In today’s briefing:
- JAPAN ACTIVISM: Silchester Goes After Bank of Kyoto
- Lasertec – A Miss At Stratospheric Valuations But That Isn’t Even The Biggest Problem
- Keisei-Shin Keisei: Merger Seems like a Done Deal
- Advantest (6857 JP): Orders Unsustainable, Cyclical Risk High
- Donki: New Formats, More Growth
- Japan’s Governance: About an Article on Companies to Which Transitional Measures Are Applied
JAPAN ACTIVISM: Silchester Goes After Bank of Kyoto
- Silchester International Investors has owned Bank of Kyoto (8369 JP) for 16 years and is now the largest shareholder in the bank.
- They have been dissatisfied, become vocal behind the scenes with their dissatisfaction, and BoK management disagrees so they will go to the mattresses. Gently.
- This could get some investors excited, but it is unlikely to be a successful activist effort.
Lasertec – A Miss At Stratospheric Valuations But That Isn’t Even The Biggest Problem
- Lasertec’s 3Q disappointed as revenue of ¥16.6bn materially undershoot consensus estimates of ¥26.6bn but given quarterly volatility in deliveries and acceptances that is understandable.
- What is more concerning is the emerging picture of gross margin decline which the company had previously warned about.
- Given inflated valuations these small negatives together with no guidance raise could drive a continued correction.
Keisei-Shin Keisei: Merger Seems like a Done Deal
- Japan-Based Railway Company Keisei Electric Railway Co (9009 JP) (“Keisei”) and its 44.64%-owned equity method affiliate Shin Keisei Electric Railway (9014 JP) (“Shin Keisei”) have signed a Share Exchange Agreement.
- Shin Keisei Shareholders will receive 0.82 Keisei Shares per Shin Keisei Share. Following the completion of this Deal, Shin Keisei will become a wholly-owned subsidiary of Keisei.
- Below is a closer look at the details of this Transaction and the likelihood of Deal Completion.
Advantest (6857 JP): Orders Unsustainable, Cyclical Risk High
- The recent surge in IC test equipment orders is unsustainable. Only service orders maintain a positive trend.
- After peaking this fiscal year, sales and profits are likely to show double-digit declines. When earnings might hit bottom is not clear, but cyclical gearing is high.
- Earnings could rebound in 2 or 3 years, but visibility is poor. Don’t forget that Advantest has dropped into the red three times in the past 20 years.
Donki: New Formats, More Growth
- PPI has begun roll out of new, specialty food stores designed to slot into a variety of shopping malls.
- On the surface, these stores look like mini-Don Quijote stores, emphasising low prices and a dazzling density of product, but focused on sweets, liquor, cosmetics, or a combination.
- Expansion will help reach new customers, reduce the expense of opening new stores, and help with building scale for private brands.
Japan’s Governance: About an Article on Companies to Which Transitional Measures Are Applied
- Since all 9 companies have low foreign shareholding ratios due to the presence of large shareholders, a shortcut to increasing stock price performance is to increase the foreign shareholding ratio.
- Unless it’s feasible to reduce stake of major shareholders, the key will be to raise ROA, which is correlated with valuations, so growth policy and capital allocation must be clarified.
- For long-term investors, continued increase in the % independent directors is also helpful. The stock performance of these companies will likely vary in the future depending on the measures taken.
Before it’s here, it’s on Smartkarma
