IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>Since KKR's JPY4,750 preconditional offer was announced, <a href="https://www.smartkarma.com/entities/taiyo-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15154:1" rel="noopener">Taiyo Holdings (4626 JP)</a> shares have traded above terms on 75% of days, with the offer due to open in late October.</li>
<li>Pressure for a bump: Results beat guidance, peers have rerated, the offer lacks a control premium compared to peer multiples, IFA valuations look stale and competing-offer clauses.</li>
<li>However, KKR can likely close without a bump: minimum acceptance is within reach and could be lowered, no activist has emerged, an interloper looks unlikely, and the price is defensible.</li>
</ul>


Since KKR's JPY4,750 preconditional offer was announced, Taiyo Holdings (4626 JP) shares have traded above terms on 75% of days, with the offer due to open in late October.
Pressure for a bump: Results beat guidance, peers have rerated, the offer lacks a control premium compared to peer multiples, IFA valuations look stale and competing-offer clauses.
However, KKR can likely close without a bump: minimum acceptance is within reach and could be lowered, no activist has emerged, an interloper looks unlikely, and the price is defensible.


Taiyo Holdings (4626 JP): Bump Pressure Builds, but KKR Holds the Cards

<ul>
<li>Since <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co (KKR US)</a> announced its preconditional tender offer for <a href="https://www.smartkarma.com/entities/taiyo-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15154:1" rel="noopener">Taiyo Holdings (4626 JP)</a> on 31 March, the shares have largely traded above the JPY4,750 offer. </li>
<li>The case for a bump is gaining credence due to Taiyo’s better-than-expected results, significant peer rerating, the diminishing control premium and the irrevocables’ competing offer clauses.</li>
<li>Nevertheless, KKR has no immediate cause for concern as no activist has emerged, and the market could sell off in the four months remaining before the offer opens. </li>
</ul>


Since KKR &amp; Co (KKR US) announced its preconditional tender offer for Taiyo Holdings (4626 JP) on 31 March, the shares have largely traded above the JPY4,750 offer. 
The case for a bump is gaining credence due to Taiyo’s better-than-expected results, significant peer rerating, the diminishing control premium and the irrevocables’ competing offer clauses.
Nevertheless, KKR has no immediate cause for concern as no activist has emerged, and the market could sell off in the four months remaining before the offer opens. 


Taiyo Holdings (4626 JP): Watching and Waiting as the Case for a Bump Gains Credence

<ul>
<li>On 19 December, Bloomberg reported that KKR has emerged as a frontrunner to privatise <a href="https://www.smartkarma.com/entities/taiyo-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15154:1" rel="noopener">Taiyo Holdings (4626 JP)</a>, but “<em>the tender offer price may be lower than the current price.</em>”</li>
<li>Since the first Bloomberg article on 27 May, Taiyo’s shares are up 84% vs. the median peers’ shares, which are up 62%. Therefore, the shares reflect some takeover premium.   </li>
<li>Based on the medium-term management plan, which is likely KKR’s base case, I estimate a tender offer of around JPY4,624, 1.2% below the last close.</li>
</ul>


On 19 December, Bloomberg reported that KKR has emerged as a frontrunner to privatise Taiyo Holdings (4626 JP), but “the tender offer price may be lower than the current price.”
Since the first Bloomberg article on 27 May, Taiyo’s shares are up 84% vs. the median peers’ shares, which are up 62%. Therefore, the shares reflect some takeover premium.   
Based on the medium-term management plan, which is likely KKR’s base case, I estimate a tender offer of around JPY4,624, 1.2% below the last close.


Taiyo Holdings (4626 JP): An Impending KKR Takeunder?

