Analyst

Steve

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nippon-paint-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7387:1" rel="noopener">Nippon Paint Holdings (4612 JP)</a> is a branded decorative paint player.  China made up nearly 40% of the operating profit of the company. </li>
<li>
<a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.</li>
<li>
<a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> is a Japanese beauty company that relies heavily on China. </li>
</ul>



Nippon Paint Holdings (4612 JP) is a branded decorative paint player.  China made up nearly 40% of the operating profit of the company. 

Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.

Shiseido Company (4911 JP) is a Japanese beauty company that relies heavily on China. 


<ul>
<li>Since the release of 3Q24 (YE August) results on July 10, the share price of <a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> is up nearly 10%, greatly outperforming Nikkei during the same time frame. </li>
<li>The 3Q24 results showed that Japan's operating profit finally improved, while China remained solid.  </li>
<li>The company is currently trading at 24x 2025E PE with strong earnings growth.</li>
</ul>


Since the release of 3Q24 (YE August) results on July 10, the share price of Saizeriya (7581 JP) is up nearly 10%, greatly outperforming Nikkei during the same time frame. 
The 3Q24 results showed that Japan's operating profit finally improved, while China remained solid.  
The company is currently trading at 24x 2025E PE with strong earnings growth.


Saizeriya (7581 JP):  Improvement In Profitability In Japan Materialized in 3Q24

<ul>
<li>After a strong 68% increase in share price in 2023, <a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> has been trading range bound, and up 8% year-to-date in 2024. </li>
<li>Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.</li>
<li>Japan's operating profit is set to improve in the second half of the current fiscal year (ending August), and China's strength will continue on the back of accelerating store openings. </li>
</ul>


After a strong 68% increase in share price in 2023, Saizeriya (7581 JP) has been trading range bound, and up 8% year-to-date in 2024. 
Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.
Japan's operating profit is set to improve in the second half of the current fiscal year (ending August), and China's strength will continue on the back of accelerating store openings. 


Saizeriya (7581 JP):  Buy On Any Weakness On A More Profitable Japan And Continued Strength In China

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>
<a href="https://www.smartkarma.com/entities/kfc-holdings-japan-ltd" target="_blank" data-smartkarma-citation="entities:12358:1" rel="noopener">Kfc Holdings Japan (9873 JP)</a> has recommended a tender offer from <a href="https://www.smartkarma.com/entities/carlyle-group-inc-the" target="_blank" data-smartkarma-citation="entities:33402:1" rel="noopener">Carlyle Group / (CG US)</a> at JPY6,500 per share, a 20.4% premium to the last close. </li>
<li>The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.</li>
<li>Due to the <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a> irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid. </li>
</ul>



Kfc Holdings Japan (9873 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY6,500 per share, a 20.4% premium to the last close. 
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.
Due to the Mitsubishi Corp (8058 JP) irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid. 


KFC Holdings Japan (9873 JP): Carlyle Finger Lickin' Tender Offer at JPY6,500

<ul>
<li>The Nikkei reports that Carlyle is in the final stages of buying <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a>’s 35% stake in <a href="https://www.smartkarma.com/entities/kfc-holdings-japan-ltd" target="_blank" data-smartkarma-citation="entities:12358:1" rel="noopener">Kfc Holdings Japan (9873 JP)</a>, which will result in a tender offer. </li>
<li>The structure will likely be similar to the <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a>/ <a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson Inc (2651 JP)</a> tender, where MitCorp provides an irrevocable NOT to accept but vote for share consolidation.</li>
<li>The shares have been up 33.6% since Nikkei flagged the sale on 28 February. KFC Japan will trade in line with peers’ multiples at a JPY5,700 offer.  </li>
</ul>


The Nikkei reports that Carlyle is in the final stages of buying Mitsubishi Corp (8058 JP)’s 35% stake in Kfc Holdings Japan (9873 JP), which will result in a tender offer. 
The structure will likely be similar to the KDDI Corp (9433 JP)/ Lawson Inc (2651 JP) tender, where MitCorp provides an irrevocable NOT to accept but vote for share consolidation.
The shares have been up 33.6% since Nikkei flagged the sale on 28 February. KFC Japan will trade in line with peers’ multiples at a JPY5,700 offer.  


KFC Holdings Japan (9873 JP): Carlyle Edging Towards a Tender Offer

Japan

SAIZERIYA CO., LTD. operates an Italian restaurant chain based in the Tokyo metropolitan area.  The Company's menu includes pizza, pasta, seafood, and meat entrees.

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Saizeriya (7581 JP)

China Consumer Plays Listed In Japan

In this insight, we look at three Japan listed China consumer plays, which I have written before. They are Nippon Paint, Saizeriya, and Shiseido.

Steve