In today’s briefing:
- Renesas (6723 JP) ANOTHER Clean-Up Block Trade as Hitachi/NEC Exit
- Renesas Electronics (6723 JP): Passives Will Need to Buy a LOT This Year
- Renesas Electronics Placement – Another US$2bn Deal, Momentum and Index Weights Should Help
- Japanese Laggard Opportunity #2: Okuma Corp (6103 JP)
- Fujitsu General (6755) – UGLY Forecast Change but Fujitsu Still Wants Out
- Size of Market Capitalization Will Make a Difference in Corporate Governance and Value Creation
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Renesas (6723 JP) ANOTHER Clean-Up Block Trade as Hitachi/NEC Exit
- Last November saw the clean-up trade of INCJ getting out of Renesas Electronics (6723 JP). That was 180+mm shares, well over-subscribed.
- Today we have news Hitachi and NEC are getting out of their stakes. That’s 123mm shares in an Accelerated Block Offering of about US$2bn. I expect it will go well.
- Recent gains in semiconductor stocks globally make this larger discount attractive. I expect a little heaviness but not much. There are index repercussions for international indices.
Renesas Electronics (6723 JP): Passives Will Need to Buy a LOT This Year
- Hitachi Ltd (6501 JP) and NEC Corp (6701 JP) are looking to sell their entire stake in Renesas Electronics (6723 JP) in a deal that will raise around US$2.2bn.
- Renesas Electronics (6723 JP) dropped a bit in November following INCJ’s stake sale but momentum has picked up again as the stock reaches for new highs.
- The float increase in global indices will coincide with the offering. There will be BIG buying by TSE Tokyo Price Index TOPIX (TPX INDEX) trackers in October.
Renesas Electronics Placement – Another US$2bn Deal, Momentum and Index Weights Should Help
- Hitachi Ltd (6501 JP) and NEC Corp (6701 JP) aim to raise around US$2.1bn via a sell-down of their stake in Renesas Electronics (6723 JP).
- The stock has seen a number of deals over the past few years with the most recent one being a cleanup in Nov 2023, which did well.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Japanese Laggard Opportunity #2: Okuma Corp (6103 JP)
- Okuma Corp (6103 JP) is flagged as a good candidate to boost its shareholder value, it has a net cash balance sheet, P/BV of 0.9x and low PE of 10.7x
- Management has elaborated a detailed plan to boost its P/BV ratio, with targets to boost revenues and profit margins, as well as a 35% dedicated payout for dividends
- Okuma should trade at least 1x Book given its strong business positioning and brand name; we derive a fair value of JPY7,300 (11% UPSIDE) using FY2024’s forecast book value
Fujitsu General (6755) – UGLY Forecast Change but Fujitsu Still Wants Out
- Fujitsu General (6755 JP) came out with an ugly Q3 and ugly full-year forecast change. It appears there is lots of inventory-clearing in the channel in addition to macroeconomic headwinds.
- The split is a little difficult to discern, but the reason for channel-clearing makes a lot of sense from the distributor side. How long it lasts hard to know.
- This creates the impetus for more cost-cutting/restructuring measures before a delayed v-bound to March 2025. Fujitsu STILL wants to sell. It may make extraordinary proposals to get it done.
Size of Market Capitalization Will Make a Difference in Corporate Governance and Value Creation
- It is premature to start discussions on stopping raising the hurdles of the Corporate Governance Code when Japan’s boards are not dominated by a majority of independent directors.
- If listed companies are left to voluntarily improve their corporate governance practices, differences in corporate governance practice efforts among listed companies are expected to widen.
- Companies with high percentage of foreign shareholders, primarily those with large market capitalization, are expected to continue to improve their corporate governance practices through engagement by overseas investors. vice versa