Category

Japan

Daily Brief Japan: Lawson Inc, Fast Retailing, Mitsubishi Heavy Industries, Eiken Chemical, Nippon Television, FamilyMart Co Ltd and more

By | Daily Briefs, Japan

In today’s briefing:

  • KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
  • Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
  • Fast Retailing: Earnings Preview
  • Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
  • Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit
  • NTV’s Change of Policy Is a Positive Effect Of TSE’s Request, But Its Seriousness Will Be Tested Now
  • Familymart Ties with Coca Cola on Logistics, Sells Laundromat Business


KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap

By Travis Lundy

  • KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP)
  • It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines. 
  • There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up. 

Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches

By Arun George

  • Lawson Inc (2651 JP) has announced that the pre-condition for the KDDI Corp (9433 JP) tender offer is satisfied. The offer terms are unchanged at JPY10,360 per share. 
  • The offer is arguably light due to the market re-rating, does not reflect significant synergies and is below the midpoint of the IFA DCF valuation range. 
  • Nevertheless, the offer will likely succeed as it represents an all-time high, with no vocal opposition, an achievable 30.2% minority acceptance rate, and the shares never trading through terms. 

Fast Retailing: Earnings Preview

By Oshadhi Kumarasiri

  • While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
  • Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
  • Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.

Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up

By Scott Foster

  • MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
  • A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
  • The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. 

Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit

By Mark Chadwick

  • The med-tech sector is ripe for consolidation. Smaller players like Hogy Medical (3593 JP) , and Eiken Chemical (4549 JP)  exhibit sub-par growth and lagging valuations
  • Activist investors like ValueAct Capital, Dalton and Asset Value have recognized an opportunity for growth and potential M&A
  • Both Hogy and Eiken trades at a deep discount to larger domestic peers and stand to benefit the most from any consolidation

NTV’s Change of Policy Is a Positive Effect Of TSE’s Request, But Its Seriousness Will Be Tested Now

By Aki Matsumoto

  • Although unavoidable under the provisions of Broadcasting Act, the fact that the right to receive dividends as interest-bearing securities was inhibited was problematic in terms of fairness with other shareholders.
  • NTV Holdings, which has ignored this issue, changes its policy, which is a positive impact of “TSE’s request,” but NTV’s seriousness can be measured by whether it raises its ROE.
  • If the intention is to leave cross-shareholdings intact and attract overseas investor purchases through some share repurchases, there would be little prospect of a serious increase in ROE.

Familymart Ties with Coca Cola on Logistics, Sells Laundromat Business

By Michael Causton

  • In one of many ventures in response to the 2024 logistics problem, Familymart began an experimental collaboration with Coca Cola Bottlers in February, seeking to reduce delivery frequency in Kanagawa.
  • It is also streamlining its business, selling both its gyms and laundries recently.
  • While unlisted, its ongoing innovations provide an insight into the wider convenience store sector.

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Daily Brief Japan: Roland DG Corp, TSE Tokyo Price Index TOPIX, Look Holdings Incorporated and more

By | Daily Briefs, Japan

In today’s briefing:

  • Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game
  • Shareholder Returns Should Be Examined on a Cash Basis, Not on a Net Profit Basis
  • Look HD Bullish on Fashion Imports and Exports


Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game

By Arun George

  • In response to Roland DG Corp (6789 JP) request, on 22 March, Taiyo said it was considering a revised offer. However, Taiyo has since remained silent. 
  • Despite discussions with Brother Industries (6448 JP), the Board have not been able to eliminate dis-synergies concerns. The Board has left the decision to accept the Taiyo offer to shareholders.
  • While the Board is trying to dissuade Brother, Brother will take its offer directly to shareholders if the Taiyo offer fails. Taiyo’s behaviour suggests a reluctance to bump. 

Shareholder Returns Should Be Examined on a Cash Basis, Not on a Net Profit Basis

By Aki Matsumoto

  • The pace of share repurchases in 2023 (+1.4%, YoY) is not sufficient compared to the increase in corporate profits, and there is much room for reconsideration of cash allocations.
  • In Japan, where many manufacturers keep CapEx within the depreciation, it’s more important to verify whether shareholder return is appropriate on a cash basis rather than a net income basis.
  • Companies that fail to formulate measures to generate ROE that exceeds the cost of capital in accordance with TSE requests are not able to achieve an appropriate cash allocation.

