Daily Brief Japan: Seven & I Holdings, CELSYS, Joban Kosan, Descente Ltd, TSE Tokyo Price Index TOPIX, CYND, Yuke’s Co Ltd, Poletowin Pitcrew Holdings and more

• Despite Seven & I Holdings (3382 JP)‘s rejection, Alimentation Couche-Tard (ATD CN) remains prepared to enter collaborative and friendly discussions to focus on finding greater value for 7&i shareholders. 
• Couche-Tard’s options are to return with a revised offer, go hostile or walk away. Couche-Tard will likely test the Board’s resolve by returning with a higher offer.
• The Board’s options are to go through the motions (appointing IFAs), conduct a market check or launch a more aggressive action plan to placate restive shareholders. 

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• SUNWELS Co (9229 JP) and Macbee Planet (7095 JP) moved to the Prime market in July 2024 and their TOPIX Inclusion events took place at the end of August 2024.
• We currently have CELSYS (3663 JP), Japan Eyewear Holdings (5889 JP), and Core Concept Technologies Inc (4371 JP) in our TOPIX Inclusions pre-event watchlist.

• In the annals of foreign buyers of Japanese tourism-related real estate assets, there have been a few good examples, and several disasters. Yesterday, we got a new suitor for assets. 
• Fortress SPV Ontario GK will attempt to buy out Fukushima-based Joban Kosan (9675 JP) through a double Tender Offer. 
• There is a history here of a bump on an MBO on an associated company. That may have caused it to trade at a premium on Day 1. It’s unrelated.

• Itochu’s Textile division continues to execute the directive from its CEO to expand reach and coverage in the fashion and lifestyle sectors, with sports one of the major target categories.
• It will completely absorb Descente as part of this plan, meaning the brand is likely to become one of the largest in the portfolio.
• The ongoing tender offer will likely succeed giving Itochu a bargain and investors no stake in the future.

• If a company seeks immediate effects to improve capital profitability, it’ll return cash to shareholders because it’ll be years before the company can recoup it by making more investments now.
• Even companies that have increased valuations by raising their capital profitability can improve it by reducing their cash on hand and policy shareholdings, which are still too large.
• Companies with low capital profitability and low valuations have to gain investor confidence through quarterly earnings disclosures by demonstrating that their disclosed goals are achievable.

• CYND Co., Ltd. is a dominant player in the reservation management software for beauty salons in Japan, with 90% of its revenue coming from recurring contracts
• The company has high barriers to scale and has acquired its second largest competitor, effectively eliminating competition
• CYND has the potential to significantly increase its revenue over the next decade, led by its co-founders with strong insider ownership, and is currently valued at JPY 4.1bn with a projected net 10-year IRR of 24.1% for Sun Mountain.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Revenue: JPY1.6bn (-20.2% YoY), Operating profit: JPY36mn (-78.3% YoY), Recurring profit: JPY56mn (-76.4% YoY), Net income: JPY21mn (-88.0% YoY).
• 1H progress against revised full-year forecast: 47.8% for revenue, 32.5% for operating profit, 49.8% for recurring profit, 31.3% for net income.
• Cost of revenue ratio rose by 10.1pp YoY to 75.0%, SG&A expense ratio decreased by 4.4pp YoY to 22.7%.

• Revenue grew 11.0% YoY to JPY24.3bn, supported by order growth in Overseas Solutions and yen depreciation.
• Operating profit of JPY360mn (+36.2%) due to lower recruitment costs and deferred restructuring expenses.
• Revised FY01/25 forecast: Revenue JPY51.0bn, Operating profit JPY1.8bn, Recurring profit JPY1.8bn, Net income JPY322mn.