In today’s briefing:
- Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
- Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
- Advantest (6857 JP): High Gearing on the Downside
- Matsui Securities – Rising Average Daily Volume & New Accounts, With Strong July Monthly Figures
- T&K Toka (4636 JP): Bain’s JPY1,400 Pre-Conditional Tender Offer
- Rakuten Securities IPO: Japan Optimism and Fractional Trading Boost Revenue Amid Stable Costs
- 2Q Follow-Up – Golf Digest Online (3319 JP)
- LaKeel (4074) – Continuing Healthy Business Expansion
- Sodick (6143) – Aiming to Steer Through Current Circumstances
- Aoyama Zaisan (8929) – Pioneering Market Leader Aligned with Japan’s Aging Megatrend
Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
- [cue Tom Hardy gif saying “That’s Bait”]. But yes, this story has a backstory to the Japanese underworld, and while the original sin may have been minor, it’s everything.
- The firm was raided, the CEO resigned, a govt authority “recommended” Sanei get rid of Mr Koike’s influence, banks got antsy, employee morale dropped. Sanei needed a saviour.
- Koike-San asked Open House (3288 JP) to buy his shares. They agreed to take over the company. It’s basically a done deal with a possible twist.
Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
- In January 2023, NAVF and Michael 1925 LLC – affiliates of Dalton Investments LLC – announced a hostile partial Tender Offer for T&K Toka Co Ltd (4636 JP).
- It failed. They wanted to buy 21.72% at ¥1300 to get to 44% post-Tender. The Company objected. Dalton/etc didn’t get the shares. Shares fell afterward.
- Today, Bain announced a deal to take over the company at ¥1,400/share. T&K TOKA has agreed. It may not be as easy as that. And there is a fulcrum investor.
Advantest (6857 JP): High Gearing on the Downside
- Advantest is highly geared to changes in sales, with average contribution margins of 36% and 51% at the gross and operating profit levels, respectively.
- This works on the downside as well as the upside, something that has perhaps not received sufficient attention as optimists imagine a repeat of the recent extraordinary up-cycle.
- The share price is down 19% from its July 18 high, but at the top of its 5-year P/E range even vs historical peak EPS.
Matsui Securities – Rising Average Daily Volume & New Accounts, With Strong July Monthly Figures
- Japan online retail stock broker, better average daily volume and rising new accounts
- Monthly data shows strong July average daily volume after an exceptional June
- Granular data on monthly new accounts is strong, now at +31% in July YoY
T&K Toka (4636 JP): Bain’s JPY1,400 Pre-Conditional Tender Offer
- T&K Toka Co Ltd (4636 JP) has recommended Bain’s pre-conditional tender offer of JPY1,400 per share, a 32.0% premium to the undisturbed price.
- The pre-conditions relate to China TOB treatment measures (T&K Toka sell downs its Hangzhou Toka Ink stake to hold less than 30%) and various country approvals (Japan and Serbia).
- The offer will open in early January 2024. The minimum acceptance condition requires a 39.2% minority acceptance rate (50.3% excluding Nippon Active), which is doable due to a reasonable offer.
Rakuten Securities IPO: Japan Optimism and Fractional Trading Boost Revenue Amid Stable Costs
- Rakuten Group (4755 JP) announced last month that its consolidated subsidiary, Rakuten Securities (RAKUSEC JP), has applied for a listing on the Tokyo Stock Exchange.
- In the last eight quarters, the Securities business has experienced more than 100% profit growth, thanks to linear revenue growth while costs remained relatively stable.
- The previous private market valuation of ¥400bn implies a PE ratio of 15.0x, assuming the company maintains its current 2Q23 profitability level.
2Q Follow-Up – Golf Digest Online (3319 JP)
- Post-merger integration (PMI) for SkyTrak business was largely completed during the 1H, and the GOLFTEC ANYWHERE initiative is now in full swing.
- GOLFTEC continues to steadily open new corporate centers.
- Following 1H unit sales of 5,000 units (new SkyTrak+ only launched at the end of May), the Company expects SkyTrak 2H unit sales of 10,000+ units.
LaKeel (4074) – Continuing Healthy Business Expansion
- Underlyingtrendsremainpositive–Q1-2FY12/2023results missed company guidance which was a negative optic, with a slowdown in sales growth to 9.8% YoY from 26.4% YoY shown in the prior year.
- The cause was license sale slippage into H2 FY12/2023 which is not terminal, and to reflect this FY company guidance has remained unchanged. Despite some earnings volatility, we believe there is sufficient evidence to indicate that LaKeel’s overall business is continuing healthy expansion, particularly with its DX services.
- Market demand continues to be robust from key financial and service sectors, and the company has earmarked manufacturing as a new area to engage.
Sodick (6143) – Aiming to Steer Through Current Circumstances
- Digging in for the duration – continuing weak demand from China contributed significantly to weak Q1-2 FY12/2023 numbers, with sales declining 14.8% YoY and resulting in an operating loss.
- The key issue is that customers are experiencing low utilization rates at production facilities, and hence do not require new capacity.
- Sodick revised its guidance for FY12/2023, with expectations of similar market conditions persisting into H2 FY12/2023.
Aoyama Zaisan (8929) – Pioneering Market Leader Aligned with Japan’s Aging Megatrend
- Specialist property consultancy geared for growth – Aoyama Zaisan Networks Company is a comprehensive property consulting firm, offering wealth management, succession, and estate administration solutions to asset-owning individuals and business owners.
- It aims to become the market leader in offering strategic individualized services such as ADVANTAGE CLUB, a highly successful real estate fractional ownership product.
- This unique offering allows individuals to invest in high-value real estate located in prime metropolitan areas providing stable and low-risk income.
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