Daily Brief Japan: Shinko Electric Industries, JSR Corp, TSE Tokyo Price Index TOPIX, Mitsubishi Estate, Nexon and more

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer. 
• That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence. 
• News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been. 

• Since “profitability of capital” like ROE or ROIC cannot create value in mid-to-long-term without improvement, the fact that ROE has stalled is a cause for concern for future stock prices.
• The slow growth in Net Profit Margin and the sluggish improvement in Asset Turnover and Financial Leverage indicate that it is still holding too much cash, cross-held shares, etc. 
• Nearly half of all listed companies are companies with major shareholders of 20% or more, which is an obstacle to improving corporate governance.

• In this insight, we explore Mitsubishi Estate, who is the second largest real estate company in terms of market cap
• Mitsubishi Estate major business is in office (Tokyo CBD), residential/condo, as well as some retail and hotel
• Japan stock market is upbeat and saw the largest inflow among Asia YTD.  8802 valuation is not demanding.

• Nexon is a leader in the video game virtual worlds industry with an enterprise value of $11.4 billion
• The company has consistently high EBIT margins and a robust portfolio of popular franchises that have generated billions in revenue
• Despite being undervalued by the market compared to its peers, Nexon is poised for significant growth and offers potential for future success for investors

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.