Look HD Bullish on Fashion Imports and Exports

By Michael Causton

  • It has been a tough few years for premium fashion importers. 
  • Decimated sales during Covid were followed by a sharp depreciation in the Yen that has forced a hike in prices and/or a squeeze on profits.
  • Look has found some solutions, adding new brands while exploring new markets and expects significant upside in revenues and profits.

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Daily Brief Japan: Resona Holdings, United Arrows, Carta Holdings, Inc. and more

By | Daily Briefs, Japan

In today’s briefing:

  • Japanese Banks – Cash Balances and the BoJ’s Negative Interest Rate Policy Exit
  • United Arrows (7606): Q3 FY03/24 Update
  • 3q Follow-Up – CARTA HOLDINGS (3688 JP)


Japanese Banks – Cash Balances and the BoJ’s Negative Interest Rate Policy Exit

By Victor Galliano

  • The Japanese banks’ share prices have barely moved following the Bank of Japan’s exit from negative interest rates; is it largely discounted or does the continued accommodative stance instil caution? 
  • Japanese banks will benefit from 100% of their deposits at the BoJ earning 0.1%, as opposed to 40% of bank deposits which was the case up to the 20th March
  • We believe our positive recommendations are all geared into higher domestic interest rates; we highlight Resona, Mizuho and Suruga in this report for their high cash and at bank balances

United Arrows (7606): Q3 FY03/24 Update

By Shared Research

  • United Arrows (7606 JP) is an industry leader in operating clothing select shops in Japan, and is the eighth largest apparel company in the country in terms of sales value.
  • In FY03/23, United Arrows reported revenue of JPY130.1bn, operating profit of JPY6.4bn, recurring profit of JPY6.9bn, and net income attributable to owners of the parent of JPY4.3bn
  • In May 2023, the company announced its long-term vision ending in FY03/33 and medium-term management plan ending in FY03/26 as the first step.

3q Follow-Up – CARTA HOLDINGS (3688 JP)

By Sessa Investment Research

  • FY23/12 saw a strong push towards management initiatives aimed at a V-shaped recovery in financial performance.
  • On the other hand, conservative guidance was provided for FY24/12, due to the uncertain market sentiment, strategic cost increases, and the need to avoid downward revisions for three consecutive terms in the mid-year.
  • Although the stock price fell sharply after the 4Q FY23/12 earnings announcement, it has recently been recovering somewhat, perhaps fueled by the recognition and understanding of the conservatism of the guidance and the company’s true earnings potential.

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Daily Brief Japan: ZOZO Inc, Hogy Medical and more

By | Daily Briefs, Japan

In today’s briefing:

  • Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
  • Hogy Medical (3593): A Prescription for Renewed Growth


Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update

By Travis Lundy

  • ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
  • All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others. 
  • Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.

Hogy Medical (3593): A Prescription for Renewed Growth

By Mark Chadwick

  • NAVF and Dalton invest heavily in Hogy Medical, eyeing its market dominance and growth potential in disposable surgical equipment
  • Despite past underperformance, NAVF’s proactive engagement signals a push for a more aggressive overseas expansion
  • We see a number of continued catalysts for future shareholder value enhancement and improved corporate governance position

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Daily Brief Japan: Nikkei 225, JSR Corp, Shinko Electric Industries, Fast Retailing, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • EQD | Nikkei 225 Flying High, Don’t Burn Your Wings….
  • (Mostly) Asia-Pac M&A: IntelliCentrics, Chilled & Frozen Logistics, Boral, Orecorp, Link Admin, JSR
  • Weekly Deals Digest (24 Mar) – Shinko, C&F Logistics, JSR, IntelliCentrics, SciClone, Link Admin
  • Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend
  • First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English


EQD | Nikkei 225 Flying High, Don’t Burn Your Wings….

By Nico Rosti

  • The Nikkei 225 INDEX has been rallying for >3 months, rising more than 28%. Is it too much, too fast?
  • Short-Term, if we look at the Market Reversal Matrix’s SHORT WEEKLY model for the index, it looks like it could either reverse within a couple of weeks, or stall.
  • Look for the ~41000 resistance area to place SHORT or hedge your LONG positions.

(Mostly) Asia-Pac M&A: IntelliCentrics, Chilled & Frozen Logistics, Boral, Orecorp, Link Admin, JSR

By David Blennerhassett


Weekly Deals Digest (24 Mar) – Shinko, C&F Logistics, JSR, IntelliCentrics, SciClone, Link Admin

By Arun George


Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend

By David Blennerhassett


First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English

By Aki Matsumoto

  • Companies with the highest Disclosure in English scores have the highest ROE, Tobin’s Q, Market Capitalization, and Foreign Shareholder Ratio, while companies with the lowest scores have the lowest values.
  • Companies with the highest Disclosure in English scores also show generally higher Board Practices and Key Actions. Both Disclosure in English and these practices are the result of engagement efforts.
  • If Disclosure in English and corporate governance efforts are advanced through engagement, it can be hypothesized that profitability will also increase through engagement with overseas investors.

