Daily Brief Japan: Pasona Group, Nidec Corp, Keisei Electric Railway Co, Lasertec Corp, Shimano Inc, Nippon Prologis Reit and more

• Pasona (2168.JP) is a long investment opportunity due to its ownership of a majority stake in Benefit One (2412.JP), which is the subject of a bidding war between M3 (2413.JP) and Dai-Ichi Life (8750.JP).
• Potential bids for Benefit One could result in a significant cash windfall for Pasona, estimated at around 50% more than its current enterprise value, as well as an operating business valued at an additional 50% of its current EV.
• With the founder of Pasona being 71 years old, the bidding war could lead to a management buy-out or a substantial return of capital program for the company.

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• Nidec reported a solid set of quarterly numbers, except for another huge structural loss in its EV business. 
• Nidec saw sales growth and operating profitability improvements in all other segments
• We continue to think that Nidec is attractively priced at under 20x EV/ EBIT given structural growth drivers

• Until the “parent-subsidiary (affiliate) listing” is resolved, the value of parent company isn’t  usually reflected. If Keisei has some business interest in holding OLC shares, it’s responsible for explaining it.
• If OLC shares were mostly sold, there’d be nothing left for Keisei, which couldn’t find strategy for using cash, so the decision of not losing the growing affiliate isn’t bad.
• This small sale is to buy time until a clear growth strategy is found, but once the ratio of foreign shareholders exceeds 1/3, building time will likely become more difficult.

• Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
• Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
• Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. 

• Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid
• 1Q operating profit beat the analyst consensus, but the upward revision to full year is minor and falls short of street estimates
• The stock has priced in an improving outlook. However, valuations are now looking full compared to historical levels. 

• In this insight, we look at the fundamentals of J-REITs.  We look at overall Japan real estate, interest rate impact, as well as industry dynamics
• We like logistics sector due to its strong industry fundamentals; we are more bearish on office as vacancy will see more fluctuation in terms of new supply
• On the back of valuation and industry fundamentals, we suggest LONG Nippon Prologis REIT and SHORT Nippon Building Fund