9765 Jp) – Making Steady Progress in Building up Technical Capabilities and Human Capital
Pasona: The Wrong Price
- As discussed here in a piece about the Partial Tender Offer, Pasona Group (2168) has agreed to sell its controlling stake in Benefit One (2412) to M3 (2413).
- That will leave Pasona Group with a fair chunk of cash and possibly a residual stake in Benefit One, depending on the results.
- Though we don’t know what the future holds, Pasona now is the wrong price for its future.
Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group Holdings (2502 JP) today announced a collection of 10 shareholders (mostly financial institutions) would sell a total of 33.48mm shares (6.6% of shares out) in Asahi Group.
- This will become more of a thing going forward. Cross-holders “want” to unwind. And in many cases, the cross-held want to buy back stock (reduce E, raise ROE).
- This deal is “good” in that it clears out a lot of the bank cross-holders in one fell swoop. But there are more crossholders behind.
Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns
- A group of shareholders are looking to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
- The deal would represent 23 days of Asahi’s three month ADV. Its latest extended large primary deal has done very well.
- While the deal isn’t particularly well flagged, it is an extended one allowing the market to price in the impact of the share sale.
Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Nine shareholders are looking to sell 33.48m shares of Asahi Group Holdings (2502 JP). That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.
- Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.
- There will be buying from global trackers but nothing from TOPIX trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.
Asahi Group (2502 JP): US$1.3bn Secondary Placement
- Asahi Group Holdings (2502 JP) announced a pure secondary offering of 33.5 million or 6.61% of outstanding shares. At the last close, the placement was worth JPY194 billion (US$1.3 billion).
- Notwithstanding Asahi’s explanation, the selling shareholders’ motivation for exiting their shareholding is likely to capitalise on the strong share price performance – Asahi shares are up 45% YTD.
- Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 28 November and 1 December (likely 28 November).
Nippon Paint (4612 JP): Results Beat On Resilient China 2C Business
- Nippon Paint Holdings (4612 JP) announced a better-than-expected 3Q23 results this week, mainly driven by a resilient China decorative paint business.
- The company also raised 2023 operating profit guidance, expecting around 6% higher operating profit (Y168bn from Y158bn previously).
- At 21x forward PE, the company is attractively valued given the growth profile and strong market share position in most end-markets.
SPARX – Sharply Expanding ROE, 1H24 Profit Annualized Surges YoY, FUM Strongly Up, Costs Contained
- ROE is now 24.4% in 1H24 compared with 18.0% last year. ROE consistently rising well, from 15.9% in FY21.
- Quarterly net profit up 47% YoY in 2Q24. On an annualized basis, net profit in FY24 can show considerable delta from FY23, a year when returns and profit were good.
- Costs are well-contained. SG&A to assets was 23.7% at its recent peak and now it’s 20.8%. SG&A to revenue is now 55.5% compared with 65.3% at its recent peak.
Takara Bio (4974 JP): Smaller-Than-Expected Decline in H1FY24 Profit; FY24 Guidance Revised Downward
- In H1FY24, Takara Bio Inc (4974 JP) reported 41% YoY decline in revenue to ¥19.1B, dragged by 46% YoY decrease in revenue from reagents, which contributed 78% of total revenue.
- Operating profit plunged 87% YoY to ¥1.4B, 28% ahead of guidance, due to lower-than-expected R&D expenses. Net profit decreased 87% YoY to ¥1.1B, 67% higher than the guidance.
- Takara Bio has cut FY24 sales, operating profit, and net profit guidance by 15%, 63%, and 64%, respectively, as the company is anticipating a sluggish life science R&D market globally.
Geniee (6562 JP) – Resilient Ad Growth and Marketing SaaS Driving Momentum
- Q1-2 FY3/2024 results demonstrated robust growth by Geniee with sales growth of 23.7% YoY and operating profit growth of 99.9% YoY.
- The Marketing SaaS segment has seen robust sales growth and margin improvement YoY, paving the way for a resilient earnings stream going forward.
- However, given a weaker-than-expected outlook for the advertising market both domestically and overseas, the company has lowered FY3/2024 guidance whilst maintaining its medium-term guidance range for FY3/2026.
Ohba |(9765 Jp) – Making Steady Progress in Building up Technical Capabilities and Human Capital
- Earnings Trends: 1Q FY24/5 results were solid, with steady sales and improved gross profit margins.
- Profit growth was limited owing to higher SG&A expenses in absolute terms stemming from hiring personnel, higher wages, and the inclusion of SG&A expenses of Ohba Research and Land Surveys.
- However, the company is likely to see more benefits from the steady accumulation of orders and continuous improvement in gross profit margin from 2Q onward, when it becomes easier to secure sales volume owing to the seasonality of its business.
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