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Daily Brief Japan: Japan Airlines and more

By | Daily Briefs, Japan

In today’s briefing:

  • Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA


Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

By Neil Glynn

  • JAL finishing FY24 strongly with another guidance upgrade – upgraded FY26 targets more logical in light of existing ANA targets
  • ​Demand momentum particularly helpful as wages rise across Japan and ​cost control to remain impressive over FY25-FY26 as LCC growth set to dilute FSC inflation
  • ​Detailed analysis of JAL’s widening margin gap to ANA suggests revenue solution required – momentum helpful and needs to be watched carefully

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Daily Brief Japan: Chilled & Frozen Logistics Holdings, Nippon Shokubai, Sourcenext Corp, Sun*, Azbil Corp, Organo Corp, LaKeel, Hochiki Corp, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)
  • Chilled & Frozen Logistics (9099 JP): AZ-COM Maruwa (9090 JP)’s Hostile Offer
  • Nippon Shokubai (4114) – Business Transformation and Scope for Improving Capital Management
  • SOURCENEXT (4344): Q3 FY03/24 Update
  • Sun* (4053): Full-Year FY12/23 Update
  • Azbil (6845): Q3 FY03/24 Update
  • Organo (6368): Q3 FY03/24 Update
  • LaKeel (4074): Full-Year FY12/23 Update
  • Hochiki (6745): Q3 FY03/24 Update
  • A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors


Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)

By Travis Lundy

  • Chilled & Frozen Logistics Holdings (9099 JP) last week announced its “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”.
  • Today it announced AZ-Com Maruwa Holdings (9090 JP) had announced its intention to launch a Tender Offer on C&F Logistics without having contacted C&F first. A HOSTILE deal. Yum.
  • The deal is proposed at a 50% premium, with the goal of getting to a minimum of 50.00%. This will be interesting.

Chilled & Frozen Logistics (9099 JP): AZ-COM Maruwa (9090 JP)’s Hostile Offer

By Arun George

  • AZ-Com Maruwa Holdings (9090 JP) has launched a pre-conditional hostile offer for Chilled & Frozen Logistics Holdings (9099 JP) at JPY3,000 per share, a 47.0% premium to the last close.
  • The pre-conditions primarily relate to regulatory approvals. The tender is expected to start in early May. The Board responded that it will evaluate the offer.
  • The hostile offer was a reaction to the Board’s lack of engagement. The Board will struggle to reject an attractive offer, which is 37.5% higher than the all-time high. 

Nippon Shokubai (4114) – Business Transformation and Scope for Improving Capital Management

By Astris Advisory Japan

  • Driving strategic revitalization – Nippon Shokubai is a global chemical company with competitive proprietary technology, a track record of sustained free cash flow generation, and a balance sheet with room for optimization.
  • It has embarked on a business transformation, strategically focused on expanding its Solutions business with higher- margin performance chemicals and identifying energy, electronics, and life science sectors as growth markets.
  • Organizational changes being conducted aim to enhance human resource development and conduct quicker decision-making. 

SOURCENEXT (4344): Q3 FY03/24 Update

By Shared Research

  • Sourcenext Corp (4344 JP) plans, develops, and sells PC software, smartphone apps, and IoT products.
  • In POCKETALK®, besides the existing device business, the company will focus on sales of software products, including Simultaneous Interpreter for the POCKETALK® for BUSINESS series for corporate customers.
  • The revision is mainly due to the extended lead time from inquiry to full-scale orders for the POCKETALK for BUSINESS Simultaneous Interpretation web browser version.

Sun* (4053): Full-Year FY12/23 Update

By Shared Research

  • Sun* (4053 JP) provides consulting, software development, recruiting, and other services to companies that seek to create value or businesses, including startups.
  • In FY12/23, revenue was JPY12.5bn (+16.5% YoY), operating profit JPY1.8bn (+96.8% YoY), recurring profit JPY2.3bn (+99.1% YoY), and net income attributable to owners of the parent JPY1.6bn (+90.4% YoY).
  • Sun* does not disclose a medium-term business plan with quantitative targets, but it releases qualitative targets related to KPI growth.

