In today’s briefing:
- Rakuten Bank IPO – Lower Range Makes It Even More Attractive
- Rakuten Bank IPO: New Price Range Is a Steal
- MSCI Japan May QCIR: Couple of Potential Changes
- DB Group: Kim Family Feud Leading to a Potential M&A Fight?
- Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
- Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)
- JCNC’s Logic-Defying Valuation
- ZJLD Group Pre-IPO Peer Comparison – Smallest but Compensated with Growth. Sentiment Picking Up
- Rakuten Bank IPO Valuation: A Deep Value Play in Japanese Banking
- Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price
Rakuten Bank IPO – Lower Range Makes It Even More Attractive
- Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$630m in its Japan listing in April 2023.
- RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
- In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuations in the IPO price range.
Rakuten Bank IPO: New Price Range Is a Steal
- Rakuten Bank (5838 JP) has set its IPO price at JPY1,300-1,400 per share which is 20%-29% lower than the IPO reference price range of JPY1,630-1,960 per share.
- We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: Valuation Insights.
- The new price range values Rakuten Bank at a discount vs peers for the ROE it delivers. SBI Sumishin Net Bank (7163 JP) strong post-IPO performance suggests strong sector sentiment.
MSCI Japan May QCIR: Couple of Potential Changes
- Based on the last close, we expect Kawasaki Kisen Kaisha (9107 JP) to replace Nihon M&A Center (2127 JP) in the MSCI Japan Index at the May QCIR.
- Passive trackers will need to buy less than 1x ADV on Kawasaki Kisen Kaisha (9107 JP) while selling over 5x ADV on Nihon M&A Center (2127 JP).
- Kawasaki Kisen Kaisha (9107 JP) trades cheaper than its closest peers and there are some interesting market neutral trades there.
DB Group: Kim Family Feud Leading to a Potential M&A Fight?
- In this insight, we discuss another very interesting situation brewing which is the potential family feud at the DB Group.
- One of the scenarios of the Kim family at DB Group is a sibling conflict between Nam-Ho Kim (Chairman) and his sister Ju-Won Kim.
- Our base case valuation of DB Inc is target market cap of 488 billion won or 2,428 won per share, which is 36% higher than current price.
Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
- There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
- If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
- This implies an essential premise for us to set up a more aggressive preemptive position on KT.
Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)
- Rakuten Bank (5838 JP) has priced at a new range of ¥1,300-1,400/share, down from ¥1,630-1,930/share. That lowers TTM PER and PBR to well below where SBI Sumishin was priced.
- This will now be universally recognised by pre-IPO analysts as a raging buy. Even at the top end. Important considerations: Rakuten parent TAM, growth, index inclusions, etc.
- There are OTHER important considerations going forward which show themselves in the documents.
JCNC’s Logic-Defying Valuation
- Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
- The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
- There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic.
ZJLD Group Pre-IPO Peer Comparison – Smallest but Compensated with Growth. Sentiment Picking Up
- ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
- ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
- In this note, we discuss the industry dynamics and undertake a peer comparison.
Rakuten Bank IPO Valuation: A Deep Value Play in Japanese Banking
- Rakuten Bank announced its IPO price range at ¥1,300-1,400 per share, which is 20-29% lower than the initially indicated price range at the time of filling of the IPO prospectus.
- The new price puts Rakuten Bank (5838 JP) on 4.9-5.3x FY+2 PE, which is the lowest in Japan’s banking sector.
- Japanese banks usually trade at a price-to-book of 0.2x per 1% ROE. This indicates that Rakuten Bank, which is priced at 1.0-1.1x, may deserve a fair price-to-book of over 2.0x.
Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price
- Today, it was announced that HS Holdings (8699 JP) subsidiary Khan Bank LLC – Mongolia’s largest bank – would IPO this month.
- This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.
- There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.
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