Daily Brief Japan: Sanei Architecture Planning, Omron Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer
Omron (6645) | Long-Term View Unchanged but Bumpy Ride
Expanding Nominal Profits from Shift from Deflation Rather than P/B Is the Driver of Stock Prices

Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer

Sanei Architecture Planning (3228 JP) has recommended Open House (3288 JP)’s tender offer of JPY2,025 per share, an 18.0% premium to the undisturbed price (15 August).
The transaction is required to facilitate the exit of Mr Koike, the largest shareholder, and satisfy Article 27 of the Tokyo Metropolitan Organized Crime Exclusion Ordinance.
Irrevocables represent a 64.21% ownership ratio, and the lower limit requires a 6.9% minority acceptance rate. The offer is a reasonable solution to the current predicament.

Omron’s stock price has collapsed 20% after missing Q1 earnings estimates.
The recovery in demand has been pushed back – the company may cut its full year guidance at the interim stage
On near-term earnings, the stock is around fair value. There is +20% upside for longer-term investors based on our DCF

TSE market capitalization of has doubled since 1990 and the number of companies has doubled, while TOPIX is 20% lower than its 1989 high. Money went mainly to IPOs.
P/B, TSE’s expectation for stock price appreciation, had high correlation with TOPIX, 0.84 from 1999-2019. However, it correlated negatively for 4 years from 2020 with other factors having significant impact.
Correlation between TOPIX and nominal GDP is 0.94 for 2020-2023, showing higher correlation. Expectations of higher nominal profits caused by transition from deflation to inflation are behind the stock rally.

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