Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks. </li>
<li>Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers. </li>
<li>The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more. </li>
</ul>


Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks. 
Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers. 
The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more. 


Short-Term Itochu Buyback - A Cushion, But Style Bias Matters More

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.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/phc-holdings-corp" target="_blank" data-smartkarma-citation="entities:34198:1" rel="noopener">PHC Holdings (6523 JP)</a> is a leading diversified diagnostic, life sciences and medical device company serving global markets. PHC shareholders include <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> (owns 48.0% of PHC), <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> (21.1%), Life Science Institute (13.2%) and <a href="https://www.smartkarma.com/entities/panasonic-corp" target="_blank" data-smartkarma-citation="entities:222:1" rel="noopener">Panasonic Corp (6752 JP)</a> (11.3%).</p></div><div><p>At the indicative price of JPY3,700 per share, PHC will have a market cap of JPY452 billion (US$4.1 billion). PHC plans to raise JPY172 billion ($1.57 billion) by offering 5.8 million primary shares (JPY22 billion raise) and 40.7 million secondary shares (JPY150 billion raise). </p></div><div><div>
<p>In <a href="https://www.smartkarma.com/insights/phc-holdings-ipo-initiation-sugar-high" target="_blank" data-smartkarma-citation="insights:57915" rel="noopener">PHC Holdings IPO Initiation: Sugar High</a>, we opined that at first glance, PHC offers solid growth, stable and healthy margins along with solid cash generation. However, on an organic basis, the revenue has declined in each of the last two financial years. The strong growth in the recent first quarter was largely due to low comps and an unsustainable revenue boost from COVID-19 related products. We concluded that PHC’s fundamentals are mixed and we are inclined to watch this IPO from the sidelines.</p>
<div class="content-highlight"><p>Our valuation analysis suggests that PHC is fully valued at the indicative price. In combination with the mixed fundamentals, we would pass on the IPO. </p></div>
</div></div>

PHC Holdings (6523 JP) is a leading diversified diagnostic, life sciences and medical device company serving global markets. PHC shareholders include KKR &amp; Co Inc (KKR US) (owns 48.0% of PHC), Mitsui &amp; Co Ltd (8031 JP) (21.1%), Life Science Institute (13.2%) and Panasonic Corp (6752 JP) (11.3%).At the indicative price of JPY3,700 per share, PHC will have a market cap of JPY452 billion (US$4.1 billion). PHC plans to raise JPY172 billion ($1.57 billion) by offering 5.8 million primary shares (JPY22 billion raise) and 40.7 million secondary shares (JPY150 billion raise). 
In PHC Holdings IPO Initiation: Sugar High, we opined that at first glance, PHC offers solid growth, stable and healthy margins along with solid cash generation. However, on an organic basis, the revenue has declined in each of the last two financial years. The strong growth in the recent first quarter was largely due to low comps and an unsustainable revenue boost from COVID-19 related products. We concluded that PHC’s fundamentals are mixed and we are inclined to watch this IPO from the sidelines.
Our valuation analysis suggests that PHC is fully valued at the indicative price. In combination with the mixed fundamentals, we would pass on the IPO. 


<p><a href="https://www.smartkarma.com/entities/phc-holdings-corp" target="_blank" data-smartkarma-citation="entities:34198:1" rel="noopener">PHC Holdings (6523 JP)</a> is a leading diversified diagnostic, life sciences and medical device company serving global markets. PHC shareholders include <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> (owns 48.0% of PHC), <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> (21.1%), Life Science Institute (13.2%) and <a href="https://www.smartkarma.com/entities/panasonic-corp" target="_blank" data-smartkarma-citation="entities:222:1" rel="noopener">Panasonic Corp (6752 JP)</a> (11.3%).</p><p>PHC plans to raise JPY172 billion ($1.57 billion) by offering 5.8 million primary shares and 40.7 million secondary shares at an indicative price of JPY3,700 per share. KKR, Mitsui &amp; Co, Life Science Institute, Panasonic and LCA 3 Moonshot are the selling shareholders. Books will open from 28 September to 4 October. The deal will price on 6 October and the shares are due to list on 14 October. </p><div class="content-highlight"><p>At first glance, PHC offers solid growth, stable and healthy margins along with solid cash generation. However, on an organic basis, the revenue has declined in each of the last two financial years. The strong growth in the recent first quarter was largely due to low comps and an unsustainable revenue boost from COVID-19 related products. On balance, we think that PHC’s fundamentals are mixed and we are inclined to watch this IPO from the sidelines. </p></div>

