In today’s briefing:
- Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO
- ToyoKen (1890)- Infroneer Declines to Bid Up, YFO Now In Driver’s Seat – Now It’s A Range Trade
- JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Apr 2022
- Shimano (7309): Bumpy Part 2 – Channel Checks
- Oriental Land’s New Medium-Term Plan: A Reality Check for Consensus
- Z Holdings Q4 21 Results Reaction: Growth Pushed Back a Year; Downgrade to Neutral
- Koito – Profitability Remains Under Pressure
- Monex – Crypto Business Keeps Weakening But Valuation Discount Excessive
- Mercari – Problems, Problems, But We Are Getting Bulled Up Anyway
- Sky Perfect JSAT (Buy) – Q4 21 Results Reaction: A Huge Declaration of Confidence
Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO
- KKR and Hitachi Ltd (6501 JP) have a deal to get KKR to buy Hitachi Transport System (9086 JP) in a VLBO (Very Leveraged BuyOut).
- As somewhat expected, it is a “split price deal” where Hitachi will accept a lower price for its 40% stake than minorities will receive in a Tender Offer.
- This is a big win for Hitachi Transport shareholders, but the Tender Offer likely won’t start until late September.
ToyoKen (1890)- Infroneer Declines to Bid Up, YFO Now In Driver’s Seat – Now It’s A Range Trade
- Toyo Construction (1890 JP) today released a change to its Target Opinion Statement for Infroneer’s takeover bid at ¥770/share. It supports the tender itself, but withdraws its recommendation investors tender.
- Infroneer refused to raise their price, so this effectively kills their bid (though they will extend). TC will engage with Yamauchi Family Office which has separately offered to bid ¥1,000/share.
- The dynamics have now changed. This is a range trade, and will likely take time unless Infroneer says “I’ll sell at ¥1,000/share.”
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Apr 2022
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-April 2022.
Shimano (7309): Bumpy Part 2 – Channel Checks
- Channel checks with Merida Industry (9914 TT) and Giant Manufacturing (9921 TT) on the Asia order book provide color on Shimano’s results so far.
- Channel checks with the Dutch Accell Group (ACCEL NA) also do not show any encouraging data either.
- Share buyback will provide short term relief but it won’t make revenue growth rate to be as high as early 2021.
Oriental Land’s New Medium-Term Plan: A Reality Check for Consensus
- Oriental Land (4661 JP) fell more than 10% today after a strong earnings beat in 4QFY22, which saw revenue and OP beat consensus by ¥7.0bn and ¥8.6bn respectively.
- The medium-term outlook is very disappointing with the company expecting no pricing growth and low park attendance.
- After moving up nonsensically during COVID due to extremely inflated medium-term consensus, we think Oriental Land’s share price could start falling apart after this medium-term plan announcement.
Z Holdings Q4 21 Results Reaction: Growth Pushed Back a Year; Downgrade to Neutral
- FY22 EBITDA guidance is disappointing as strategic investments accelerate yet again and leaving investors uncertain on whether previous guidance for FY23 can be met
- We think ZHD’s FY23 target of ¥ 390bn in EBITDA is reachable but a meaningful beat, which is factored into consensus, is less likely
- So FY22 is another transition year but without the excitement on the potential for LINE as an alternative theme. It is better to be on the sidelines.
Koito – Profitability Remains Under Pressure
- Koito reported 4QFY22 results on the 27th of April and had a 16% revenue miss despite a 3% revenue beat for the quarter.
- Top line momentum remains strong overseas but material costs continue to pressure gross margins.
- Guidance for ¥67bn in OP was a significant miss vs. consensus at ¥92.3bn.
Monex – Crypto Business Keeps Weakening But Valuation Discount Excessive
- Monex results were weak as OP of ¥14.9bn missed consensus estimates for ¥18.4bn in OP.
- Gains for DeFi token sales failed to offset continued heavy spending in the US and de-SPAC costs at Coincheck at a time when crypto has been weak.
- Despite the negatives, the Japan business continues to form a solid base and arguably almost justifies the entire market cap on its own.
Mercari – Problems, Problems, But We Are Getting Bulled Up Anyway
- Mercari’s 3Q results underwhelmed with both revenue (-4.5%) and OP (¥2.9bn loss vs. a predicted ¥1.0bn profit) missed.
- Guidance was also weak and problems with rising fraudulent transactions in Japan and low tax reporting thresholds for sellers in the US are headwinds.
- Nevertheless, the drastic fall in the stock price appears to have gotten far ahead of these problems and ignores the bright future of the company in our view.
Sky Perfect JSAT (Buy) – Q4 21 Results Reaction: A Huge Declaration of Confidence
- Sky Perfect Jsat (9412 JP) posted Q4 results and guidance that are ahead of expectations for profitability
- The company has unveiled plan to re-leverage and invest more, starting with its recently announced JV with NTT , underscoring its confidence in the potential of the space business
- The plan also includes a c. 60% increase in shareholder returns over the next five years, likely through the flexible application of share buybacks
Before it’s here, it’s on Smartkarma