Azbil (6845): Q3 FY03/24 Update

By Shared Research

  • Azbil Corp (6845 JP) provides automation services for buildings, factories, and plants and also offers subsistence-related automation services in the lifestyle area.
  • In FY03/23, sales were JPY278.4bn (+8.5% YoY), operating profit was JPY31.3bn (+10.7% YoY), recurring profit was JPY32.1bn (+8.9% YoY), and net income attributable to owners of the parent was JPY22.6bn.
  • Azbil in May 2021 announced a new medium-term management plan to cover the four fiscal years from FY03/22 to FY03/25 and new long-term targets for FY03/31.

Organo (6368): Q3 FY03/24 Update

By Shared Research

  • As a comprehensive water treatment engineering company, Organo Corp (6368 JP) engages in the planning, design, procurement, construction, operational management, and maintenance of water treatment plants.
  • In FY03/23, orders received were JPY173.5bn, revenue was JPY132.4bn, operating profit was JPY15.2bn, recurring profit was JPY16.0bn, and net income attributable to owners of the parent was JPY11.7bn.
  • Organo Corporation announced revisions to its full-year forecast for FY03/24.

LaKeel (4074): Full-Year FY12/23 Update

By Shared Research

  • LaKeel (4074 JP) is a software development company that uses a new system development method called microservices.
  • In FY12/23, revenue was JPY7.7bn (+11.2% YoY), operating profit JPY775mn (+0.3% YoY), recurring profit JPY807mn (+10.3% YoY), and net income attributable to owners of the parent JPY540mn.
  • The company has not announced a medium-term business plan, but has medium-term targets of JPY10.0bn in revenue and an OPM of 15% to be achieved.

Hochiki (6745): Q3 FY03/24 Update

By Shared Research

  • Hochiki Corp (6745 JP) is a major manufacturer of fire alarm and fire extinguishing systems.
  • In FY03/23, the company posted revenue of JPY85.5bn, operating profit of JPY5.6bn, recurring profit of JPY5.9bn, and net income attributable to owners of the parent of JPY4.4bn.
  • Hochiki Corporation announced an upward revision of its full-year FY03/24 earnings forecast.

A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

By Aki Matsumoto

  • In the past, value traps were macro environment that couldn’t generate profits in deflationary economy, and micro problem of managers who didn’t listen to constructive management improvement proposals from investors.
  • The introduction of Stewardship Code and Corporate Governance Code, and TSE’s request for change in awareness of companies, has reduced the risk of activist investors’ investment strategies flailing around in vain.
  • Management awareness has just begun to change, and few companies generate intrinsic value, as evidenced by the fact that ROE hasn’t begun to improve. Activist investors will continue taking interest.

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Daily Brief Japan: ZOZO Inc, Trial Holdings, NEC Corp, Kobe Bussan and more

By | Daily Briefs, Japan

In today’s briefing:

  • The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
  • Trial Holdings IPO: Trading Debut
  • NEC (6701 JP): Generative AI (Part 2)
  • Kobe Bussan: Expect More Growth


The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)

By Travis Lundy

  • Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
  • But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn  2 days later.
  • Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated. 

Trial Holdings IPO: Trading Debut

By Arun George


NEC (6701 JP): Generative AI (Part 2)

By Scott Foster

  • CEO Jensen Huang’s keynote address at Nvidia’s GTC event on March 18 was a reminder that generative AI is about building secure and reliable systems, not chatting up the future.
  • NEC has spent three years developing its own AI supercomputer, creating the best performing Japanese-language large language model (LLM), and testing new AI products in-house before delivering them to clients.
  • The introduction of generative AI and LLMs into business- and industry-specific solutions should provide meaningful additions to NEC’s telecom services, social infrastructure, aerospace and national security related businesses. 

Kobe Bussan: Expect More Growth

By Michael Causton

  • Discount cash and carry wholesaler/franchisor, Kobe Bussan, posted more record results for FY2023, a reflection of the demand for discount retailing.
  • Net profits were down due to foreign exchange costs, but the company continues to expand to meet the growing demand for discount retailing,
  • Kobe is also now building domestic factories to counter exchange rate fluctuations, and a new restaurant and food services arm with big potential to grow its wholesale business.

