In today’s briefing:
- Thinking About The Toyota Tender Offer Buyback
- Go-To Arbs Amid Market Carnage
- Fancl (4921 JP): Kirin (2503 JP) Relents and Bumps to JPY2,800
- How Has the Index Rebalance Strategy Performed During Market Turmoil?
- Daikin (6367) | Q1 Earnings: Frozen in Uncertainty
- Sapporo Holdings: Investor Activism Sparks Short-Term Gains, Tax Reforms Ensure Long-Term Success
- Wacom (6727 JP) – Preparing to Transition to a New Stage of Growth
- The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though
- AZ-Com Maruwa Holdings (9090 JP): Q1 FY03/25 flash update
- Axell Corp (6730 JP): Q1 FY03/25 flash update
Thinking About The Toyota Tender Offer Buyback
- In May when shares were trading near ¥3,500-3,600, Toyota announced a ¥1trln buyback. When shares fell, they announced a Tender Offer Buyback at a large discount (¥2,781/share).
- Subsequently, the shares fell very sharply on Thursday 1 August, then again Friday and yesterday. That put shares WELL below the Tender Offer Price. That creates possible opportunity.
- This insight discusses modalities (talk to your advisor for specific advice/info) who might do what and why. It sets parameters. But I think Toyota is cheap here.
Go-To Arbs Amid Market Carnage
- As global market roil, clean M&A deals come into focus.
- This insight briefly summarises those transactions in Asia/Oceania which are expected to comfortably complete, irrespective of the background noise.
- Standout deals include APM Human Services (APM AU), Huafa Property Services Group (982 HK), Alps Logistics (9055 JP), I’Rom Group (2372 JP), and Arvida (ARV NZ).
Fancl (4921 JP): Kirin (2503 JP) Relents and Bumps to JPY2,800
- Kirin Holdings (2503 JP) has increased the Fancl Corp (4921 JP) tender offer price by 4.1% to JPY2,800 and extended the offer period to 28 August. The price is final.
- Kirin tried to get the required acceptances by refusing to bump and extending the offer period. However, these tactics failed, as the shares continued to trade above terms.
- The Board twice asked Kirin to raise its offer higher than JPY2,800, but eventually recommended the revised offer. Nevertheless, the bump should be sufficient for Kirin to succeed.
How Has the Index Rebalance Strategy Performed During Market Turmoil?
- The market turmoil over the last few trading sessions has not been kind to a simple index rebalance strategy of buying the forecast adds and selling the forecast deletes.
- The overall returns and stock specific returns indicate that trades are more crowded in some indices as compared to others and traders should consider that when position sizing.
- Anecdotally, periods of negative returns are followed by periods of strong returns for the strategy as weak hands are shaken out of their positions.
Daikin (6367) | Q1 Earnings: Frozen in Uncertainty
- Q1 Operating Profit -2% YoY; weaker than analyst consensus; Full year guidance unchanged but risk to the downside
- Key concerns around EU and China remain in Q1. Both regions seeing zero top line growth and heat pumps have cratered
- The stock price has declined 16% since our last note, underperforming Topix by around 6%. Valuation more supportive
Sapporo Holdings: Investor Activism Sparks Short-Term Gains, Tax Reforms Ensure Long-Term Success
- Sapporo Holdings (2501 JP)‘s strategic position in the domestic market, coupled with untapped potential in international markets, makes the company an interesting prospect for the long-term.
- 3D Investment Partners’ July 2024 letter praising Sapporo’s intention to divest its real estate business has reignited investor interest in Sapporo as a play focusing on Japan’s investor activism.
- Therefore, Sapporo seems interesting both in the short term and long term, as we think shares could break out to a new high with trading volumes showing signs of improvement.
Wacom (6727 JP) – Preparing to Transition to a New Stage of Growth
- Wacom is a technology company specializing in the development of graphic tablets (pen tablet products), pen displays (display products), and related digital interface solutions.
- Leveraging its high reputation for its branded products, it is expanding in the OEM solutions market.
- Due to changes in market structure driven by demand shifting towards general-purpose tablets and lengthening replacement cycles, Wacom is focused on improving its sales mix and earnings quality by developing a service-centric growth engine.
The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though
- The cost is somewhat reduced for the user because of the higher weighting of more liquid stocks. Meanwhile, selling pressure is inevitable for less liquid companies whose weights are reduced.
- Even if the number of stocks decreases, 1,200 stocks isn’t small number. Also, even though the market capitalization of the components has increased, approximately 73 billion yen isn’t sufficiently liquid.
- With calls for increased engagement, the number of issues remains too large for domestic asset managers, where passive funds account for a high percentage of AUM.
AZ-Com Maruwa Holdings (9090 JP): Q1 FY03/25 flash update
- Revenue increased by 4.5% YoY to JPY49.7bn, while operating profit decreased by 50.5% YoY to JPY1.9bn.
- Logistics segment revenue was JPY49.0bn (+4.4% YoY) with operating profit of JPY2.4bn (-36.4% YoY).
- Other segment revenue was JPY689mn (+14.1% YoY) with operating profit of JPY94mn (+32.4% YoY).
Axell Corp (6730 JP): Q1 FY03/25 flash update
- Sales decreased to JPY4.1bn (-9.3% YoY), operating profit to JPY528mn (-32.0% YoY), and recurring profit to JPY521mn (-34.3% YoY).
- Q1 FY03/25 results achieved 62.5% of 1H sales forecast, 88.0% of operating profit, and 86.8% of recurring profit.
- Sales of products for pachinko and pachislot machines decreased YoY, with graphics LSI sales dropping by 20,000 units.
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