In today’s briefing:
- MEGA M&A! 7&I (3382 JP) Gets Non-Binding Bid from Alimentation Couche-Tard (ATD CN)
- Seven & I Holdings (3382 JP): Couche-Tard “friendly” Proposal Likely to Go Nowhere
- Star Asia Investment Corp Placement – Needs a Decent Correction Leading up to Pricing
- Pan Pacific International Holdings (7532 JP): Full-year FY06/24 flash update
- Amidst Changes in Purpose of Policy Shareholdings, We Should Note Whether They Are Really Decreasing
- Sodick (6143) – An Upbeat Result Reflecting Transformational Efforts
- NextAge (3186): Disruptive Business Model at Massive Discount
- IPS Inc (4390 JP): Initial Coverage,Q1 FY03/25 flash update
MEGA M&A! 7&I (3382 JP) Gets Non-Binding Bid from Alimentation Couche-Tard (ATD CN)
- Today, part-way through the day, the Nikkei ran an article saying that Alimentation Couche-Tard (ATD CN) had made a confidential non-binding proposal to buy Seven & I Holdings (3382 JP).
- 7&i shares obviously went up (limit up in a hurry, staying there, large size traded limit up at close).
- Now things get complicated. 7&i has said they received a non-binding proposal for all the shares. There will be a Special Committee of all Independent Directors. All stakeholders will matter.
Seven & I Holdings (3382 JP): Couche-Tard “friendly” Proposal Likely to Go Nowhere
- Seven & I Holdings (3382 JP) shares rose 22.7% as it confirmed media reports that it had received a confidential, non-binding preliminary proposal from Alimentation Couche-Tard (ATD CN).
- The interest is unsurprising due to the weak share price performance. Since ValueAct’s open letter on 25 January 2022, the shares are up 5.2% vs. the Nikkei 225 up 38.0%.
- Couche-Tard aims for a friendly offer, which is challenging as it requires support from the founder’s family and the Japanese government. Therefore, the probability of a binding proposal is low.
Star Asia Investment Corp Placement – Needs a Decent Correction Leading up to Pricing
- Star Asia Investment (3468 JP) is looking to raise around US$118m in its primary follow-on offering to acquire four hotels. The acquisition will amount to a total of JPY34.7bn (US$237.5m).
- The deal is a somewhat large one to digest, at 83 days of three month ADV and 13.3% of TSO .
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Pan Pacific International Holdings (7532 JP): Full-year FY06/24 flash update
- FY06/24 results: Sales JPY2,095.1bn (+8.2% YoY), operating profit JPY140.2bn (+33.2% YoY), net income JPY88.7bn (+34.1% YoY).
- FY06/25 forecast: Sales JPY2,220.0bn (+6.0% YoY), operating profit JPY150.0bn (+7.0% YoY), net income JPY86.5bn (-2.5% YoY).
- Store count end-June 2024: 742 total, 632 domestic, 110 overseas; 24 new stores in Japan, 12 overseas.
Amidst Changes in Purpose of Policy Shareholdings, We Should Note Whether They Are Really Decreasing
- The increase in foreign ownership and the decline in cross-shareholdings have encouraged management reform. In order for engagement to be effective, it is essential to further reduce cross shareholdings.
- Reasonable explanation of the reasons for such transfers as changes in the purpose of policy shareholding or contributions to retirement benefit trust must be provided in the annual securities report.
- Rising stock prices increase the value of policy shareholdings. To accelerate the reduction of policy shareholdings, numerical targets should be published, such as by setting milestones.
Sodick (6143) – An Upbeat Result Reflecting Transformational Efforts
- Q1-2FY12/24 results were a positive surprise in our view.
- Quarterly Q2 FY12/24 OPM of 4% returned to positive territory after four consecutive quarters of losses, driven by a combination of price hikes, revision to the product line-up to improve sales mix, restructuring measures, and sales volume expansion with a marked jump in China demand for electronic discharge machines.
- We believe Sodick has begun to transform to become more resilient and operationally efficient.
NextAge (3186): Disruptive Business Model at Massive Discount
- NextAge has, in just two short years, moved from number 3 to number 1 in the used car market in Japan.
- It’s market share is still less than 7% and we no longer see any meaningful obstacle in the company’s path to 30% share within the next 8 years.
- The stock underperformed Topix by 59% following a series of earnings misses, but we think all issues have been resolved. Fair value could be 3x the current price.
IPS Inc (4390 JP): Initial Coverage,Q1 FY03/25 flash update
- Revenue reached JPY3.7bn (+47.5% YoY), with increases in Global Telecommunications but declines in Domestic Telecommunications and Medical & Healthcare.
- Operating profit was JPY760mn (+84.0% YoY), with cost ratio falling 7.1pp YoY and SG&A ratio rising 3.0pp YoY.
- Foreign exchange gains of JPY350mn were booked in Q1 FY03/25 due to valuation of foreign currency-denominated receivables and payables.
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