In this briefing:
- Last Week in Event SPACE: Kosaido, Descente, Panalpina, Ophir, RPC, Baidu, CJ Corp
- Nissan Governance Outlook – Foggy Now, Sunny Later
- CyberAgent: Tumbling Dice
- ECM Weekly (9 February 2019) – Pinduoduo, Homeplus, PNB Metlife, Cal-Comp Tech
- The Downward Revision in FY03/19 Guidance Places Panasonic in Our Worst-Case Scenario
1. Last Week in Event SPACE: Kosaido, Descente, Panalpina, Ophir, RPC, Baidu, CJ Corp
Last Week in Event SPACE …
- Something is up as Kosaido Co Ltd (7868 JP)‘s shares trade almost 40% through terms and back down – still 18% through terms.
- Descente Ltd (8114 JP)‘s management’s explanation why Itochu owning 40% would be bad is almost a paean to good governance, but the gloves are off.
- Panalpina Welttransport Holding (PWTN SW) is burdened with “social costs” in the near-term.
- Opportunistic yes, but Medco Energi Internasional T (MEDC IJ)‘s proposal for Ophir Energy (OPHR LN) is okay in a less-than-ideal situation.
- A possible last minute counter to Apollo’s disappointing offer for RPC Group PLC (RPC LN).
- The market is valuing Baidu Inc (ADR) (BIDU US) core ops as an “Old Economy” company with little to no growth prospect.
- Plus CCASS movements and expected upcoming events for key M&A transactions.
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classification and Events – or SPACE – in the past week)
M&A – ASIA-PAC
Kosaido Co Ltd (7868 JP) (Mkt Cap: $176mn; Liquidity: $1.2mn)
When Bain announced its MBO for Kosaido at ¥610/share, Travis Lundy concluded (in his insight Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do?) that it was a lowball bid and a virtual asset strip in progress. The kind of thing which gives activist hedge funds a bad name, but when cloaked in the finery of “Private Equity”, it looks like the renewal of a business. The share price jumped from the 400s to just under the Tender Offer Price, traded there for several days, then a week after it started trading at or near arb terms, the share price suddenly jumped through terms and headed higher.
- Travis’ inclination at Thursday’s price (¥775/share) is that at a 30% discount to book, there could be enough here to entice someone to split the company up at a slightly better level, but he doubts that it is worth 1x book. Given the headaches involved in making this company worth more than book, it would be worth less than book now. If the Info business can be rescued, then it is cheap. If it cannot, it is not.
- Because “management-friendly” shareholders currently hold at least 40% and probably more like 50+%, Travis thinks Murakami-san will find it really tough to mount, or get someone else to mount, a truly hostile action.
- Perhaps Murakami-san’s goal here is to block the deal then get management to use debt to buy out other people and expand the funeral parlour business, then get a strategic to buy the whole thing out. It could be, but Travis doesn’t think chasing the market at 25-30% above where Murakami-san got in is a good risk.
Since Travis wrote, Murakami-san’s vehicles have added another 1.24% to reach 9.55% of shares out. The last set of shares was purchased at an average of ¥652/share.
(link to Travis’ insight: Kosaido: Activism Drives Price 30+% Through Terms)
Descente Ltd (8114 JP) (Mkt Cap: $1.8bn; Liquidity: $4.3mn)
This past Thursday 7 February, Descente announced a weak Position Statement (Against) (in Japanese) the Itochu Corp (8001 JP) Tender Offer with a 28-page supporting powerpoint deck (also in Japanese). Descente appears to have no ability to defend itself, and its claim that a large shareholder like Itochu could damage corporate value by weakening governance is effectively a statement that others (like perhaps Wacoal) would too, so only a full takeover makes sense under that defense.
- Descente management’s explanation for why Itochu owning 40% would be bad is almost a paean to good governance. If the influence of suppliers and customers in the shareholder register is bad, it is bad – whether friendly to management or not. Conflict of interest can happen via entrenchment.
- The lack of a white knight proposed and effective “I got nothing, but please don’t tender” response is bearish for the shares. if management is right and Itochu’s presence at 40% will lower corporate value, the back end might be worth less than ¥1,871/share where it was trading pre-tender. That would mean the fair value of shares now would still be below here.
