In today’s briefing:
- Can Son-San Take Over Softbank Group Through Buybacks?
- 2023 High Conviction: NTT (Buy) – Surging DoCoMo Underappreciated as Markets Step Back from Value
- Softbank Group – China Rebound Has Helped After End-Of-Buyback Hangover
- Going Private Is an Option for Both the Companies and Investors
Can Son-San Take Over Softbank Group Through Buybacks?
- On Thursday 8 December, an article showed up in Bloomberg suggesting Son-san had “increased his stake” as the company bought back shares, giving him more rights, “edging towards a buyout.”
- That is a stretch. He went from below one-third to above one-third, giving him an explicit veto on shareholder super-majority resolutions, but it’s minor. He now has 34.2%.
- The suggestion: if he got two-thirds, he could squeeze out minorities without a Tender Offer. Technically true, but not easy. I dig deeper and propose how it could be done.
2023 High Conviction: NTT (Buy) – Surging DoCoMo Underappreciated as Markets Step Back from Value
- We have tweaked our numbers after Q2 results and catching up with the company. In particular, we come away with more confidence in wireless / fintech growth
- NTT looks cheap at 11x FY22e EPS v 12x for KDDI even as relative growth is expected to be better with ~9% EPS growth
- Shares have outperformed TOPIX (+18% YTD v -3%) and this should continue in 2023 as solid financial performance and an attractive shareholder returns story provide support
Softbank Group – China Rebound Has Helped After End-Of-Buyback Hangover
- Alibaba is up 20% QTD and the public Vision Fund portfolio is on track for its first positive quarter in almost two years thanks to China upside, mostly for Didi
- That has kept the share price elevated even as the discount to fair value has expanded since buybacks ended at Q2 results
- At 34% now, there is room for the discount to expand further as the range before the buyback surge was generally closer to 40%
Going Private Is an Option for Both the Companies and Investors
- While it’s natural for a rational investor to disagree with a company that cannot generate a return commensurate with the risk, the existence of cross-shareholdings in Japanese companies complicates matters.
- The benefit of listing is raising capital on favorable terms by trading shares at a value greater than shareholders’ equity, but there are not many Japanese companies trading at premium.
- Going private is one option for companies that are unable to find growth investment opportunities and accumulate cash on their balance sheets. In this regard, Japanese equities are of interest.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars