In today’s briefing:
- 7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal
- Nissan Tokyo Sales Holdings (8291 JP) – Large Offering on Tiny Cap With Deep Value
- Kioxia IPO: Peer Comparison and Valuation
- Understanding Kioxia, A Worthwhile IPO?
- NextAge (3186): Here We Go Again?
- GEECHS (7060 JP) – Q2 Follow-Up
- Geniee (6562 JP) – Maintaining a Growth Profile
7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal
- A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
- The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
- But more directly, this leads us back to 7&I (3382) – What If… A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.
Nissan Tokyo Sales Holdings (8291 JP) – Large Offering on Tiny Cap With Deep Value
- Nissan Tokyo Sales (8291 JP) is a network of 120 dealerships with revenue from sales and repairs of about US$1bn a year. Nissan owns 34%. P&C insurers own 21%.
- The P&C insurers will sell their 21%, to an offering and a ToSTNeT-3 buyback. Expect the net offering to be 10.5%, which is still 60+ days of ADV.
- But it has net cash, securities, more securities, and landholdings. It trades at <0.5x book and a very large part of book is finance-able. This looks like an MBO candidate.
Kioxia IPO: Peer Comparison and Valuation
- Kioxia has announced the terms for its IPO, and plans to raise $730m through issuing new shares as well as offer by existing shareholders, at a market capitalisation of $819bn.
- Kioxia Holdings (285A JP) ‘s earnings have been volatile and margins have trailed compared to peers Micron and SK Hynix. Earnings are approaching a new peak.
- Kioxia’s implied valuation multiples are at a deep discount to peer multiples, suggesting there is significant upside to the indicative IPO price range.
Understanding Kioxia, A Worthwhile IPO?
- Kioxia is planning to offer its IPO on 18 December 2024. This Insight profiles Kioxia and its market.
- NAND flash, Kioxia’s product, is a commodity, and that results in dramatic price, revenue, and margin swings.
- Kioxia is in a joint venture that provides excellent scale economies which are offset by a supply agreement that amplifies troubles caused by oversupplies
NextAge (3186): Here We Go Again?
- NextAge’s stock price dropped nearly 8% on December 5, when the Topix was up, with no apparent news on either the company’s website or any local media.
- The next day, the Nikkei reported that the Financial Services Agency had raided the company’s office after confirming that insurance schemes had been deployed to defraud customers.
- This sounds like an old story being leaked by rivals, so we called the company and confirmed: This is most likely old news.
GEECHS (7060 JP) – Q2 Follow-Up
- On November 8th, 2024, Geechs Inc. (hereafter, the “Company”) announced its H1 FY2025/3 earnings results.
- Net sales rose 2.2% YoY to JPY 12,183 mn, EBITDA rose 3.5% YoY to JPY 256 mn, and operating profit rose 84.3% YoY to JPY 193 mn.
- Steady expansion of its core IT freelance matching business (Japan), the Seed Tech business turning profitable for the first time, and the absence of losses from G2 Studios (former Game business), sold at the end of the previous fiscal year helped boost results, but losses widened in the IT freelance matching business (Overseas).
Geniee (6562 JP) – Maintaining a Growth Profile
- Geniee demonstrated high double-digit growth in sales (+36.3% YoY) and reported OP (+77.2% YoY) for Q1-2 FY3/25 results.
- The acquisitive impact from the consolidation of Socialwire (3929) in July 2024 was positive, with a one-time ¥0.07bn gain related to disposing of a shared office operation.
- Other income also benefitted by ¥0.32bn from the transition of JAPAN AI Co. from a consolidated subsidiary to an affiliate company due to capital-raising activities.
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