In today’s briefing:
- Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
- Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
- Rakuten Bank (5838 JP) – Attractive Versus Domestic Neobank Peers, with Added Technical Support
- Japan Pachinko Sector Meets Secular Decline with Pivots in Strategy
Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
- The index announcements regarding the the changes to indices following the Rakuten (4755 JP) offering have been a bit weird.
- Some of that may have to do with timing. Some is just weird
- The result is that there is less to buy this week than I previously expected, and the buying gets dragged out longer.
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
- In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
- I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
- Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.
Rakuten Bank (5838 JP) – Attractive Versus Domestic Neobank Peers, with Added Technical Support
- Rakuten Bank’s imminent TOPIX index inclusion is a further share price support, to a neobank with a fundamentally attractive outlook
- Rakuten Bank trades on a LTM PE multiple of 10.9x, LTM PBV ratio of 1.5x and an ROE of 13.8%, the best ROE to PBV ratio of its neobank peers
- Aside from its premium long-run growth prospects and low prospective PEG ratio, Rakuten Bank is also the lowest cost to serve Japanese neobank
Japan Pachinko Sector Meets Secular Decline with Pivots in Strategy
- Universal Entertainment and Dynam Japan bave moved off total dependence on pure historic pachinko revenue flows as total market continues to slide.
- Universal’s move to the casino sector as a core profit center and Dynam’s strong hall closure strategy are keys to future of the sector.
- Dynam has been fighting off inflationary headwinds in opperating costs of their halls and sharp depreciation of equipment responsible for profit decline.
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