In today’s briefing:
- Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
- [Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
- Renesas (6723 JP): Two More Strategic Acquisitions
- Weekly Deals Digest (18 Feb) – Toei, Outsourcing, YSK, Altium, Ansarada, China TCM, Vinda
- Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
- Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues
- Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn’t Easy for Companies with Low Valuation
- 2024 High Conviction Update: Asahi Intecc (7747 JP)- Strong H1 Performance; FY24 Guidance Reaffirmed
Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
- Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
- A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn.
- This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.
[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
- There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
- There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have
- 9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.
Renesas (6723 JP): Two More Strategic Acquisitions
- Renesas has acquired PCB electronic design company Altium and Gallium Nitride power device maker Transphorm. Its tender offer for Sequans Communications has been extended.
- These are positive developments in our view, but sales and profit margins were down in 4Q of FY Dec-23 and are expected to decline this quarter as well.
- On the other hand, inventory adjustment is proceeding and the share price has dropped 12.6% since last Tuesday. Buy on weakness for the longer term.
Weekly Deals Digest (18 Feb) – Toei, Outsourcing, YSK, Altium, Ansarada, China TCM, Vinda
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Toei Animation (4816 JP)‘s US$550 Million secondary offering.
- Event-Driven developments: Outsourcing Inc (2427 JP), Altium Ltd (ALU AU), Ansarada Group Ltd (AND AU), China Traditional Chinese Medicine (570 HK), Vinda International (3331 HK).
Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
- There were index review announcements for the HSI, HSCEI INDEX, HSTECH, HSCI, HSIII and some global indices last week.
- There are a bunch of review cutoffs early in the coming week followed by announcements for the STAR50 INDEX and STAR100 Index later in the week.
- Another week of outflows for Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share ETF (2828 HK) as inflows to iShares Emerging Markets ex-China (EMXC US) continue.
Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues
- Nobody “named” having >5.0% in Outsourcing (2427 JP); no public noise, the stock down; people won’t be fighting for a bump unless the delay and impairment are truly meaningless.
- Stay long MGM China Holdings (2282 HK) as its FY23 top line surpasses pre-Covid levels.
- Investors and risk arbitrageurs who are worried about the potential loss of the case to RF SUNY should simply avoid, or sell then avoid JSR Corp (4185 JP) shares.
Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn’t Easy for Companies with Low Valuation
- Over the past year, Tobin’s Q increased slightly for listed companies as a whole; companies that increased their ROE and ROA increased their Tobin’s Q. vice versa.
- Companies that originally had high stock valuations and high ROE and ROA increased their valuations by becoming more profitable. Raising ROE and ROA is the key to higher valuations.
- For companies with low valuations, it wasn’t easy to raise ROE and ROA solely at TSE’s request. Some of companies whose stock valuations have fallen will go private through MBOs.
2024 High Conviction Update: Asahi Intecc (7747 JP)- Strong H1 Performance; FY24 Guidance Reaffirmed
- Asahi Intecc (7747 JP) announced better-than-expected result in H1FY24, with double-digit growth across all major parameters. Growth was driven by favorable Fx, recovery and expansion of cases, and strong demand.
- Revenue from medical division increased 22% YoY to ¥48B. Operating income of the medical division increased 52% YoY to ¥13B, representing 540bps YoY margin expansion to 27.3%.
- Asahi Intecc has not revised FY24 guidance as it is difficult to forecast currency movements and revenue from distributors in medical division due to volatility of quarterly transactions.
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