Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

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Equity Capital Markets

SG Holdings is the holding company of Sagawa Express, and is the number two player in home deliveries behind <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings Co Ltd (9064 JP)</a>. Based on the midpoint of the tentative price range (JPY1,580) the company is likely to raise about JPY124bn, resulting in a market cap of about JPY500bn. In addition to allowing the employee shareholding association to sell a substantial portion of their holdings and eventually using funds potentially raised from the sale of treasury stock to invest in a large logistics centre near Tokyo, the listing could help improve the company's image and help attract drivers and other workers who are currently in extremely short supply. The inheritance tax could also be a consideration as chairman Kuriwada Eichi is 71. The PE based on the tentative range of JPY1,540-1,620 would be 16.7-17.5x, slightly more expensive than peers such as <a href="https://www.smartkarma.com/entities/2395" target="_blank" data-smartkarma-citation="entities:2395:1">Hitachi Transport System Ltd (9086 JP) </a>and <a href="https://www.smartkarma.com/entities/18582" target="_blank" data-smartkarma-citation="entities:18582:1">Nippon Express Co Ltd (9062 JP)</a> which are trading at about 15x, but cheaper than <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings Co Ltd (9064 JP)</a> which trades at 24x FY03/19 PE.<div class="content-caption">Basic Information</div><table class="table table-striped"><tbody><tr><td>Company Name</td><td>SG HOLDINGS CO.,LTD</td></tr><tr><td>Company Ticker</td><td>9143</td></tr><tr><td>Stock Exchange</td><td>TSE 1st Section</td></tr><tr><td>Business Description</td><td>Goods delivery &amp; pickup and logistics</td></tr><tr><td>Unit Size</td><td>100</td></tr><tr><td>New Shares Offered</td><td>0</td></tr><tr><td>Existing Shares Offered</td><td>71,582,900</td></tr><tr><td>Overallotment (Existing Shares; Domestic Only)</td><td>7,192,500</td></tr><tr><td>Total Shares Offered</td><td>78,775,400</td></tr><tr><td>Tentative Pricing Date</td><td>24th November</td></tr><tr><td>Tentative Price</td><td>1,540～1,620</td></tr><tr><td>Estimated Capital to be Raised (JPY bn)</td><td>124.5</td></tr><tr><td>Pricing Date</td><td>4th December</td></tr><tr><td>Price</td><td>Undecided</td></tr><tr><td>Bookbuilding</td><td>27th November - 1st December</td></tr><tr><td>Application Dates</td><td>5th December - 8th December</td></tr><tr><td>Listing Date</td><td>13th December</td></tr><tr><td>Shares Outstanding at Listing</td><td>320,197,200</td></tr><tr><td>Estimated Market Capitalisation (JPY bn)</td><td>505.9</td></tr></tbody></table><div style="text-align: left;" class="content-caption">Source: Company Disclosures, LightStream Research</div><div class="content-caption">Underwriters</div><table class="table table-striped"><tbody><tr><td>　</td><td>Broker</td></tr><tr><td rowspan="2">Lead and International Underwriters</td><td>Daiwa Securities</td></tr><tr><td>MUFG Morgan Stanley Securities</td></tr><tr><td rowspan="4">Underwriters</td><td>Mizuho Securities</td></tr><tr><td>SMBC Nikko Securities</td></tr><tr><td>Kabu.com Securities</td></tr><tr><td>Okasan Online Securities</td></tr></tbody></table><div style="text-align: left;" class="content-caption"> Source: Company Disclosures, LightStream Research</div><div class="content-caption"> Domestic and International Tranches</div><table class="table table-striped"><tbody><tr><td>　</td><td>Domestic</td><td>International</td></tr><tr><td>Number of Shares</td><td>47,950,300</td><td>23,632,600</td></tr><tr><td>Seller</td><td>SG Holdings Employee Shareholding Association: 47,050,300 Kondo Nobuaki: 900,000</td><td>SG Holdings Employee Shareholding Association: 23,632,600</td></tr><tr><td>Capital Raised (JPY)</td><td>75,761,474,000</td><td>37,339,508,000</td></tr><tr><td>Proportion</td><td>66.99%</td><td>33.01%</td></tr></tbody></table><div style="text-align: left;" class="content-caption"> Source: Company Disclosures, LightStream Research</div><div class="content-caption">Shareholders and Lockup</div><table class="table table-striped"><tbody><tr><td>Shareholder</td><td>Shares Held</td><td>Current Percentage</td><td>Percentage