In today’s briefing:
- T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
- Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
- T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
- Yahoo Troubles Continue for Z Holdings
- SMFG (8316) – 75% Less JGBs than MUFG | Affiliates Show Worsening Profit | Credit Costs ~2x Vs Past
- Otsuka Holdings (4578 JP): Strong 1H23 Result Prompts 2023 Guidance Raise; Pipeline Is Advancing
- Seibu Giken Pre-IPO – Rapid Growth Followed by Rapid Deceleration
- The First Thing Managers Should Do Is Disclose Their Cost of Capital and Their Company’s Return
T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
- Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
- They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited.
- Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.
Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
- Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
- So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal.
- This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path.
T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
- Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
- T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
- The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.
Yahoo Troubles Continue for Z Holdings
- GTVs for Yahoo’s shopping division fell by 8% in 1Q2023.
- Although this was expected and gross profits did improve, the downturn reflects deeper concerns.
- Even the group’s Zozo fashion platform are much more slowly.
SMFG (8316) – 75% Less JGBs than MUFG | Affiliates Show Worsening Profit | Credit Costs ~2x Vs Past
- SMFG can benefit like peer banks from BOJ policy change, but less so than MUFG, while at the same time, there does not appear to be a strong alpha story
- ROE and ROA for SMFG show now expansion over the years, and this is stark contrast to MUFG, part of this appears to be due many weak subsidiaries
- Credit costs are now averaging 23bps over the past four quarters vs 13bps during 1Q18 to 4Q19, not improving credit metrics like many others, with high write-offs.
Otsuka Holdings (4578 JP): Strong 1H23 Result Prompts 2023 Guidance Raise; Pipeline Is Advancing
- In 1H23, Otsuka Holdings (4578 JP) reported revenue growth of 16% YoY to ¥947.5B, ahead of the guidance of ¥867B, as all operating segments recorded increased revenue.
- In 1H23, revenue from pharmaceutical segment grew 21% YoY to ¥637.9B, mainly driven by the growth of the four global products, which contributed 49% of segment revenue.
- Encouraged by a better-than-expected 1H23 result, Otsuka has raised 2023 guidance. The company has increased revenue, operating profit, and net profit guidance by 6%, 17%, and 19%, respectively.
Seibu Giken Pre-IPO – Rapid Growth Followed by Rapid Deceleration
- Seibu Giken (6223 JP) (SG) is looking to raise around US$120m in its Japan IPO via selling a mix of primary and secondary shares.
- SG sells desiccant dehumidifiers and VOC concentrators in over fifty countries globally. Its two main products accounted for over 90% of its revenue in 2022.
- In this note, we look at the company’s past performance.
The First Thing Managers Should Do Is Disclose Their Cost of Capital and Their Company’s Return
- While 4% of the number of companies mentioned in annual securities reports regarding P/B, half of companies have P/B of below 1x, which suggests managers still lack sense of urgency.
- Many companies that mention P/B in their annual securities reports rely on share repurchases, and their presentation of strategies to increase cash flow is weak.
- Clearly stating the cost of capital will lead to more appropriate ROE and ROIC targets and disclosure of specific measures to achieve them.
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