Daily Brief Japan: Rakuten Bank , Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Rakuten Bank IPO Trading – Ample Upside
Rakuten Bank IPO: Trading Debut
Modest ROE Growth Expected to Increase Shareholder Proposals for Higher Shareholder Returns

Rakuten Bank IPO Trading – Ample Upside

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

Rakuten Bank (5838 JP) priced its IPO at JPY1,400 per share to raise gross proceeds of US$620 million. The shares will start trading on 21 April.
We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: New Price Range Is a Steal.
Peers have re-rated and our valuation analysis points to a fair value of around JPY1,900 per share, 36% above the IPO price. Therefore, the IPO price remains attractive.

The fact that there is a certain correlation between ROE+DOE and TOPIX reconfirms that it’s effective to ask management to improve performance in terms of both profitability and shareholder return.
While % change in shareholders’ equity moves in line with % of change in net profit, dividend payout moves moves differently. Many companies still adopt a “stable dividend” policy.
If shareholders propose share repurchases, dividend increases, etc., it can be said that management has determined that the shareholder return (ROE+DOE) it has secured is not sufficient.

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