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Daily Brief Japan: Shinko Electric Industries, Sakura internet, Snow Peak Inc, LIFULL, Trial Holdings, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • Shinko Electric (6967 JP): Tender State of Play
  • Sakura Internet (3778) | Estimating the Value of 2,500 GPUs
  • Snow Peak: Cheap MBO
  • 1Q Follow-Up – LIFUL (2120 JP)
  • Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side
  • Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges


Shinko Electric (6967 JP): Tender State of Play

By Arun George

  • Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread has narrowed from a high of 10.4% to the current 4.2%. 
  • The narrowing spread can be attributed to the JSR Corp (4185 JP) tender launch, which suggests likely China SAMR approval, and Ibiden Co Ltd (4062 JP) giving up recent gains. 
  • Like JSR, we expect China SAMR to allow JIC to withdraw its Shinko merger control filing. There is a good chance the tender launches before the guided late August start.

Sakura Internet (3778) | Estimating the Value of 2,500 GPUs

By Mark Chadwick

  • The share price of Sakura Internet has risen by over 500%, adding Y230 billion in market cap, since investors began pricing in the AI opportunity
  • We use pricing data from Amazon AWS to model the revenue opportunity for Sakura’s GPU AI-cloud
  • We estimate that 2,500 H100 GPUs could yield an equity value of Y49 billion, far less than the value the market has ascribed

Snow Peak: Cheap MBO

By Michael Causton

  • Snow Peak agreement with Bain Capital to take the outdoor brand private next month seems to have been in the works for a couple of years. 
  • Although sales are expected to rebound this year to near record highs, Snow Peak insists the domestic camping boom is over and will look at long-term growth overseas instead.
  • Even so, the MBO price looks cheap. Snow Peak is likely to see a rebound in domestic sales in FY2024 and its plans for overseas expansion are solid.

1Q Follow-Up – LIFUL (2120 JP)

By Sessa Investment Research

  • LIFULL reported an 8% increase in net sales to ¥8.1 bn, driven by overseas acquisitions made during the second quarter of the previous FY.
  • OP from comparable operations remained steady at around ¥0.15bn. In the previous year, the company recorded an operating profit of ¥0.8bn, but this included ¥0.66bn in profits from the sale of Rakuten LIFULL STAY, a hotel and lodging platform operator, in October of 2022.
  • In the current term, the company recorded a net loss of ¥0.05bn, but this included about ¥0.2bn in one-off costs for the transition to a new management structure in the overseas business. 

Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side

By Sumeet Singh

  • Trial Holdings (5882 JP) (TH) raised around US$259m after pricing its IPO at the top-end in its Japan IPO.
  • TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
  • We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.

Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

By Aki Matsumoto

  • TOPIX-Type passive funds have the challenges of buying stocks that aren’t of high quality and of not providing sufficient engagement. JPX Prime 150 is expected to resolve these issues.
  • Some believe that JPX Prime 150, a market capitalization-weighted index, shows little difference in performance from TOPIX. However, more careful engagement will contribute to value creation in the long run.
  • The continued creation of passive funds linked to the JPX Prime 150 Index is expected to further highlight high quality companies.

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Daily Brief Japan: JSR Corp, Tokio Marine Holdings, D.Western Therapeutics Institute Inc. and more

By | Daily Briefs, Japan

In today’s briefing:

  • JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)
  • JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating
  • Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
  • 4Q Follow-Up -D. Western Therapeutics Institute (DWTI) | 4576


JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)

By Travis Lundy

  • The Tender Offer is finally here. JIC announced the official launch after the close today.
  • JIC appears to be taking on the SUNY RF risk as-is. The Tender Offer details vs the original expectations in the late June 2023 document are unchanged. 
  • Once started, unless a US court approves an injunction causing regulatory delay, this is done. But there are path events. And of course there is a double arb here.

JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating

By Arun George

  • JSR Corp (4185 JP) notes that the pre-condition for JIC’s tender has been satisfied. The offer price remains unchanged at JPY4,350 per share. 
  • The offer remains attractive despite the material re-rating of peers. The tender should succeed when combined with shareholder fatigue and a lack of vocal opposition. 
  • The tender requires a 66.7% minority acceptance rate. The gross and annualised spread for a 23 April payment is 0.6% and 7.1%, respectively.

Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell

By Sumeet Singh

  • The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
  • Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
  • In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

4Q Follow-Up -D. Western Therapeutics Institute (DWTI) | 4576

By Sessa Investment Research

  • Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs
  •  2) 2024 application/approval and 2025 launch of DW- 1002 in Japan, 2023 application and 2024 approval/launch in China, as well as orphan drug designation for combination formula MembraneBlue-DualⓇ (DW-1002 + trypan blue) in the US
  • 3) in Japan, start P2 clinical trials in 2024, P3 trials in late 2025 though 2026, and normal schedule application for approval for regenerative cell-therapy DWR-2206 in 2027

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