In today’s briefing:
- Toshiba (6502) – Thinking About the Arb
- Japan Tobacco High Conviction Update: Potential 62% Upside
Toshiba (6502) – Thinking About the Arb
- Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.
- On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.
- Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We’ll see where those lie in a week when earnings come.
Japan Tobacco High Conviction Update: Potential 62% Upside
- Japan Tobacco’s 1Q23 performance exceeded consensus expectations, with revenue and OP surpassing by 5.3% and 12.3%, respectively.
- Consensus expected no volume growth for Japan Tobacco in declining combustible tobacco market; targeted mid-single digit constant currency revenue growth via pricing.
- Higher cigarette prices are expected to contribute to Japan Tobacco (2914 JP)‘s OP growth, which we anticipate will exceed its historical peak levels in the next few years.
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