In today’s briefing:
- Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value
- Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Nexon (3659) | Down 17% on Quarterly Miss!
- Tokyo Electron (8035 JP): 1H FY03/25 flash update
- 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Azoom (3496 JP): Full-year FY09/24 flash update
- Parent-Subsidiary Listings Are a Microcosm of Japanese Stocks: Change to Value-Creation Is Long Away
Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value
- In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
- Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
- The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.
Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
- Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
- There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.
Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
- JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).
Nexon (3659) | Down 17% on Quarterly Miss!
- Nexon’s 3Q24 earnings report saw its stock dip -17% as revenue missed guidance and foreign exchange losses weighed on the bottom line.
- Nexon’s operating profit rose +11% y/y to ¥51 billion, with an operating margin of 38%
- The stock is trading at 8.5x EBITDA, which makes it very attractive versus the sector
Tokyo Electron (8035 JP): 1H FY03/25 flash update
- In 1H FY03/25, the company reported revenue of JPY1.12tn, operating profit of JPY313.9bn, and net income of JPY243.9bn.
- The revised full-year forecast for FY03/25 includes revenue of JPY2.40tn and operating profit of JPY680.0bn.
- The company announced a JPY70.0bn share buyback plan, acquiring up to 3.5mn shares, representing 0.8% of outstanding shares.
7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
- The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
- There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.
Azoom (3496 JP): Full-year FY09/24 flash update
- Sales increased by 27.4% YoY, with the Idle Asset Utilization segment driving growth, achieving JPY10.0bn in sales.
- The company forecasts FY09/25 sales of JPY12.5bn, operating profit of JPY2.5bn, and net income of JPY1.6bn.
- Visualization segment reported full-year sales of JPY214mn, focusing on technical skill improvement and expanding the sales team.
Parent-Subsidiary Listings Are a Microcosm of Japanese Stocks: Change to Value-Creation Is Long Away
- Listed subsidiaries decrease but increase if equity method listed companies are included. Many companies haven’t fully exercised treatment of subsidiaries, selling only a little of their shares to below 50%.
- Many parent companies that own listed subsidiaries and equity-method listed companies have placed cash in subsidiaries or equity-method companies without increasing their own stock prices.
- Although companies have changed their mindset somewhat, they haven’t changed their management to effectively use cash to create value, which is the reason for the low valuations of Japanese stocks.
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