In today’s briefing:
- TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
- ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
- Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
- Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches
- Additional Points Add to Our Recent Bearish View on Takeda.
- MIXI Inc. (2121 JP) – At an Inflection Point to Generate Shareholder Value
TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
- Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
- The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.
Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
- Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.
Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
- 18 months after announcing the offer, ENEOS Holdings (5020 JP) launched the Tatsuta Electric Wire & Cable (5809 JP) tender offer at unchanged JPY720, 4.9% below the last close price.
- The Board requested a bump, but Eneos refused due to Tatsuta’s missed targets, no competing offer and the supportive updated IFA valuation
- The lack of a bump, no vocal opposition, deal fatigue, the Board’s unexpected recommendation, weak earnings and 73.9% takeover premium will help acceptance.
ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
- ENEOS announced its deal for Tatsuta Electric Wire & Cable (5809 JP) 18mos ago. China approval took a while. Now they have launched.
- The TOPIX Non-Ferrous Metals sector has returned 60%. TOPIX 50%. There is a new TSE Sheriff in town asking for PBR 1.0x. BVPS is up. Presumably, forward CF is up.
- But the TOB Price is unchanged. That is disappointing. One reason why a higher price was rejected was that no other buyer approached to take over the company. 🤷🏻♂️
Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
- The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
- There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.
Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches
- Mimasu Semiconductor Industry (8155 JP) notes that the pre-condition for Shin Etsu Chemical (4063 JP)’s JPY3,700 tender offer has been satisfied. The tender runs from 21 June to 5 August.
- The share price has traded at or above the offer on 15 out of 38 trading days, partly due to expectations of a counteroffer.
- While the offer is below the midpoint of the IFA DCF valuation range, it represents an all-time high. The lack of activists or competing offers suggests a done deal.
Additional Points Add to Our Recent Bearish View on Takeda.
- Production problems of Vyvanse generics seem to be largely resolved with nine of the ten suppliers back in stock.
- Safety concerns with Takeda’s approved psoriasis competitor does raise further concerns as they are both TYK-2 inhibitors.
- The company’s $900 m big restructure and cited areas for margin improvement are not “convincing” and lack detail.
MIXI Inc. (2121 JP) – At an Inflection Point to Generate Shareholder Value
- Approaching a transformational phase – MIXI Inc. is a digital content company generating earnings from its ‘MONSTER STRIKE’ mobile gaming franchise.
- Operating in a mature domestic gaming market, the company has successfully diversified into lifestyle and sports, but to date has experienced limited earnings contribution.
- We believe this is about to change, driven by the new monetization strategy for the ‘FamilyAlbum’ video and photo- sharing service app in FY3/25.
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