In today’s briefing:
- Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
- And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
- Socionext (6526 JP): US$1.9bn Secondary Placement
- Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right
- TRYT IPO: Revised IPO Price Range Remains Unattractive
- Lawson (2651) | Dividend Grower
- The Key Is to Be Able to Use Cash on Hand Effectively in the Future
Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
- Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock.
- I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.
Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
- Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
- Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
- Every now and then, you get a tender offer proposal which is truly offensive. This is one.
- Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk.
- But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs.
Socionext (6526 JP): US$1.9bn Secondary Placement
- Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
- The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
- We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).
Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right
- Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
- Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
- In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.
TRYT IPO: Revised IPO Price Range Remains Unattractive
- Tryt Inc (9164 JP) has disclosed a revised IPO price range of JPY1,100-1,300 per share, which is -32% to -20% below the IPO reference price of JPY1,620 per share.
- We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case and TRYT IPO: Valuation Insights.
- Our analysis suggests that Tryt remains unattractively valued at the revised IPO price range. Also, market sentiment on the sector has weakened. We would pass on the IPO.
Lawson (2651) | Dividend Grower
- We are bullish on Lawson and see fair value at Y7,500 per share based on 3% FY2/25 DPS of Y225/share
- The domestic convenience store business is recovering post pandemic leading to a possible earnings beat
- The market remains sceptical of mid-term growth drivers like Seijo Ishii and China expansion plans
The Key Is to Be Able to Use Cash on Hand Effectively in the Future
- Although more companies have recently started to use their cash for shareholder returns, this is still not enough in terms of the dividend payout ratio.
- Both sales and profits of companies haven’t increased by that amount for past 10 years. The question for the future is whether the cash on hand can be used effectively.
- It is hoped that the quality of listed companies on prime market will improve as a result of M&As involving industry restructuring, the dissolution of parent-subsidiary listings and going private.
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