Nippon Investment Bespoke Research UK Ltd

Nippon Investment Bespoke Research UK

Equity Bottom-Up

<ul><li>While MEC’s (4971 JP) FY25 (Dec year-end) 1H sales fell short of guidance by 2.2% to ¥9,387mil (+5.7% YoY), OP improved +3.3% YoY to ¥2,440mil, coming in 8.5% above the firm’s guidance of ¥2,250mil.</li><li>This was primarily due to less than expected SG&A spending – something the firm had flagged in an earlier release.</li><li>Net profit [NP] was revised from ¥1,450mil (-23.2% YoY) to ¥1,893mil (+0.2% YoY), thanks to the receipt of a subsidy from the Ministry of Economy, Trade and Industry [METI] specifically for smaller sized companies to support growth investment.</li></ul>

While MEC’s (4971 JP) FY25 (Dec year-end) 1H sales fell short of guidance by 2.2% to ¥9,387mil (+5.7% YoY), OP improved +3.3% YoY to ¥2,440mil, coming in 8.5% above the firm’s guidance of ¥2,250mil.This was primarily due to less than expected SG&A spending – something the firm had flagged in an earlier release.Net profit [NP] was revised from ¥1,450mil (-23.2% YoY) to ¥1,893mil (+0.2% YoY), thanks to the receipt of a subsidy from the Ministry of Economy, Trade and Industry [METI] specifically for smaller sized companies to support growth investment.

<ul><li>MEC’s (4971 JP) FY25 (Dec year-end) Q1 results were largely in line with guidance for OP to rise +3.8% YoY / +19.8% QoQ to ¥1,093mil on sales of ¥4,423mil (+1.6% YoY / -2.8% QoQ).</li><li>Chemical segment sales rose +8.0% YoY / -4.5% QoQ to ¥4,237mil, thanks to 1) a steady increase in demand for chemicals used in high-end packages related to generative AI, and 2) a gradual recovery in demand associated with PCs, smartphones and general servers.</li><li>MEC is guiding for FY25 1H OP of ¥2,250mil (-4.8% YoY) on sales of ¥9,600mil (+8.1% YoY), and full-year OP of ¥5,000mil (+9.6% YoY) on sales of ¥20,000mil (+9.7% YoY).</li></ul>

MEC’s (4971 JP) FY25 (Dec year-end) Q1 results were largely in line with guidance for OP to rise +3.8% YoY / +19.8% QoQ to ¥1,093mil on sales of ¥4,423mil (+1.6% YoY / -2.8% QoQ).Chemical segment sales rose +8.0% YoY / -4.5% QoQ to ¥4,237mil, thanks to 1) a steady increase in demand for chemicals used in high-end packages related to generative AI, and 2) a gradual recovery in demand associated with PCs, smartphones and general servers.MEC is guiding for FY25 1H OP of ¥2,250mil (-4.8% YoY) on sales of ¥9,600mil (+8.1% YoY), and full-year OP of ¥5,000mil (+9.6% YoY) on sales of ¥20,000mil (+9.7% YoY).

Japan

MEC COMPANY LTD. manufactures and markets chemicals and equipment for printed circuit boards.  The Company has sales/manufacturing subsidiaries in Taiwan, Hong Kong, Belgium, and US.

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Mec Co Ltd (4971 JP)

Taiyo Holdings (4626 JP): Bump Pressure Builds, but KKR Holds the Cards

The tender launch has moved to around late November, from early October. Approvals still outstanding: China’s competition clearance and Japan’s...

Arun George

Taiyo Holdings (4626 JP): Watching and Waiting as the Case for a Bump Gains Credence

The shares have largely traded above the JPY4,750 offer price as the case for a bump gains credence. Nevertheless, KKR has no immediate cause for...

Arun George

Taiyo Holdings (4626 JP): An Impending KKR Takeunder?

Based on the medium-term management plan, which is likely KKR’s base case, I estimate a tender offer of around JPY4,624, 1.2% below the last close....

Arun George

MEC Co., Ltd (4971 JP): Research Update

While MEC’s (4971 JP) FY25 (Dec year-end) 1H sales fell short of guidance by 2.2% to ¥9,387mil (+5.7% YoY), OP improved +3.3% YoY to ¥2,440mil,...

Nippon Investment Bespoke Research UK

MEC Co., Ltd (4971 JP): Research Update

MEC’s (4971 JP) FY25 (Dec year-end) Q1 results were largely in line with guidance for OP to rise +3.8% YoY / +19.8% QoQ to ¥1,093mil on sales of...

Nippon Investment Bespoke Research UK

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