- If Itochu gets its 40% and ANTA votes with Itochu, it is highly possible that the two could effect dramatic change at the management and board level. That would be very hostile and corporate Japan would have something to say about that. Travis says “I am not sure Itochu would go that hostile immediately.”
- Michael Causton just wrote about Descente’s rejection of the Itochu tender saying “The Gloves Are Off”. He notes there is a perception of a cultural difference between Descente’s brand cultivation and Itochu Textile’s hands-off approach to brand management, but notes that the differences between Descente and Itochu need to be resolved quickly in order to optimally ramp up brand awareness and sales points ahead of the Rugby World Cup in Japan this year, the Olympics, next year, and the World Masters Games the year after.
links to:
Travis’ insight: Descente’s Doleful Defense (Dicaeologia)
Michael’s insight: Itochu and Descente: Gloves Off
ND Software (3794 JP) (Mkt Cap: $212mn; Liquidity: $0.04mn)
ND Software (NDS) announced a MBO sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be ~7.2x trailing 12-month EV/EBITDA. The deal comes with a 66.7% minimum threshold for completion, after which there will be a two-step squeeze-out, as is the norm in deals like this. Looks straightforward, but …
- Sometime activist Symphony Financial Partners (SFP) holds around 20% in NDS. If on board, this this deal is almost done because 31.26% is already pledged to tender, Symphony’s stake would make it 51.5%. Other presumably management-friendly shareholders own another 10%, and employees own about 7%. If Symphony is on board, that easily clears the 67% hurdle. If SFP are not on board, they own about 60% of what is necessary to block this deal. And they could buy on market to raise their stake further.
- Travis would not want to sell out his shares tomorrow at ¥1699/share. Or even ¥1701. He thinks there is a chance that the loose float is scooped up by shareholders or players who might want to increase their stake and see if this deal can be bumped.
(link to Travis’ insight: ND Software (3794 JP) TOB for an MBO – Fireworks a Possibility)
M&A – Europe/UK
Panalpina Welttransport Holding (PWTN SW) (Mkt Cap: $4.1bn; Liquidity: $20mn)
Palpina confirmed that the Ernst Göhner Foundation, Panalpina’s largest shareholder (46% of shares out) does not support the current non-binding proposal from DSV and that it supports Panalpina’s Board of Directors in pursuing an independent growth strategy that includes M&A. Panalpina’a stock tanked, but is trading only 3% below DSV’s indicative offer, and 20.5% above where the stock was trading in mid-January before DSV’s indicative non-binding proposal.
- If management had said that they have a plan which is to grow themselves out of their current doldrums, and their largest shareholder supports that plan to stick with management and go slow, nothing will get done until the new chairman is installed in May at the AGM, and even then, given the Foundation’s position that they support management’s “independent growth strategy”, there is not much minority shareholders can do.
- This is an ongoing issue of governance. If the directors are effectively chosen by the Ernst Göhner Foundation, which supports the company’s independence, so they do too, minority shareholders serve no purpose other than to provide capital for the foundation to keep Panalpina listed.
- This doesn’t mean that there will be no deal, but it does mean there will be a lull unless someone else comes up with a more aggressive offer. Travis expects this is eventually worth another go but he would want to reload lower and/or later, or when Panalpina is in a better position after the full IT package is deployed.
Since Travis wrote, DSV has released earnings and said it is still significantly engaged in the bid, and comments from the chairman of the Ernst Göhner Foundation has made comments suggesting it is not wedded to the idea, so it comes down to price – someone has to pay now to get the benefits expected from the full IT package.
Travis pointed out in the discussions that interestingly, when DSV released earnings it did not announce a buyback, which would have been normal, leading some to speculate the company is saving its cash for another go at it.
(link to Travis’ insight: Largest Panalpina Shareholder to Other Shareholders: Get Stuffed)
Ophir Energy (OPHR LN) (Mkt Cap: $204mn; Liquidity: $3mn)
On its fourth attempt Medco Energi Internasional T (MEDC IJ) receives board approval for its £0.55/share (66% premium to the closing price) offer for Ophir. The deal is conditional on receiving 75% shareholder approval, approval from the relevant authorities in Tanzania and Ophir not losing all or substantially all of its Bualuang interests in Thailand. It is expected that the Scheme will become effective in the first half of 2019.
