In today’s briefing:
- Seven & I Holdings (3382 JP): Evaluating the Potential MBO
- [JAPAN ACTIVISM] Exedy (7278) – Immediate Results Reaction Was a Damp Squib, But Climbing Now
- Even in Japan, Significant Growth Potential for Seven Eleven and Other CVS
- Kadokawa (9468 JP): Take Profits as a Sony Privatisation Rumours Surface
- FineToday Pre-IPO – The Positives – Established Brands Across Multiple Regions
- Honda Faces Profit Crunch: Rising Costs vs. Ambitious EV Plans! – Major Drivers
- 2025 High Conviction: Freee KK – Becoming Free From Losses; Significant Upside
- Japan Post Holdings – Guidance Continues to Underwhelm
- Daido Steel Co., Ltd (5471 JP) Research Update
- Eisai Co Ltd (4523 JP): Mixed H1FY25 Performance; Guidance Reaffirmed; Leqembi Struggle Continues
Seven & I Holdings (3382 JP): Evaluating the Potential MBO
- Seven & I Holdings (3382 JP) did not dispute the NHK article’s claims that the founding family aims to raise buyout funds by the end of the fiscal year.
- Since 13 November, there have been conflicting press reports on the MBO offer price. The NHK article’s implied offer price of JPY3,082 seems the most credible.
- The MBO’s aggressive completion timeline pressures Alimentation Couche-Tard (ATD CN) to respond by either overbidding, working with the founding family at the back-end or walking away.
[JAPAN ACTIVISM] Exedy (7278) – Immediate Results Reaction Was a Damp Squib, But Climbing Now
- I wrote last when Exedy was at ¥3,900 and had just announced, good earnings, a sharp div hike, and a huge buyback. The stock reacted well, but not THAT well.
- Murakami-San had indeed lifted his stake, and the stock is now climbing again. Presumably, the company is in the market buying. At this price, it depends on what Murakami-san does.
- Fat div. Lots of volume to buy in the next several months, but the big story is future measures.
Even in Japan, Significant Growth Potential for Seven Eleven and Other CVS
- Seven Eleven’s future usually gets outlined as: Japan ex-growth and only growth is overseas. This is wrong. While the CVS sector is saturated, Seven Eleven itself has not reached saturation.
- There are major areas of growth, both territorially and new offshoot businesses. Seven is already 32% more efficient than Lawson but more to come.
- Here we take a deep dive into the state of CVS retailing in Japan and how Seven Eleven does, and will, fit into this – and how it will grow.
Kadokawa (9468 JP): Take Profits as a Sony Privatisation Rumours Surface
- Kadokawa Dwango (9468 JP) shares rose 16% after Reuters reported that Sony Corp (6758 JP) is in talks to acquire it. Kadokawa confirmed an initial letter of intent.
- The privatisation interest is unsurprising as Kadokawa’s publishing arm, acclaimed intellectual properties, and positioning in the anime industry would be attractive to Sony.
- The upside is limited as the last close reflects a significant takeover premium. There is a risk if a binding proposal emerges, it could be takeunder like Bain/T-Gaia.
FineToday Pre-IPO – The Positives – Established Brands Across Multiple Regions
- CVC Capital is aiming to raise over US$500m, via selling some of its stake in FineToday Holdings Co Ltd (289A JP) in Japan.
- FineToday (FT) is a beauty and personal care company in Asia offering a range of products, including hair care, skin care and body care products.
- In this note, we talk about the positive aspects of the deal.
Honda Faces Profit Crunch: Rising Costs vs. Ambitious EV Plans! – Major Drivers
- Honda Motor Co., Ltd.’s financial results for the first quarter of the fiscal year 2025 offer a complex picture of both achievements and challenges.
- The company reported its highest-ever quarterly operating profit of JPY 484.7 billion, marking a significant year-on-year increase by JPY 90.2 billion.
- This improvement was largely driven by increased unit sales in the motorcycle business in India and Brazil, as well as robust sales of hybrid automobile models in Japan and the United States.
2025 High Conviction: Freee KK – Becoming Free From Losses; Significant Upside
- Freee KK (4478 JP) offers cloud-based online accounting and HR/Payroll software to small and medium businesses (SMBs) in Japan. The company operates a subscription-based revenue model.
- Freee reported its first-ever profits recently and we expect continued improvement in freee’s profitability driven by its strong business model vs MF whose business model has started to breakdown.
- Freee’s current valuation multiples are cheap and there is significant upside to the current share price, hence we recommend making an entry.
Japan Post Holdings – Guidance Continues to Underwhelm
- H1 Results improved but did not raise guidance for the FY
- Insurance subsidiary surprised with a buyback of shares after strong results
- Bank subsidiary profits improved as expected as interest rates increase
Daido Steel Co., Ltd (5471 JP) Research Update
- FY24 GUIDANCE WAS REVISED.
- POST FY24 GROWTH SCENARIO REMAIN UNCHANGED.
Eisai Co Ltd (4523 JP): Mixed H1FY25 Performance; Guidance Reaffirmed; Leqembi Struggle Continues
- During H1FY25, Eisai Co Ltd (4523 JP) reported 3% YoY growth in revenue, driven by mainstay drugs. However, operating profit declined 11% YoY and net profit decreased 6% YoY.
- Although Eisai kept its FY25 total revenue guidance unchanged, it has reduced Leqembi FY25 revenue guidance by ¥14B to ¥42.5B due to lower revenue expectation from Americas.
- Leqembi is expected to be approved in Europe for a narrower set of patients. Next year, the drug will face competition in the U.S.
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