In today’s briefing:
- JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- Trial Holdings IPO: Valuation Thoughts
- Merger Arb Mondays (04 Mar) – JSR, Shinko, Outsourcing, APM, Alumina, Adbri, Azure, CSR, Probiotec
- Nippon Express Placement – Lukewarm Track Record, Although Buyback Could Lift Share Price
- 3/4 of the Companies Are Giving up the Opportunity to Communicate Their Value to Overseas Investors
JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to One (relatively) Simple Indicator.
- Foreigners have a lot of ammunition left. But cross-holding unwinds are picking up, and buybacks are too, and dividend reinvestments are smaller than public pension selling. Which way next?
Trial Holdings IPO: Valuation Thoughts
- Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$236 million at the IPO reference price of JPY1,550 per share.
- We previously discussed the IPO in Trial Holdings IPO: The Investment Case.
- In this note, we discuss valuation. Our analysis suggests that Trial is attractively valued at the IPO reference price of JPY1,550. We would participate in the IPO.
Merger Arb Mondays (04 Mar) – JSR, Shinko, Outsourcing, APM, Alumina, Adbri, Azure, CSR, Probiotec
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: APM Human Services Internation (APM AU), Probiotec Ltd (PBP AU), Alumina Ltd (AWC AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), China TCM.
- Lowest spreads: Tietto Minerals Ltd (TIE AU), Orecorp Ltd (ORR AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Yaizu Suisankagaku Industry (2812 JP).
Nippon Express Placement – Lukewarm Track Record, Although Buyback Could Lift Share Price
- A group of shareholders are looking to raise US$220m from selling their stakes in Nippon Express Holdings (9147 JP).
- Overall, the deal would be a relatively large one to digest at 11 days of Nippon Express’ three month ADV, and 4.8% of the firm’s total shares outstanding.
- Together with the announcement, the firm has also guided towards a share buyback program which should provide some share price support a month post-deal, in our view.
3/4 of the Companies Are Giving up the Opportunity to Communicate Their Value to Overseas Investors
- About half of the prime market companies were able to communicate to investors that they are aware of their cost of capital and are committed to share price conscious management.
- Half of the companies are reluctant to engage in constructive dialogue with investors, sustainable growth and medium-to-long-term improvement of corporate value, which is the concept of prime market listing criteria.
- A quarter of prime market listed companies disclosed in English. Since TSE requires disclosure of this information in Corporate Governance Report, disclosure in English of this document becomes more important.
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