In today’s briefing:
- Seven & I: Positives All Around But Upside Is Limited
- Softbank (9984 JP) – Klarna’s Coming “down Round”
- Seven & I (3382) | So What if Walmart Missed
- Softbank – Misra Out
- Softbank Group – Business as Usual
- JAPAN ACTIVISM: Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target
- The Light and Dark Sides of the Creation of the TSE Prime Market Make Us Think Again
- Torikizoku Holdings (3193): June SSS Recovered to 85% of Pre-Pandemic Levels
- Companies Holding “Continuation Meetings” Will Hold Them on the Days of Concentration of the AGMs
Seven & I: Positives All Around But Upside Is Limited
- With OP up by 32.1% YoY, 1QFY23 was the first genuine sign of the realisation of synergies from the Speedway acquisition.
- There could be more good news on the horizon as various news outlets have reported that the sale of Sogo Seibu is moving closer.
- Yet we are neutral on Seven & I Holdings (3382 JP) in the short-term. We think investors needs to see the true colours of synergies for shares to break ¥6,100.
Softbank (9984 JP) – Klarna’s Coming “down Round”
- Press reports indicate that Klarna is seeking a new funding round, after a 1Q22 of big losses and a recent 10% headcount reduction at Klarna
- Softbank made its investment in Klarna at its peak valuation in July 2021; the implied new Klarna valuation range is between 30% and 85% down from the peak
- We explore the coming “down round”, and we assess Klarna’s potential valuation metrics relative to payment company peers including US listed BNPL company Affirm and the hit to Softbank’s investment
Seven & I (3382) | So What if Walmart Missed
- Investors should ignore the news around restructuring….it’s nice but basically irrelevant
- The long-term valuation proposition is driven by the core convenience store businesses in the US and Japan
- Unlike Walmart, we think 7&I should have a good quarter in the US and beat analyst expectations for Q1
Softbank – Misra Out
- It was reported today that Vision Fund CEO Rajeev Misra would step away from his role to establish his own investment fund.
- This continues the pattern of turnover of high profile figures within the Softbank Group raising questions about overall management stability.
- With Masayoshi Son also now officially taking amore direct role in managing Vision Fund 2 it also underscores the continuing concentration of decision-making ability.
Softbank Group – Business as Usual
- Vision Fund head Rajeev Misra will step down from Vision Fund 2 to take a new gig managing money for Midde Eastern partners. His VF1 role is unchanged for now
- Structurally, this does not change very much as Son-san has always been the decision maker on investments and we never considered Misra as a candidate for succession
- After surviving $47bn in public equity losses over the last year, it surprisingly looks like Misra’s departure is voluntary
JAPAN ACTIVISM: Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target
- Silchester International Investors targeted the AGMs of four Japanese regional banks in which it had held shares for 12-17yrs writing open letters, and asking each for a small special dividend.
- One was heavily over-capitalised and significant cross-holding owning Chugoku Bank (8382 JP)
- Their Shareholder Proposal flopped badly. The shareholder structure isn’t there to support it, now or in future, and among regional banks, this is on the “less attractive” side valuation-wise.
The Light and Dark Sides of the Creation of the TSE Prime Market Make Us Think Again
- I would like to discuss the points on the Nikkei article, “Mercari’s Prime Market Approval Raises Hopes for Growth Market to Include Similar Companies in the Future.”
- Mercari’s listing on prime market is a great hope for companies planning to list on prime market, and the inclusion in the TOPIX is also positive for their stock price.
- “Transitional measures” companies need to carefully discuss the feasibility of the plan for meeting the listing criteria and whether they should continue to be listed as before.
Torikizoku Holdings (3193): June SSS Recovered to 85% of Pre-Pandemic Levels
- Same-store sales were 643.8% vs. June 2021 (1648.4% for May), 115.9% vs. June 2020 (684.1% for May), and 84.7% vs. June 2019 (83.2% for May)
- Compared to June 2021, the guest count was 601.0% (1591.9% for May), and the average check was 107.1% (103.5% for May)
- The number of stores at the end of June was 617 (flat MoM). The number of company-owned stores was 386 (flat MoM)
Companies Holding “Continuation Meetings” Will Hold Them on the Days of Concentration of the AGMs
- I would like to discuss the issues on the Nikkei article titled “Over 10 Companies Hold ‘Continuation Meetings’ of Shareholders’ Meetings Due to Improper Accounting, etc.”
- Companies that hold “continuation meetings” are divided into 2 groups: inappropriate accounting and China lockdown. However, the companies in both groups plan to hold AGMs on days AGMs are concentrated.
- It is too much to ask shareholders for voting without financial results, and many companies seem intent on avoiding dialogue with shareholders by holding AGM on such a concentration day.
Before it’s here, it’s on Smartkarma