After Listing</td><td>Lockup</td></tr><tr><td>SG Holdings Employee Shareholding Association</td><td style="text-align: right;">86,547,315</td><td style="text-align: right;">27.03%</td><td style="text-align: right;">4.95%</td><td style="text-align: right;">180 days</td></tr><tr><td>Shinsei Kosan</td><td style="text-align: right;">37,872,000</td><td style="text-align: right;">11.83%</td><td style="text-align: right;">11.83%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sagawa Art Museum</td><td style="text-align: right;">24,200,181</td><td style="text-align: right;">7.56%</td><td style="text-align: right;">7.56%</td><td style="text-align: right;">180 days</td></tr><tr><td>Kuriwada Eichi</td><td style="text-align: right;">16,018,800</td><td style="text-align: right;">5.00%</td><td style="text-align: right;">5.00%</td><td style="text-align: right;">180 days</td></tr><tr><td>MUFG Financial Group</td><td style="text-align: right;">14,959,860</td><td style="text-align: right;">4.67%</td><td style="text-align: right;">4.67%</td><td style="text-align: right;">180 days</td></tr><tr><td>SMFG Financial Group</td><td style="text-align: right;">12,600,000</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">180 days</td></tr><tr><td>MS&amp;AD Insurance Group</td><td style="text-align: right;">12,600,000</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sumitomo Life Insurance</td><td style="text-align: right;">12,600,000</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">3.94%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sagawa Printing</td><td style="text-align: right;">11,308,200</td><td style="text-align: right;">3.53%</td><td style="text-align: right;">3.53%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sompo Holdings</td><td style="text-align: right;">10,200,000</td><td style="text-align: right;">3.19%</td><td style="text-align: right;">3.19%</td><td style="text-align: right;">180 days</td></tr><tr><td>Isuzu Motors</td><td style="text-align: right;">9,900,000</td><td style="text-align: right;">3.09%</td><td style="text-align: right;">3.09%</td><td style="text-align: right;">180 days</td></tr><tr><td>SG Holdings</td><td style="text-align: right;">9,787,449</td><td style="text-align: right;">3.06%</td><td style="text-align: right;">3.06%</td><td style="text-align: right;">180 days</td></tr><tr><td>Tanaka Industries</td><td style="text-align: right;">9,600,000</td><td style="text-align: right;">3.00%</td><td style="text-align: right;">3.00%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sagawa Masaaki</td><td style="text-align: right;">9,217,200</td><td style="text-align: right;">2.88%</td><td style="text-align: right;">2.88%</td><td style="text-align: right;">180 days</td></tr><tr><td>Sagawa Hikari</td><td style="text-align: right;">5,394,600</td><td style="text-align: right;">1.68%</td><td style="text-align: right;">1.68%</td><td style="text-align: right;">180 days</td></tr><tr><td>SGH Foundation</td><td style="text-align: right;">5,118,000</td><td style="text-align: right;">1.60%</td><td style="text-align: right;">1.60%</td><td style="text-align: right;">180 days</td></tr></tbody></table><div style="text-align: left;" class="content-caption">Source: Company Disclosures, LightStream Research</div><div class="content-caption">Use of Funds and Other Information</div><table class="table table-striped"><tbody><tr><td></td><td colspan="2"></td></tr><tr><td>Use of Funds</td><td colspan="2">The construction of a large logistics centre in Koto-ku in Tokyo (the X Frontier project) by its subsidiary</td></tr><tr><td rowspan="4">Related Companies</td><td colspan="2">Sagawa Express (Consolidated subsidiary; delivery business)</td></tr><tr><td colspan="2">SG Moving (Consolidated subsidiary; house movers business)</td></tr><tr><td colspan="2">World Supply (Consolidated subsidiary; logistics business)</td></tr><tr><td colspan="2">107 consolidated subsidiaries and 10 equity affiliates</td></tr><tr><td rowspan="3">Recent 3rd Party Placements</td><td>Date</td><td>31st July 2013</td></tr><tr><td>Buyer</td><td>SG Holdings Employee Shareholding Association</td></tr><tr><td>Issue Price</td><td>JPY 70</td></tr></tbody></table><div style="text-align: left;" class="content-caption">Source: Company Disclosures, LightStream Research</div>

