In today’s briefing:
- Rakuten Bank IPO: New Price Range Is a Steal
- Rakuten Bank IPO – Lower Range Makes It Even More Attractive
- Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands
- MSCI Japan May QCIR: Couple of Potential Changes
- Toyo Construction (1890 JP): YFO Loses Ground to the Board’s New Five-Year Plan
- Can Many Companies that over Years Could Not Suddenly Transform Themselves Thanks to TSE Requests?
Rakuten Bank IPO: New Price Range Is a Steal
- Rakuten Bank (5838 JP) has set its IPO price at JPY1,300-1,400 per share which is 20%-29% lower than the IPO reference price range of JPY1,630-1,960 per share.
- We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: Valuation Insights.
- The new price range values Rakuten Bank at a discount vs peers for the ROE it delivers. SBI Sumishin Net Bank (7163 JP) strong post-IPO performance suggests strong sector sentiment.
Rakuten Bank IPO – Lower Range Makes It Even More Attractive
- Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$630m in its Japan listing in April 2023.
- 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 the company’s past performance and undertook a peer comparison. In this note, we talk about valuations in the IPO price range.
Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands
- Two weeks ago, Toyo Construction (1890 JP) released a new Mid-Term Management Plan with a new investment plan, and a new capital plan (100% payout, ¥50/share minimum div til Mar-2026).
- Obvious goal: get the stock above ¥1,000/share so YFO’s ¥1,000 bid looks unattractive. Then they attacked on a FEFTA basis, saying YFO’s foreign entities need permission to go over 10%.
- Now Toyo has released a March 2024 forecast, with a ¥63/share dividend and 105% guided payout. The stock popped. LOTS of shares trading. Now only up small.
MSCI Japan May QCIR: Couple of Potential Changes
- Based on the last close, we expect Kawasaki Kisen Kaisha (9107 JP) to replace Nihon M&A Center (2127 JP) in the MSCI Japan Index at the May QCIR.
- Passive trackers will need to buy less than 1x ADV on Kawasaki Kisen Kaisha (9107 JP) while selling over 5x ADV on Nihon M&A Center (2127 JP).
- Kawasaki Kisen Kaisha (9107 JP) trades cheaper than its closest peers and there are some interesting market neutral trades there.
Toyo Construction (1890 JP): YFO Loses Ground to the Board’s New Five-Year Plan
- The Toyo Construction (1890 JP) Board has tried every tactic to delay YFO’s JPY1,000 tender offer. The Board’s new five-year medium-term management plan tilts the fight in its favour.
- The Board’s new management plan, particularly the dividend payout, now provides shareholders with a credible alternative to accepting YFOs’ tender offer. The payout ratio for FY23-FY25 is set at 100%.
- YFO’s primary tactic is to replace the Board at the June AGM, but shareholders have less reason to support it. Improving sentiment and the offer continue to underpin the shares.
Can Many Companies that over Years Could Not Suddenly Transform Themselves Thanks to TSE Requests?
- Not because TSE requires it, but because management should provide shareholders with a concrete plan and outlook for cash allocation based on the company’s growth stage and the external environment.
- For companies that disclosed improvement measures before TSE requested them and saw their stock price rise significantly, the sustainability of the stock price depends on the feasibility of the plan.
- The stock market jumped the gun and rallied in anticipation of the company’s announcement of feasible plan as expected, even though the company has yet to disclose any improvement plan.
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