In today’s briefing:
- Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer
- KLine (Kawasaki Kisen (9107)) – ToSTNeT-3 For All The Marbles
- Internet Initiative Japan (Buy) – Q2 22 Results Reaction: Mobile Recovery Boosts Corporate DX Growth
- Deepening Cash Allocation Required This Year of a New All-Time High in Share Repurchases
Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer
- The Nikkei Asia reports that JIP has submitted a formal proposal to privatise Toshiba Corp (6502 JP) for about JPY2.2 trillion (US$15 billion) based on “Toshiba’s current share price.”
- JIP’s offer is below expectations of around a JPY6,000 bid which is likely driven by the inability to secure sufficient debt financing. JIP remains in negotiations with banks.
- While there is a risk that JIP will be unable to improve its offer to secure Board approval, the downside is low as Toshiba/peers’ current price ratio is attractive.
KLine (Kawasaki Kisen (9107)) – ToSTNeT-3 For All The Marbles
- On Thursday, Kawasaki Kisen Kaisha (9107 JP) announced earnings, lower-than-consensus guidance and a ¥100bn buyback via ToSTNeT-3 this week, and on market if not filled via ToSTNeT-3.
- The stock fell 5+%. I wrote I thought it was a buy and that the buyback was “game-able.” It rose 10+% from then til now.
- That was the fun. Now we get the games. Positioning strategy matters.
Internet Initiative Japan (Buy) – Q2 22 Results Reaction: Mobile Recovery Boosts Corporate DX Growth
- Internet Initiative Japan (3774 JP) posted solid Q2 results with the best quarterly revenue growth since 2016 and a 12th consecutive quarter of margin expansion
- Results were driven by growth tailwinds for corporate digitization which was also visible in KDDI/Softbank results as well as a recovery in mobile which was not
- The company did not raise its full-year financial guidance despite an H1 beat but forecasts looks increasingly conservative
Deepening Cash Allocation Required This Year of a New All-Time High in Share Repurchases
- With company cash equivalents reaching all-time high of 140 trillion yen and many company managers feeling that their company’s stock price is undervalued, share repurchases will reach all-time high.
- Since the introduction of the Corporate Governance Code in 2015, share repurchases have become an established cash allocation alternative for companies. Companies will continue to enhance the practices over time.
- There is a need to deepen communication by showing investors how the company uses cash in its growth strategy, not limited to shareholder returns.
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