- There is an opportunistic element to Medco’s tilt after Ophir recently announced the denial of the license extension for the Fortuna project by the Equatorial Guinea Ministry of Mines and Hydrocarbons. This resulted in a $300mn non-cash impairment. Ophir had previously written down $310mn on the same project back in September.
- Shareholders such as Petrus (~2.8% stake) won’t support the offer having announced in mid-Jan that Medco’s earlier £0.485/share proposal “massively under-values” Ophir.
- Reg approvals are not expected to be an issue – the stake in Tanzania is for a 20% non-controlling interest, a similar % approved in a prior sale to Pavilion in 2015. There is no approval/consent required from the Thai authorities – it is in there really to cover the unlikely situation that for some reason the Thai authorities raise an objection.
Ophir’s shares are trading at or close to terms. Given Medco’s numerous proposals in short succession – four in three months – a bump cannot be dismissed. And the recent disclosure of a new shareholder (Sand Grove) may warrant such an outcome. A firm offer is on the table backed by the Ophir’s board. I’d look to get involved a spread or two below terms.
(link to my insight: Medco’s “Okay” Offer For Ophir After Fortuna Setback)
RPC Group PLC (RPC LN) (Mkt Cap: $4.2bn; Liquidity: $43mn)
On January 23, after months of media speculation, RPC announced a final cash offer by a unit of Apollo Global Management for £7.82/share by way of a scheme. Two institutional shareholders, Aviva, with 1.93% and Royal London Asset Management, with 1.44%, immediately expressed disappointment with the offer valuation.
- On January 31, Berry Global Group, a former Apollo portfolio company, announced it was considering a possible cash offer for RPC and has requested due diligence. RPC responded with a release confirming it will engage with Berry in order to advance discussions in the interests of delivering best value to shareholders.
- The price being paid by Apollo is not very generous, though RPC’s sale process has been widely reported since September, 2018. Apollo’s ‘no increase’ declaration has made it easy for BERY to win this, provided no one else comes to the party. (I reached out to RPC who confirmed Apollo is restricted from countering a higher bid as it is bound by the language in the Offer announcement that the offer of £7.82 per share is final and will not be increased.) So there is limited upside from here unless you think someone else could join BERY as a late gatecrasher.
- Apollo’s offer provides an effective floor so there is limited downside from here, especially under strict UK rules which make it difficult for an acquirer to walk. John DeMasi recommend buying RPC on the possibility BERY comes out with a generous offer or another buyer shows up due to the undemanding valuation of Apollo’s offer.
(link to John’s insight: RPC Group PLC – It Ain’t Over ’til It’s Over)
STUBS & HOLDCOS
Baidu Inc (ADR) (BIDU US) (Mkt Cap: $60.6bn; Liquidity: $490mn)
Johannes Salim, CFA tackled Baidu which he estimates is trading at a discount to NAV of 29% or ~2 SD below its 3-yr average NAV discount.
- It’s a weak-ish stub with 57%-owned video streaming subsidiary iQIYI Inc (IQ US) (which went public in 1Q18) and 19%-owned online travel agency, Ctrip.Com International (Adr) (CTRP US), together accounting for 14% of NAV.
- BIDU’s core business (primarily online/mobile search services plus new initiatives such as Baidu Cloud and autonomous driving), accounts for 78% of NAV, with net cash a further 8% of NAV.
- Fundamentally, BIDU’s core business has grown healthily, with strong cash flows generation. Johannes estimates the market is unjustifiably valuing this business at US$49.3bn, or 8.7x 2019E EV/EBITDA or 11.2x 2019P, suggesting little to no growth prospect.
(link to Johannes’ insight: Baidu: Time to Swoop In, with NAV Discount Widening Substantially)
CJ Corp (001040 KS) (Mkt Cap: $3bn; Liquidity: $7.5mn)
Sanghyun Park recommends long Holdco and short the synthetic sub ((Cj Cheiljedang (097950 KS), CJ ENM (035760 KS), CJ CGV Co Ltd (079160 KS) and Cj Freshway (051500 KS) on a ratio of 50:40:7:3 ) at this point.
- By my calcs, CJ Corp is trading at a 52% discount to NAV compared to a 52-week average of 41%. CJ C and CJ ENM comprise 63% of NAV.
