In today’s briefing:
- Toshiba (6502) – JIP Gets Preferred Bidder Status and We Get The First Price Leak
- Socionext (6526 JP): Index Inclusion Timeline
- Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation
- GLP J-REIT Placement – Most of the past Deals Have Done Well, This One Could Be Tricky
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Results Announced; BIG Trade
- StubWorld: Macau Plays Need To Up Non-Gaming Game
- Lionheart IPO – Thoughts on Valuation
- Elmo Software Confirms Takeover Interest from Various Parties
- ELMO Software (ELO AU): KKR Returns To The Well
- Pre-IPO Giant Biogene – The Strength and the Concerns
Toshiba (6502) – JIP Gets Preferred Bidder Status and We Get The First Price Leak
- Overnight, a few news outlets are running with the story that Toshiba Corp (6502 JP) has granted “preferred bidder” status to the Japan Industrial Partners (JIP)-led consortium bid.
- JIP had originally signed up with public-private fund JIC, forming one of the four bids (the other three being CVC, Bain, and Brookfield) but JIP and JIC split last month.
- “Preferred Bidder status” is just that. It’s not exclusive, but one can read between the lines. But the articles have interesting details, including the first trial ballon price leak.
Socionext (6526 JP): Index Inclusion Timeline
- Socionext (6526 JP) traded 15.1% higher than its IPO price on listing day. That gives it a market cap of JPY 141.4bn (US$963m).
- Socionext (6526 JP) will be added to the TPX INDEX in November and could be added to the MSCI SmallCap Index in February and the FTSE All-Cap Index in June.
- The close yesterday indicates there could be more buying behind while the TOPIX inclusion in November will be a source of short-term demand for the stock.
Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation
- We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
- We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
- We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers
GLP J-REIT Placement – Most of the past Deals Have Done Well, This One Could Be Tricky
- GLP J-REIT (3281 JP) is looking to raise around US$220m in its placement to acquire five assets, and increase its stake in a sixth one.
- We have covered a number of past deals by the company, almost all of which have done well.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Results Announced; BIG Trade
- The number of FTSE TWSE Taiwan Dividend+ Index constituents will be increased from 30 to 50 in one step at the December rebalance.
- There are a few other changes to the index methodology, mainly around the cutoff ranks for inclusion/exclusion with a few additional constraints.
- We forecast 25 adds and 4 deletes to the index with one-way trade over US$2.2bn and big impact on many stocks due to inclusion, exclusion, capping and funding.
StubWorld: Macau Plays Need To Up Non-Gaming Game
- Reportedly Macau authorities are not satisfied with some concessionaire proposals from gaming firms and require them to increase investment into non-gaming facilities under a concession retendering process
- Preceding my comments on some of the gaming plays such as Melco International Development (200 HK) and Genting Bhd (GENT MK) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Lionheart IPO – Thoughts on Valuation
- Lionheart Studio (426630 KS), a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO.
- The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.
- We spoke about the company’s past performance and undertook a peer comparison in our previous note. In this note, we’ll talk about our earnings estimates and valuation.
Elmo Software Confirms Takeover Interest from Various Parties
- Elmo Software (ELO AU) confirmed takeover interest from several parties, including Accel-KKR. Elmo previously disclosed on 14 June that it had discussions on a non-binding offer at A$6.10 per share.
- The previous talks ended because the bidder (Accel-KKR) could not progress to a binding offer due to changing tech valuations. Elmo has materially underperformed ASX SaaS peers since 14 June.
- The current conditions suggest a higher risk that the talks will fizzle out. Despite today’s 28% pop, the shares remain undemanding compared to peer multiples providing support to the shares.
ELMO Software (ELO AU): KKR Returns To The Well
- Cloud-Based solutions provider Elmo Software (ELO AU) has confirmed it has received multiple expressions of interest from various parties, including Accel-KKR.
- No agreement has been reached with any parties, no pricing mentioned, nor whether data room access has been afforded.
- Earlier this year ELMO held discussions with Accel-KKR in regard to a change of control proposal at $6.10/share. That figure is a stretch in this market.
Pre-IPO Giant Biogene – The Strength and the Concerns
- The strength about Giant Biogene is that the founders have R&D background, which helps build trust. Meanwhile, the financial performance was good, with three years of consistent high margins.
- The sustainability of high-profit model will face pressure due to increasing competition. The establishment of long-term core competitiveness and second growth point is important. Complex related-party transaction is another concern.
- Giant Biogene is in an industry that has a large potential for future growth in valuation. Its valuation should be lower than that of Bloomage and Imeik.
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