In today’s briefing:
- Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad
- JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big
- GLP J-REIT Placement – Could Be Another Addition to Its History of Well-Performing Deals
- Appier (4180) | Another Positive Quarter
- Recruit 4Q: Earnings Growth to Decline as Labour Markets Begin to Slowdown
- Company with US Type of 3 Committees and Independent Director Chairing BOD Is the Litmus Test
Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad
- Rakuten (4755 JP) is considering raising around US$2.2bn (JPY300bn), as per Reuters reports. The company hasn’t confirmed or denied the same in its press release.
- The company has been listing some of its subsidiaries and monetising investments to raise cash and has recently hinted at a possible equity issuance.
- While there is no guarantee that the deal will ever materialize, in this note, we take an early look at the possible deal dynamics.
JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big
- Born of a merger between two not-very-well-known businesses 20 years ago, Alfresa Holdings (2784 JP) is still not very well known. It is in a boring, low-margin business.
- The highest EBIT margin in the past two decades was…. 1.8%. ROE was in the 8-10% range for 2016-2020 but has since fallen below, as PBR has fallen below 1.0x.
- Today, we got an amended Mid-Term Management Plan, a new dividend policy, and buyback of 10% of shares out based on last price. It’s worth looking in the details.
GLP J-REIT Placement – Could Be Another Addition to Its History of Well-Performing Deals
- GLP J-REIT (3281 JP) is looking to raise around US$220m through a primary follow-on offering. The deal is a large one to digest, at 17 days of three month ADV.
- The proceeds will be used to acquire three new properties and obtain a 30% co-ownership interest in a fourth one.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
Appier (4180) | Another Positive Quarter
- Appier achieved 32% revenue growth and 50.1% gross margin in Q1 FY23, exceeding company expectations
- We expect the pace of growth to accelerate, driven by stronger momentum in Digital Content in Q2 and Q3
- We remain bullish following the recent pullback in the share price. Stock is attractive at 5x EV/Rev
Recruit 4Q: Earnings Growth to Decline as Labour Markets Begin to Slowdown
- Recruit Holdings (6098 JP) reported FQ4 and full-year FY03/2023 results. FQ4 revenue increased 9.0% YoY to ¥827.7bn (vs consensus ¥846.7bn) while OP decreased 57.1% YoY to ¥19.4bn (vs consensus ¥40.0bn).
- Excluding restructuring charges and one-time charge on impairment losses on right-of-use assets, OP increased 12.4% YoY to ¥50.9bn resulting in an OPM of 6.1% vs 6.0% in 4QFY03/2023.
- Recruit’s FY03/2024E guidance is in line with our expectation where the company expects earnings to weaken as labour markets have begun to slowdown.
Company with US Type of 3 Committees and Independent Director Chairing BOD Is the Litmus Test
- Revisions to the Corporate Governance Code have increased the ratio of independent directors, and more companies have established voluntary nominating and compensation committees.
- On the other hand, the transition to a Company with US type 3 committees and an independent director chairing the board of directors has been slow in coming.
- Substantive improvements regarding the transition to a company with an audit committee and the establishment of a voluntary nominating and compensation committee should be carefully examined.
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