- Of note, the stub ops still account for 29% of NAV and primarily comprises the 55.13% stake in CJ Olive Networks and brand royalty, each accounting for ~13% of NAV.
(link to Sanghyun’s insight: CJ Corp Holdco/Synthetic Sub Trade: Current Status & Trade Approach)
Toyota Industries (6201 JP)(Mkt Cap: $15.8bn; Liquidity: $24mn)
Curtis Lehnert recommends closing the Toyota set-up trade, which hasn’t exactly been a storming one (4% or 1.96% on the gross notional).
- Toyota announced earning recently which (slightly) beat expectations slightly and the stock rallied in response. This move brought the discount to NAV in line with its 6-month average and has eroded the statistical edge of staying in the trade.
- The fundamentals for Toyota are still attractive, therefore it could be argued to hold the stub beyond these levels. However, Curtis has opted for the tactical route in the current environment and take profits when a statistical edge disappears.
(link to Curtis’ insight: TRADE IDEA – Toyota Industries (6201 JP): Close the Stub Trade)
SHARE CLASSIFICATIONS
Briefly …
- Sanghyun recommended a long 2PB and short 1P, after Hyundai Motor Co (005380 KS)‘s 1P/2PB price ratio touched 152% of σ on a 20D MA. This is the highest since late Nov last year. Hyundai Motor Share Class: Long 2PB / Short 1P Amid Restructuring Speculation
- Sanghyun also recommended go long Samsung Electronics (005930 KS)‘s1P and short Common, for a short term reversion as we enter the March shareholder meeting phase. Samsung Electronics Share Class: Long 1P / Short Common on BlackRock Showing
OTHER M&A UPDATES
Greencross Ltd (GXL AU) shareholders have approved the scheme of arrangement.
- MYOB Group Ltd (MYO AU) trades through terms after announcing Vinva is a new substantial holder.
CCASS
My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.
Often these moves can easily be explained – the placement of new shares, rights issue, movements subsequent to a takeover, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.
Name | % change | Into | Out of | Comment |
42.30% | Guotai | China Securities | ||
10.46% | Hang Seng | MS | ||
28.11% | Oceanwide | CM Securities | ||
11.15% | China Securities | Sun Securities | ||
10.39% | OCBC | DBS |
UPCOMING M&A EVENTS
Country | Target | Deal Type | Event | E/C | |
Aus | Greencross | Scheme | 11-Feb | 2nd Court Date/Scheme Effective Dt | C |
Aus | Stanmore Coal | Off Mkt | 5-Feb | Payment date | C |
Aus | GrainCorp | Scheme | 20-Feb | Annual General Meeting | C |
Aus | Propertylink | Off Mkt | 28-Feb | Close of offer | C |
Aus | Healthscope | Scheme | April/May | Despatch of Explanatory Booklet | E |
Aus | Sigma | Scheme | February | Binding Offer to be Announced | E |
Aus | Eclipx Group | Scheme | February | First Court Hearing | E |
Aus | MYOB Group | Scheme | 11-Mar | First Court Hearing Date | C |
HK | Harbin Electric | Scheme | 22-Feb | Despatch of Composite Document | C |
HK | Hopewell | Scheme | 28-Feb | Despatch of Scheme Document | C |
India | Bharat Financial | Scheme | 28-Feb | Transaction close date | C |
India | GlaxoSmithKline | Scheme | 9-Apr | Target Shareholder Decision Date | E |
Japan | Pioneer | Off Mkt | 1-Mar | Designation of Common Stock as Securities To Be Delisted by TSE | C |
Japan | Showa Shell | Scheme | 1-Apr | Close of offer | E |
NZ | Trade Me Group | Scheme | 14-Feb | Takeovers Panel and NZX on Booklet | C |
Singapore | Courts Asia | Scheme | 15-Mar | Offer Close Date | C |
Singapore | M1 Limited | Off Mkt | 18-Feb | Closing date of offer | C |
Singapore | PCI Limited | Scheme | February | Release of Scheme Booklet | E |
Thailand | Delta | Off Mkt | February-April | SAMR of China Approval | C |
Finland | Amer Sports | Off Mkt | 28-Feb | Offer Period Expires | C |
Norway | Oslo Børs VPS | Off Mkt | 4-Mar | Nasdaq Offer Close Date | C |
Switzerland | Panalpina | Off Mkt | 27-Feb | Binding offer to be announced | E |
US | Red Hat, Inc. | Scheme | March/April | Deal lodged with EU Regulators | C |
2. Nissan Governance Outlook – Foggy Now, Sunny Later
This past week saw developments which put the Nissan Motor (7201 JP) – Renault SA (RNO FP) relationship on a better path.