PHC Holdings (6523 JP) is a leading diversified diagnostic, life sciences and medical device company serving global markets. PHC shareholders include KKR &amp; Co Inc (KKR US) (owns 48.0% of PHC), Mitsui &amp; Co Ltd (8031 JP) (21.1%), Life Science Institute (13.2%) and Panasonic Corp (6752 JP) (11.3%).PHC plans to raise JPY172 billion ($1.57 billion) by offering 5.8 million primary shares and 40.7 million secondary shares at an indicative price of JPY3,700 per share. KKR, Mitsui &amp; Co, Life Science Institute, Panasonic and LCA 3 Moonshot are the selling shareholders. Books will open from 28 September to 4 October. The deal will price on 6 October and the shares are due to list on 14 October. At first glance, PHC offers solid growth, stable and healthy margins along with solid cash generation. However, on an organic basis, the revenue has declined in each of the last two financial years. The strong growth in the recent first quarter was largely due to low comps and an unsustainable revenue boost from COVID-19 related products. On balance, we think that PHC’s fundamentals are mixed and we are inclined to watch this IPO from the sidelines. 

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<p>PHC Holdings and its shareholders aim to raise around US$1.8bn via selling a mix of primary and secondary shares in its Japan IPO. The company is backed by KKR (48.7% stake pre-listing), Mistui (21.5%), Life Science Institute (13.4%) and Panasonic (11.5%).</p><p>PHC is engaged in the development, manufacturing and sale of healthcare devices and services. The company has three main segments: Diabetes Management (35% of FY21 revenue); Healthcare Services (37.9% of FY21 revenue); and Diagnosis/Life Science (26.1% of FY21 revenue).</p><p>PHC’s revenue has increased by 64% over FY19-FY21 and it was up another 29% in 1Q22. The growth has mainly been driven by acquisition of a number of firms over the reporting period. </p><p>Although, its main division, Diabetes Management appears to be suffering from a decline in revenue that has been going on for a while. In addition, it's difficult to pinpoint the growth of its other segments owing to the acquisitions having been completed mid-year.</p><p>Furthermore, it's not clear to us how the company acts as one firm, as all of its acquired firms appear to be working independently and there hasn’t been much mention of synergies.</p>

PHC Holdings and its shareholders aim to raise around US$1.8bn via selling a mix of primary and secondary shares in its Japan IPO. The company is backed by KKR (48.7% stake pre-listing), Mistui (21.5%), Life Science Institute (13.4%) and Panasonic (11.5%).PHC is engaged in the development, manufacturing and sale of healthcare devices and services. The company has three main segments: Diabetes Management (35% of FY21 revenue); Healthcare Services (37.9% of FY21 revenue); and Diagnosis/Life Science (26.1% of FY21 revenue).PHC’s revenue has increased by 64% over FY19-FY21 and it was up another 29% in 1Q22. The growth has mainly been driven by acquisition of a number of firms over the reporting period. Although, its main division, Diabetes Management appears to be suffering from a decline in revenue that has been going on for a while. In addition, it's difficult to pinpoint the growth of its other segments owing to the acquisitions having been completed mid-year.Furthermore, it's not clear to us how the company acts as one firm, as all of its acquired firms appear to be working independently and there hasn’t been much mention of synergies.

