In today’s briefing:
- Toshiba – Realistic Valuation Disappoints Markets
- Super High Premium Buyout for Totoku Electric (5807) By Carlyle
- Nexon (3659) | More Buybacks in the Pipeline
- Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd
- Yokogawa Electric (6841 JP): High Energy Prices Point to Further Upside
- Uzabase (3966) Agrees to Carlyle Takeover
- PPIH: Combating Cost Inflation Through Personal Brands Growth
Toshiba – Realistic Valuation Disappoints Markets
- The Nikkei reported on Monday that JIP’s bid values Toshiba at roughly ¥2.2trn.
- The stock has dropped to a level just below this valuation suggesting some anticipation of a Bain/JIC bid above that valuation.
- While that is plausible, the cautiousness of JIP’s bid highlights the fundamental downside risk here in our view.
Super High Premium Buyout for Totoku Electric (5807) By Carlyle
- Yesterday, Carlyle announced a buyout of Totoku Electric (5807 JP) at ¥5,660/share, which was a cool 155% premium to Tuesday’s close of ¥2,215. The stock was limit up today.
- It will be limit up tomorrow, and the next day. And probably the next day.
- This is a very interesting outcome. But it is actually not as expensive as it “looks.”
Nexon (3659) | More Buybacks in the Pipeline
- Nexon is our top pick within the Japanese Gaming Sector
- We see continued strong growth in revenue driven by existing game franchises in addition to new pipeline opportunities
- Nexon is cash rich, debt free and is returning more and more money back to shareholders
Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd
- Nexon (3659 JP) reported Q3 earnings and full-year forecasts today. Revenue came in at the bottom end of August guidance, despite the higher-than-forecast USD/yen rate.
- The forecast for full-year is below consensus. This may be seen as disappointing. The stock may fall on this.
- But a buyback announcement and relative valuation suggests time to cover the short.
Yokogawa Electric (6841 JP): High Energy Prices Point to Further Upside
- Strong 1H orders and the second upward revision to guidance this fiscal year have lifted the share price to a new high.
- The energy shortage and high energy prices should continue to drive demand for Yokogawa’s oil, gas and power related industrial control equipment. Demand from other users is also rising.
- Valuations suggest 15% to 20% additional upside potential for the share price. Recession or a strengthening of the yen could put this at risk, so watch the order flow.
Uzabase (3966) Agrees to Carlyle Takeover
- Carlyle has launched a bid for business news and data service owner Uzabase Inc (3966 JP). The bid is far below the price of a couple years ago.
- But the price clears the 2022 high by 1 tick. Some will be OK with this, but some may not be.
- At a 72% premium, optically it appears attractive, but given circumstances, it is not a total knockout, though I don’t know who would come in.
PPIH: Combating Cost Inflation Through Personal Brands Growth
- Pan Pacific International Holdings (7532 JP)’s 1QFY23 was broadly in line with consensus estimates with revenue and OP of ¥473.7bn (consensus: ¥473.8bn) and ¥23.9bn (consensus: ¥23.8bn) respectively.
- Personal brands growth and Asia expansion are driving up PPIH’s margins while most companies in the consumer sphere are failing to pass down cost inflation.
- With signs of OP moving to the pre-UNY acquisition level, we think that there’s an upside to the company’s medium-term guidance and consensus.
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