There are interesting noises around the likely arrival of Jean-Dominique Senard on the board of Nissan which the French state won’t like (because they won’t be getting the pony they want) but which would ultimately serve Renault’s interests better.
Renault and Nissan are conducting a joint investigation into the Renault-Nissan Alliance BV entity which Carlos Ghosn also chaired, and Renault has passed a dossier of Ghosn’s personal expenses borne by Renault and the Alliance to French investigators.
A trial balloon was floated in the Nikkei suggesting the French government had said to the Japanese government it was open to Renault selling some Nissan shares and perhaps the state could lower its stake in Renault. This was “categorically denied” by the French with some haste but the idea of forming a holding company was categorically denied as acceptable by the French just under a year ago. Things have changed.
Governance changes are afoot, with a steady flow of developments likely coming in March, April, May, and June.
Below, a discussion of what the board looks like, will look like, and could look like in/after June and a discussion of the structure of possible capital changes.
3. CyberAgent: Tumbling Dice
![](https://static-prod.smartkarma.com/images/media/000/078/315/original/2019-02-09_12-04-43.png?1549681495)
Source: Japan Analytics
TUMBLING DICE – After ZOZO (3092 JP) (-52%) and Mercari (4385 JP) (-50%), CyberAgent (4751 JP) is the worst-performing large-cap Internet stock in Japan over the last seven months. The company is the sector’s leading foreigner-held stock with over 48% (60%+ of the float) held by institutional investors such as Baillie Gifford (11.9%), JP Morgan AM (6.9%), Tybourne Capital (5.1%) and Blackrock Japan (5.0%). Having outperformed the sector and the market annually over the last nine years by 38% and 25%, respectively, over the seven months since the stock peaked in terms of our Relative Price Score on 13th July, CyberAgent shares have declined by 56%, underperforming the market by 48% and the sector by 37%.
PASSIVE PERILS – We will discuss the ‘perils ‘ of Passive TV in the DETAIL below. However, CyberAgent is yet another good example of the ‘perils’ of passive investing. On September 5th Nikkei Inc. announced that CyberAgent would replace Furukawa (5715 JP) in the Nikkei 225 index, with the inclusion occurring on October 1st. Since the ¥6050 intraday peak of the week before inclusion in the index, the shares have declined by 49% in 90 trading days.
![](https://static-prod.smartkarma.com/images/media/000/078/317/original/2019-02-09_12-52-50.png?1549684397)
SUMMARY – CyberAgent’s business has three ‘pillars’, internet advertising, mobile gaming software, and media. The latter now includes the linear free-to-view AbemaTV business, which helped drive the share price to a post-listing high of ¥6930 in July 2018. Since then, business conditions for two of these ‘pillars’ have degraded significantly, while the fledgeling TV business remains in ‘up-front’ investment mode. To cap what will be a turbulent year for CyberAgent, the company is moving into a new head office building in Shibuya called ‘Abema Towers‘ in March. We shall refrain from making any analogies to the Skyscraper Index.
This Insight will review: –
- CyberAgent’s growth strategy
- The company’s track profitability track record from the perspective of Net Operating Profit After Tax (NOPAT), Comprehensive Income and Operating Profit margins
- The three main business segments – Internet Advertising, Game Software, and Media
- Cash Flow and Valuation
We will also attempt to value AbemaTV and will reverse-engineer some target metrics that would justify the market’s current implied ¥41b valuation for this business, a valuation that reached ¥543b only seven months ago.
![](https://static-prod.smartkarma.com/images/media/000/078/318/original/2019-02-09_13-06-39.png?1549685220)
VISION SHIFT? – In previous years, CyberAgent had a clear vision statement – ‘To create the 21st century’s leading company’. The company’s recent performance has led to a change of tone, and CyberAgent is now rather more modestly just ‘Aiming to be a company with medium to long-term supporters’. In the vein of the lyrics from the best song on the best Rolling Stones album, Exile on Main Street, the business has recently been at ‘all sixes and sevens and nines’. In the search for new ‘supporters’, we encourage CyberAgent to just ‘keep on rolling’, letting the dice fall where they may.