PHC Holdings Pre-IPO - Many Companies Rolled into One

<p>Last November,  <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a> jointly announced they would launch a Tender Offer for the 46% of shares of <a href="https://www.smartkarma.com/entities/honshu-chemical-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:9094:1" rel="noopener">Honshu Chemical Industry (4115 JP)</a> that they did not own.</p><p>I wrote about it in <a href="https://www.smartkarma.com/insights/honshu-chemical-4115-an-embarrassment-of-riches" target="_blank" data-smartkarma-citation="insights:45197" rel="noopener">Honshu Chemical (4115) - An Embarrassment of Riches</a>. The deal was that after receiving all the approvals, perhaps in May 2021, they would launch a Tender Offer at ¥1830, which implied an EV//EBITDA of 2.7x.</p><p>When Q3 earnings were announced in February, <a href="https://www.smartkarma.com/entities/honshu-chemical-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:9094:1" rel="noopener">Honshu Chemical Industry (4115 JP)</a> lifted its OP forecast by 24% and its Net Income forecast by 33% to ¥1.8bn. But as there was no event yet for the Tender Offer, there was no "need" to review the Board's support for the Tender Offer. </p><p>I wrote about how this was WRONGER in <a href="https://www.smartkarma.com/insights/honshu-chemical-what-was-the-wrong-price-gets-wronger" target="_blank" data-smartkarma-citation="insights:48124" rel="noopener">Honshu Chemical - What WAS the Wrong Price Gets Wronger</a>.</p><p>Last week I wrote about how this looked like it might get wronger still. </p><p>On Friday, Honshu Chemical reported Revenues 2.4% higher than forecast for the full year (note the entire difference arrived in Q4. The OP result was more than 10% higher than the February upward revision to Guidance. The Net Profit number came in at ¥2.06bn, which was 14.4% higher than February guidance and 53% higher than guidance as of the Announcement. </p><p>The <em>extra cash</em> added to the firm since then amounts to 3.3% of the Tender Offer Price. </p><p>Conveniently, if any of this beat of forecasts on what the buyers called "high growth potential" would result in forward-looking forecasts different than the original management forecasts (note that the FY2021 OP result was the same as the FY2023 management forecast presented in November), the company is not showing FY2022 forecasts because of the takeover. </p>

Last November,  Mitsui &amp; Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) jointly announced they would launch a Tender Offer for the 46% of shares of Honshu Chemical Industry (4115 JP) that they did not own.I wrote about it in Honshu Chemical (4115) - An Embarrassment of Riches. The deal was that after receiving all the approvals, perhaps in May 2021, they would launch a Tender Offer at ¥1830, which implied an EV//EBITDA of 2.7x.When Q3 earnings were announced in February, Honshu Chemical Industry (4115 JP) lifted its OP forecast by 24% and its Net Income forecast by 33% to ¥1.8bn. But as there was no event yet for the Tender Offer, there was no "need" to review the Board's support for the Tender Offer. I wrote about how this was WRONGER in Honshu Chemical - What WAS the Wrong Price Gets Wronger.Last week I wrote about how this looked like it might get wronger still. On Friday, Honshu Chemical reported Revenues 2.4% higher than forecast for the full year (note the entire difference arrived in Q4. The OP result was more than 10% higher than the February upward revision to Guidance. The Net Profit number came in at ¥2.06bn, which was 14.4% higher than February guidance and 53% higher than guidance as of the Announcement. The extra cash added to the firm since then amounts to 3.3% of the Tender Offer Price. Conveniently, if any of this beat of forecasts on what the buyers called "high growth potential" would result in forward-looking forecasts different than the original management forecasts (note that the FY2021 OP result was the same as the FY2023 management forecast presented in November), the company is not showing FY2022 forecasts because of the takeover. 

Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd

Japan

MITSUI & CO., LTD. is a general trading company.  The Company has operating groups including Iron and Steel, Non-Ferrous Metals, Machinery, Chemicals, Foods, Energy, Textiles, and General Merchandise.  Mitsui also operates real estate and overseas development projects.

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Mitsui & Co Ltd (8031 JP)

Short-Term Itochu Buyback - A Cushion, But Style Bias Matters More

Itochu has announced a buyback to execute in the next 10 weeks. It is a decent part of ADV but not overwhelming. It should support the stock vs...

Travis Lundy

PHC Holdings IPO: Valuation Insights

Our valuation analysis suggests that PHC is fully valued at the indicative price. In combination with the mixed fundamentals, we would pass on the...

Arun George

PHC Holdings IPO Initiation: Sugar High

PHC plans to raise JPY172 billion ($1.57 billion) at an indicative price of JPY3,700 per share. We think that PHC’s fundamentals are mixed and we...

Arun George

PHC Holdings Pre-IPO - Many Companies Rolled into One

PHC Holdings and its shareholders aim to raise around US$1.8bn via selling a mix of primary and secondary shares in its Japan IPO.

Sumeet Singh

Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd

Honshu Chem OP and NP were up 38% and 53% for the year vs mgmt forecast just 6mos ago. What was super cheap is even cheaper. The Board didn't see...

Travis Lundy

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