Research Coverage of Japanese Listed Companies, Shared Research Inc

Shared Research

Research Coverage of Japanese Listed Companies

Shared Research Inc

Pioneering research coverage of Japanese listed companies. Now customizable and interactive for global institutional investors. Corporate access reimagined.

Equity Bottom-Up

<ul><li>Revenue decreased by 3.0% YoY to JPY100.0bn, with Agrochemical business revenue at JPY94.6bn, down 3.1% YoY.</li><li>Operating profit increased by 15.3% YoY to JPY8.6bn, driven by improved profitability from lower raw material prices in Brazil.</li><li>Net income attributable to owners declined by 50.7% YoY to JPY2.4bn due to goodwill impairment loss related to Nichino India.</li></ul>

Revenue decreased by 3.0% YoY to JPY100.0bn, with Agrochemical business revenue at JPY94.6bn, down 3.1% YoY.Operating profit increased by 15.3% YoY to JPY8.6bn, driven by improved profitability from lower raw material prices in Brazil.Net income attributable to owners declined by 50.7% YoY to JPY2.4bn due to goodwill impairment loss related to Nichino India.

Nihon Nohyaku (4997 JP): Full-year FY03/25 flash update

<ul><li>Revenue decreased by 3.0% YoY to JPY61.4bn, with agrochemicals revenue at JPY57.2bn, down 3.5% YoY.</li><li>Operating profit increased by 42.4% YoY to JPY3.6bn, driven by improved profitability and yen depreciation.</li><li>Domestic agrochemical sales rose 6.3% YoY, while overseas revenue fell 5.8% YoY due to weather impacts.</li></ul>

Revenue decreased by 3.0% YoY to JPY61.4bn, with agrochemicals revenue at JPY57.2bn, down 3.5% YoY.Operating profit increased by 42.4% YoY to JPY3.6bn, driven by improved profitability and yen depreciation.Domestic agrochemical sales rose 6.3% YoY, while overseas revenue fell 5.8% YoY due to weather impacts.

Nihon Nohyaku (4997 JP): Q3 FY03/25 flash update

<ul><li> In FY03/24, revenue was JPY103.0bn (+0.9% YoY), operating profit was JPY7.4bn (-14.9% YoY), recurring profit was JPY5.9bn (-23.7% YoY), and net income attributable to owners of the parent was JPY4.8bn (+6.4% YoY). In addition to increased sales of proprietary products in various global markets, the depreciation of the yen also contributed to higher revenue. On the profit side, a decrease in prices of certain generic products in Brazil and an increase in SG&A expenses resulted in a YoY decline in operating profit.</li><li>For FY03/25, the company forecasts revenue of JPY104.5bn (+1.4% YoY), operating profit of JPY8.1bn (+8.9% YoY), recurring profit of JPY6.7bn (+12.9% YoY), and net income attributable to owners of the parent of JPY4.8bn (+0.5% YoY). In the Agrochemicals business, it expects revenue to increase mainly in Japan. Overseas, the company sees revenue increasing in Asia and Central and South America and decreasing in Europe and North America. On the profit front, although the company expects SG&A expenses to continue to increase, it expects operating profit to increase YoY, supported by profit growth in Brazil due to anticipated lower raw material costs.</li><li>Nihon Nohyaku announced its current medium-term management plan, “Growing Global for Sustainability (GGS),” which covers a three-year period from FY03/25 to FY03/27, in May 2024.</li></ul>

 In FY03/24, revenue was JPY103.0bn (+0.9% YoY), operating profit was JPY7.4bn (-14.9% YoY), recurring profit was JPY5.9bn (-23.7% YoY), and net income attributable to owners of the parent was JPY4.8bn (+6.4% YoY). In addition to increased sales of proprietary products in various global markets, the depreciation of the yen also contributed to higher revenue. On the profit side, a decrease in prices of certain generic products in Brazil and an increase in SG&A expenses resulted in a YoY decline in operating profit.For FY03/25, the company forecasts revenue of JPY104.5bn (+1.4% YoY), operating profit of JPY8.1bn (+8.9% YoY), recurring profit of JPY6.7bn (+12.9% YoY), and net income attributable to owners of the parent of JPY4.8bn (+0.5% YoY). In the Agrochemicals business, it expects revenue to increase mainly in Japan. Overseas, the company sees revenue increasing in Asia and Central and South America and decreasing in Europe and North America. On the profit front, although the company expects SG&A expenses to continue to increase, it expects operating profit to increase YoY, supported by profit growth in Brazil due to anticipated lower raw material costs.Nihon Nohyaku announced its current medium-term management plan, “Growing Global for Sustainability (GGS),” which covers a three-year period from FY03/25 to FY03/27, in May 2024.