SG Holdings is the holding company of Sagawa Express, and is the number two player in home deliveries behind Yamato Holdings Co Ltd (9064 JP). Based on the midpoint of the tentative price range (JPY1,580) the company is likely to raise about JPY124bn, resulting in a market cap of about JPY500bn. In addition to allowing the employee shareholding association to sell a substantial portion of their holdings and eventually using funds potentially raised from the sale of treasury stock to invest in a large logistics centre near Tokyo, the listing could help improve the company's image and help attract drivers and other workers who are currently in extremely short supply. The inheritance tax could also be a consideration as chairman Kuriwada Eichi is 71. The PE based on the tentative range of JPY1,540-1,620 would be 16.7-17.5x, slightly more expensive than peers such as Hitachi Transport System Ltd (9086 JP) and Nippon Express Co Ltd (9062 JP) which are trading at about 15x, but cheaper than Yamato Holdings Co Ltd (9064 JP) which trades at 24x FY03/19 PE.Basic InformationCompany NameSG HOLDINGS CO.,LTDCompany Ticker9143Stock ExchangeTSE 1st SectionBusiness DescriptionGoods delivery &amp; pickup and logisticsUnit Size100New Shares Offered0Existing Shares Offered71,582,900Overallotment (Existing Shares; Domestic Only)7,192,500Total Shares Offered78,775,400Tentative Pricing Date24th NovemberTentative Price1,540～1,620Estimated Capital to be Raised (JPY bn)124.5Pricing Date4th DecemberPriceUndecidedBookbuilding27th November - 1st DecemberApplication Dates5th December - 8th DecemberListing Date13th DecemberShares Outstanding at Listing320,197,200Estimated Market Capitalisation (JPY bn)505.9Source: Company Disclosures, LightStream ResearchUnderwriters　BrokerLead and International UnderwritersDaiwa SecuritiesMUFG Morgan Stanley SecuritiesUnderwritersMizuho SecuritiesSMBC Nikko SecuritiesKabu.com SecuritiesOkasan Online Securities Source: Company Disclosures, LightStream Research Domestic and International Tranches　DomesticInternationalNumber of Shares47,950,30023,632,600SellerSG Holdings Employee Shareholding Association: 47,050,300 Kondo Nobuaki: 900,000SG Holdings Employee Shareholding Association: 23,632,600Capital Raised (JPY)75,761,474,00037,339,508,000Proportion66.99%33.01% Source: Company Disclosures, LightStream ResearchShareholders and LockupShareholderShares HeldCurrent PercentagePercentage After ListingLockupSG Holdings Employee Shareholding Association86,547,31527.03%4.95%180 daysShinsei Kosan37,872,00011.83%11.83%180 daysSagawa Art Museum24,200,1817.56%7.56%180 daysKuriwada Eichi16,018,8005.00%5.00%180 daysMUFG Financial Group14,959,8604.67%4.67%180 daysSMFG Financial Group12,600,0003.94%3.94%180 daysMS&amp;AD Insurance Group12,600,0003.94%3.94%180 daysSumitomo Life Insurance12,600,0003.94%3.94%180 daysSagawa Printing11,308,2003.53%3.53%180 daysSompo Holdings10,200,0003.19%3.19%180 daysIsuzu Motors9,900,0003.09%3.09%180 daysSG Holdings9,787,4493.06%3.06%180 daysTanaka Industries9,600,0003.00%3.00%180 daysSagawa Masaaki9,217,2002.88%2.88%180 daysSagawa Hikari5,394,6001.68%1.68%180 daysSGH Foundation5,118,0001.60%1.60%180 daysSource: Company Disclosures, LightStream ResearchUse of Funds and Other InformationUse of FundsThe construction of a large logistics centre in Koto-ku in Tokyo (the X Frontier project) by its subsidiaryRelated CompaniesSagawa Express (Consolidated subsidiary; delivery business)SG Moving (Consolidated subsidiary; house movers business)World Supply (Consolidated subsidiary; logistics business)107 consolidated subsidiaries and 10 equity affiliatesRecent 3rd Party PlacementsDate31st July 2013BuyerSG Holdings Employee Shareholding AssociationIssue PriceJPY 70Source: Company Disclosures, LightStream Research

SG Holdings IPO: Solid Business Strategy and Potential for Integration with Hitachi Transport

Japan

SG Holdings Co., Ltd. offers courier services. The Company provides goods delivery, cargo logistics, goods pickup, and other services. SG Holdings also operates real estate development, human resources management, and other businesses.

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SG Holdings (9143 JP)

SG Holdings IPO: Solid Business Strategy and Potential for Integration with Hitachi Transport

SG Holdings is the holding company of Sagawa Express, and is the number two player in home deliveries behind Yamato Holdings Co Ltd (9064 JP)....

Mio Kato

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