In today’s briefing:
- Park24 Placement – Large Deal to Digest and a Long Settlement Period
- Tri-Stage (2178 JP) MBO by Bain – Another Lowball Takeover Likely To Get Done
- Tokyo Electron (8035 JP): Delays and Uncertainty
- Toyo Construction (1890) – Mystery Holders Now 17% (Or More)
- Sony – An Epic Funding Round
- Lawson: Profitability Held Back by Growth Investments
- Goldwin Expecting Record Sales
- Japan’s Governance: About an Article on Board Chair
- Ohsho Food Service (9936): Earnings Forecast Update.
Park24 Placement – Large Deal to Digest and a Long Settlement Period
- Park24 Co Ltd (4666 JP) aims to raise around JPY25.5bn (US$210m) via selling 16m new shares at a fixed price of JPY1,644, representing a 9.9% discount to last close.
- Proceeds from the deal will be geared towards digital investment towards improving the firm’s business efficiency and for expanding its mobility fleet.
- In this note, we will talk about the firm’s track record and run the deal through our ECM framework.
Tri-Stage (2178 JP) MBO by Bain – Another Lowball Takeover Likely To Get Done
- Bain is getting the major execs to tender, and rolling Sojitz Corp (2768 JP)‘s 23% into the post-Tender EGM vote. That gets them to 57+%. No majority of minority here.
- But the equity check appears to be about 0.06x revenue, 4-5x PER, and takeover price EV at 4+ish years of forecast EBITDA. It’s a good rollup for its ads business.
- Too cheap, but not much you can do about it. Foreigners and financial holders own less than 0.5% of shares out.
Tokyo Electron (8035 JP): Delays and Uncertainty
- As of February, TEL expected the global wafer fab equipment market to grow by nearly 20% in calendar 2022. This seems increasingly unlikely.
- Japanese data shows equipment demand leveling off while the economic situation deteriorates and semiconductor capacity expansion projects are delayed.
- The shares have dropped 22% since the beginning of January and are now selling at 20x management’s EPS guidance for FY Mar-22. Not cheap in historical terms.
Toyo Construction (1890) – Mystery Holders Now 17% (Or More)
- WK 1-3 Limited are now (as of a week ago) 17.34% of Toyo Construction’s share register. They bought 40+% of volume in the relevant period, as I suggested they might.
- On a realtime basis, they could be 20+%, but because no single entity is there they would not become top shareholder as a triumvirate.
- I offer consolidated thoughts and like the idea of buying the dip.
Sony – An Epic Funding Round
- Sony and LEGO’s investment in Epic comes shortly after the official release of Unreal Engine 5 which promises to significantly improve efficiency for game designers and visual effects artists.
- We had predicted that Sony and Epic would continue to drift closer and would eventually dominate the metaverse and this does nothing to change that view.
- We discuss below the impact on some popular metaverse plays which investors seem to fail to realise are only metaverse plays because they can be shorted.
Lawson: Profitability Held Back by Growth Investments
- The fourth quarter was again a disappointing one for Lawson Inc (2651 JP) with operating income falling short of consensus by 14.6%.
- The next year’s OP guidance of ¥53.0bn (12.5% YoY) is around ¥10.0bn below the pre-COVID level, but Lawson’s lower profitability could be due to heavy upfront investments.
- Further out, there is substantial upside to Lawson’s profitability and consensus could be unjustly penalizing Lawson’s growth investments by valuing the company at a discounted FY+2 OP multiple.
Goldwin Expecting Record Sales
- Goldwin Inc (8111 JP) has risen to hold a leading share in outdoor wear retailing on the back of the success of The North Face.
- It has developed considerable retail and marketing skills in the process and is now applying these to its own brand with hopes of going global.
- Demand for new forms of sports and outdoor brand remain strong in Japan and globally and Goldwin’s mix of technical fabrics and quality could give it an edge.
Japan’s Governance: About an Article on Board Chair
- This article will explore the differences in Metrical Universe 1,798 companies depending on whether the board of directors is chaired by an independent director referred to Nikkei’s report.
- Companies where an independent director chairs the board of directors have had mixed responses, with some practices considered not always positive in board practices.
- In key practices, these companies are commendable in their approach, but many of them are not linked to profitability in terms of ROE and ROA, which doesn’t enhance the valuation.
Ohsho Food Service (9936): Earnings Forecast Update.
- We update our earnings forecast for Ohsho Food Service (9936, the company) and fine-tune our target price to 7,200 yen
- On January 31, the company announced 1-3Q OP of 5.0bn yen (OPM 8.0%), +8.6% YoY despite the pandemic, progressing 72% toward the full-year guidance of 7.0bn yen
- We lower our FY3/22 OP forecast from 7.5bn yen to 6.6bn yen (+8.8% YoY; OPM 7.8%; company guidance 7.0bn yen), but raise our RP forecast significantly from 8.8bn yen to 12.7bn yen (company guidance 11.5bn yen) assuming an upturn in subsidy income
Before it’s here, it’s on Smartkarma