Nihon Nohyaku (4997 JP): Coverage initiation

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Yesterday, 30 October, <a href="https://www.smartkarma.com/entities/12434" target="_blank" data-smartkarma-citation="entities:12434:1">Dentsu Inc (4324 JP)</a> announced a Partial Tender Offer for shares in internet advertising agency <a href="https://www.smartkarma.com/entities/11681" target="_blank" data-smartkarma-citation="entities:11681:1">Septeni Holdings (4293 JP)</a> along with a potential subscription to buy treasury shares held by Septeni, and shares in a Third Party Allotment. The two companies signed a Capital and Business Alliance Agreement on the same day. Details of the Tender Offer and the Capital and Business Alliance Agreement are linked <a href="http://www.dentsu.com/news/release/pdf-cms/2018110-1030en.pdf" target="_blank">here</a>.
Dentsu will buy 26,895,000 shares of Septeni (20.99%) in a Tender Offer. IF Dentsu does not get to 20.99% in the partial tender, Dentsu buy shares in a third party allotment so the post-transaction result is that they own 20.99%. Dentsu has agreed not to go over that number. All shares purchased from the company in a third party allotment (or sale of Treasury Shares) would take place at the same price as the price of the Tender Offer, ¥260/share.
This is a slightly unusual transaction, but it has been seen before (Nippon Steel for Nisshin Steel, etc). It is NOT like the deal <a href="https://www.smartkarma.com/entities/3122" target="_blank" data-smartkarma-citation="entities:3122:1">Adeka Corp (4401 JP)</a> recently did to acquire a large stake in <a href="https://www.smartkarma.com/entities/17345" target="_blank" data-smartkarma-citation="entities:17345:1">Nihon Nohyaku (4997 JP)</a> - a smaller tender offer definitely followed by a capital injection. 
That is a decent offer in many people's minds. In some ways it is a remarkable offer. Net Cash per share prior to this event was ¥118.2/share and Equity outside the Net Cash holdings was ¥6.8/share as of 30 Sep 2018 (lower in each case if counting the dilution included in the Board Incentive Plan). Dentsu is purchasing the non-cash equity for exactly 20x book.
This is effectively an acquihire with a longer-term earnout (because presumably management's exit is an eventual takeout). Investors are invited to play along but I expect this is a good sell at the TOB price. It may, however, be a good buy to own the back end on a residual fair value basis if it trades too wide.

Yesterday, 30 October, Dentsu Inc (4324 JP) announced a Partial Tender Offer for shares in internet advertising agency Septeni Holdings (4293 JP) along with a potential subscription to buy treasury shares held by Septeni, and shares in a Third Party Allotment. The two companies signed a Capital and Business Alliance Agreement on the same day. Details of the Tender Offer and the Capital and Business Alliance Agreement are linked here.
Dentsu will buy 26,895,000 shares of Septeni (20.99%) in a Tender Offer. IF Dentsu does not get to 20.99% in the partial tender, Dentsu buy shares in a third party allotment so the post-transaction result is that they own 20.99%. Dentsu has agreed not to go over that number. All shares purchased from the company in a third party allotment (or sale of Treasury Shares) would take place at the same price as the price of the Tender Offer, ¥260/share.
This is a slightly unusual transaction, but it has been seen before (Nippon Steel for Nisshin Steel, etc). It is NOT like the deal Adeka Corp (4401 JP) recently did to acquire a large stake in Nihon Nohyaku (4997 JP) - a smaller tender offer definitely followed by a capital injection. 
That is a decent offer in many people's minds. In some ways it is a remarkable offer. Net Cash per share prior to this event was ¥118.2/share and Equity outside the Net Cash holdings was ¥6.8/share as of 30 Sep 2018 (lower in each case if counting the dilution included in the Board Incentive Plan). Dentsu is purchasing the non-cash equity for exactly 20x book.
This is effectively an acquihire with a longer-term earnout (because presumably management's exit is an eventual takeout). Investors are invited to play along but I expect this is a good sell at the TOB price. It may, however, be a good buy to own the back end on a residual fair value basis if it trades too wide.

