In today’s briefing:
- Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Toyota Partial Offer Results – What Next?
- Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics
- The Key Is to Achieve Sustainable Growth Through Continuous Business Portfolio Review
- MHI (7011 JP): Election Unlikely to Affect Defense Budget
- EQD | What If The Nikkei 225 Pulls Back This Week? (Buy Here)
- Ohba (9765 Jp) – 4Q Follow-Up
- Restar (3156 JP) – Robust Start to FY3/25 and Key M&A Shift to IT Services
Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
- The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
- The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.
Toyota Partial Offer Results – What Next?
- Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
- In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
- The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
- Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
- Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.
Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.
- The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate.
- 3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.
Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics
- Kioxia is getting ready to complete its IPO in Japan as soon as in October. Kioxia’s valuation is expected to exceed JPY 1.5 trillion (about USD 10.3 billion).
- SK Hynix’s stake in Kioxia (through Bain led consortium) is 19%. SK Hynix’s stake in Kioxia would rise to 34% if the CBs are converted into equity.
- The IPO of Kioxia has mixed implications for SK Hynix which is a major shareholder. However, the IPO of Kioxia has a more direct negative impact on Samsung Electronics.
The Key Is to Achieve Sustainable Growth Through Continuous Business Portfolio Review
- Overseas investors tend to invest in companies with larger market capitalization and higher profitability, and companies with higher foreign shareholdings have significantly better values in corporate governance.
- Hitachi has been one of the most successful companies in this area, probably due to its intermittent reforms in profitability and corporate governance through engagement with overseas investors.
- Few companies, like Hitachi, achieved sustainable growth by continuous business portfolio review. This has led to high stock price volatility for many companies that cannot enter the sustainable growth phase.
MHI (7011 JP): Election Unlikely to Affect Defense Budget
- The next leader of Japan’s ruling LDP, who will almost certainly become prime minister in October, will probably not make major changes to the nation’s defense policy.
- Guidance remains unchanged after 1Q results that suggest the possibility of a better than expected order flow but also a material negative impact from a stronger yen.
- MHI’s valuation is not yet in speculative territory, but neither is it compelling. If the yen remains stable, we expect the share price to test its recent highs.
EQD | What If The Nikkei 225 Pulls Back This Week? (Buy Here)
- The Nikkei 225 INDEX has rebounded strongly in the past 2 weeks, there is a chance that it starts to pull back this week.
- This insight will try to evaluate what support levels could be good to buy, assuming the index resumes its uptrend after the pullback.
- The index could fall for 1 or 2 weeks, the current pullback pattern is bullish (i.e. buy-the-dip).
Ohba (9765 Jp) – 4Q Follow-Up
- OHBA (hereafter, the Company) reported profit lines slightly above initial forecasts.
- In FY24/5, operating profit rose 7.4% YoY to ¥1.84 bn against its initial plan of ¥1.8 bn, with profit attributable to owners of parent (hereafter, Profit ATOP) rising 24.6% YoY to ¥1.34 bn versus its initial plan of ¥1.15 bn.
- On the other hand, sales fell just short of plan.
Restar (3156 JP) – Robust Start to FY3/25 and Key M&A Shift to IT Services
- Positive numbers and strategically aligned M&A – Q1 FY3/25 results demonstrated a strong start to the FY, with most business segments performing ahead of plan.
- Positive demand from the auto and smartphone sectors and acquisitive growth drove sales volume and improved profitability YoY.
- The high return Eco-solutions segment also performed solidly, contributing to sales and earnings growth YoY.
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