4. ECM Weekly (9 February 2019) – Pinduoduo, Homeplus, PNB Metlife, Cal-Comp Tech
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
There are no new IPO filings in Hong Kong but there is news on the timeline of a few upcoming IPOs.
In Korea, Homeplus will be starting its investor education next Monday to raise about US$1.5bn. Brief details of the deal are already available. The company will be selling 345m primary shares at an indicative range of KRW4,530 – 5,000 per share. We heard that the roadshow kick off on 28th February and will likely list on 29th March.
In India, PNB is targeting to list PNB MetLife between April to September. The estimated IPO size was about US$150 – 300m and its draft prospectus was filed last year.
In the Philippines, Cal-Comp Tech (Philippines) (CCTP PH) is targeting to launch its US$123m IPO towards the end of the third quarter this year based on media reports. We have previously covered the IPO in Cal-Comp Tech (Philippines) Pre-IPO Review – Muted Growth in Core Products.
As for placements, Pinduoduo (PDD US) chose to launch its follow-on offering in the midst of Chinese New Year, raising about US$1bn in fresh capital along with sell-down from existing investors. The placement was priced at US$25 per share, a 17.5% discount from its pre-announcement price of US$30.33 on 5th February and a 5.7% discount to its 7th February close price. Settlement date is on 12th February, greenshoe expires on 10th March and lock-up expires 9th May according to Bloomberg.
Accuracy Rate:
Our overall accuracy rate is 72.1% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
![](https://static-prod.smartkarma.com/images/media/000/078/302/original/Total-Deals-Since-Inception-Accuracy-Rate-Since-Inception-_chartbuilder%20%286%29.png?1549672670)
No new IPO filings
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
![](http://www.smartkarma.com/assets/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)
News on Upcoming IPOs
- PineBridge-backed Uniparts gets SEBI nod to float IPO
- Cal-Comp Philippines eyes IPO by third quarter
- JERA new president says IPO is an option
- Singapore’s Zalora explores listing to fuel expansion
- S. Korea’s Homeplus files for up to $1.5 bln REIT IPO
- Korean bio unicorn in the making, Voronoi, to join the Kosdaq this year
Smartkarma Community’s this week Analysis on Upcoming IPO
- Koolearn: Losses in Full View
- Koolearn: Marketing Expenses Have Taken Operating Profits Down the Drain
List of pre-IPO Coverage on Smartkarma
5. The Downward Revision in FY03/19 Guidance Places Panasonic in Our Worst-Case Scenario
- Panasonic Corp (6752 JP)’s 3Q earnings were quite weak, failing to meet both consensus and our estimates. Panasonic reported revenue of JPY2,074.8bn and OP of JPY97.5bn resulting in an OPM of 4.7% compared to 5.8% in the third quarter of last year
- The majority of revenue growth came from the Automotive & Industrial Solution (A&IS) segment which saw the strongest growth in revenue at nearly 8% YoY followed by the Eco Solutions Segment. Despite the steady growth in the A&IS revenue, the segment continued to display a decline in profits by almost 13% YoY.
- A downward revision in targets was made following the weak earnings this quarter. Nine-months cumulative figures weren’t particularly attractive in the OP front as well (Revenue up 3% YoY and OP down -8% YoY as of 3QFY03/19). Panasonic is nearing our modest case scenario, although its downward revised earnings target places it in our worst-case scenario, where we expect Panasonic to be exposed to a high degree of risk, increasing its lookout for other customers. Panasonic has only tied up with Toyota Motor (7203 JP) thus far and may have to diversify its customer base further to bring earnings to a sustainable level.
- After the earnings release and news about Chinese competitor, CATL (A) (300750 CH), collaborating with Honda Motor (7267 JP) ( Honda Chooses CATL as Battery Partner for Their EVs; Panasonic Has Lost the Chance), Tesla Motors (TSLA US) announced that it was acquiring battery company Maxwell Technologies for production of its EV batteries. Panasonic fell almost -5% on Monday’s open.
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