Dentsu Buy of Septeni - Interesting SmallCap TOB

Overnight, <a href="https://www.smartkarma.com/entities/3122" target="_blank" data-smartkarma-citation="entities:3122:1">Adeka Corp (4401 JP)</a>'s Tender Offer for Shares of <a href="https://www.smartkarma.com/entities/17345" target="_blank" data-smartkarma-citation="entities:17345:1">Nihon Nohyaku (4997 JP)</a> and NichiNoh's planned subsequent issuance of shares which would take ADEKA to 51% has run into a spot of controversy. ADEKA currently owns 16.176mm shares or 23.1% of the 70mm shares outstanding. The plan was to buy UP TO 12.056mm shares taking them to 40.33%, then purchasing an extra number of shares of 11.94mm shares or more which would get them to 51%, on the condition that the minimum share purchase in the Tender Offer (7.668mm shares) was effected.US investment advisory firm Usonian Investments raised a complaint saying that ADEKA's bid to acquire a majority went against Japan's Corporate Governance Code as it treats shareholders unfairly. According to Bloomberg, Usonian said through a representative in Japan that ADEKA's deal does not provide shareholders with an equal opportunity to sell their stakes at a premium because the tender offer is of limited size.The issue is that the two-step transaction format can be used as a "loophole" allowing a would-be controlling acquirer to purchase the minimum number of shares required to get past the strictures of the "TOB Rules" (i.e. conducting a TOB to get from below one-third to above one-third), then rely on a third-party offering at a not-unfair price (a price at a discount of greater than 10% could, by precedent argument, be thought of as 有利発行 o advantageous issuance) rubber-stamped by the Board of Directors.This complaint deserves a little exploration. The company says "It's true that we are receiving opinions from shareholders... we will engage sincerely with all stock owners, including those shareholders."There is, of course, merit. And there are some solutions, helpfully thanks to the changes in the Companies Act which were effected April 1, 2015.But the Tender closes today, and next steps could be more complicated.

Overnight, Adeka Corp (4401 JP)'s Tender Offer for Shares of Nihon Nohyaku (4997 JP) and NichiNoh's planned subsequent issuance of shares which would take ADEKA to 51% has run into a spot of controversy. ADEKA currently owns 16.176mm shares or 23.1% of the 70mm shares outstanding. The plan was to buy UP TO 12.056mm shares taking them to 40.33%, then purchasing an extra number of shares of 11.94mm shares or more which would get them to 51%, on the condition that the minimum share purchase in the Tender Offer (7.668mm shares) was effected.US investment advisory firm Usonian Investments raised a complaint saying that ADEKA's bid to acquire a majority went against Japan's Corporate Governance Code as it treats shareholders unfairly. According to Bloomberg, Usonian said through a representative in Japan that ADEKA's deal does not provide shareholders with an equal opportunity to sell their stakes at a premium because the tender offer is of limited size.The issue is that the two-step transaction format can be used as a "loophole" allowing a would-be controlling acquirer to purchase the minimum number of shares required to get past the strictures of the "TOB Rules" (i.e. conducting a TOB to get from below one-third to above one-third), then rely on a third-party offering at a not-unfair price (a price at a discount of greater than 10% could, by precedent argument, be thought of as 有利発行 o advantageous issuance) rubber-stamped by the Board of Directors.This complaint deserves a little exploration. The company says "It's true that we are receiving opinions from shareholders... we will engage sincerely with all stock owners, including those shareholders."There is, of course, merit. And there are some solutions, helpfully thanks to the changes in the Companies Act which were effected April 1, 2015.But the Tender closes today, and next steps could be more complicated.

ADEKA Bid for Control of Nihon Nohyaku Runs Into Controversy

Japan

Nihon Nohyaku Co. Ltd. produces and markets a variety of insecticides and fungicides. The Company also works in the pharmaceuticals, veterinary drugs and other chemical-related fields.

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