In today’s briefing:
- [Japan M&A] – Three+ Years Later, Shimizu Comes In To Buy Out Minorities in Nippon Road (1884)
- [Japan M&A/Activism] Infroneer To Buy Out Activist Target Sumi Mits Construction (1821) Cheapish
- Nippon Road (1884 JP): Shimizu Corp (1803 JP) Tender Offer Is Light but Likely Done
- SMPP Ltd Pre-IPO – In the Right Space (Defence), at the Right Time but Growth Has Been Inconsistent
- Epco Co Ltd (2311 JP): Q1 FY12/25 flash update
- CIMC Enric (3899 HK): Deep Value
- Ravi Infrabuild Projects Ltd Pre-IPO Tearsheet
- World Holdings (2429 JP): Q1 FY12/25 flash update
- Harmonic Drive Systems (6324 JP): Full-year FY03/25 flash update
- Kulr Technology: Battery Technology Company Looks Overheated
[Japan M&A] – Three+ Years Later, Shimizu Comes In To Buy Out Minorities in Nippon Road (1884)
- In February 2022, Shimizu Corp (1803 JP) bought an additional 25% to get to 50.1% of Nippon Road (1884 JP). It wasn’t a great price.
- It was, however, a good trade to buy the dip after, as recommended. I expected Shimizu to come back in one to three years. It took three.
- Like last time, the price is light. The multiple is low. There are no synergies in the price analysis, in specific violation of the METI Fair M&A/CorpTakeover Guidelines. Bah humbug.
[Japan M&A/Activism] Infroneer To Buy Out Activist Target Sumi Mits Construction (1821) Cheapish
- Noted activist Yoshiaki MURAKAMI and associates owned ~12.5% in March 2024, perhaps a tad more. Now they own ~29%.
- Integrated Construction Co INFRONEER Holdings (5076 JP) – congenitally allergic to paying full price for acquisitions – is buying Sumitomo Mitsui Construction (1821 JP) well below FAs’ DCF range midpoints.
- But MURAKAMI-san has tossed his cards in, agreeing to tender. This looks like it gets done, but there are interesting angles.
Nippon Road (1884 JP): Shimizu Corp (1803 JP) Tender Offer Is Light but Likely Done
- Nippon Road (1884 JP) has recommended a tender offer from Shimizu Corp (1803 JP) at JPY2,520, a 16.2% premium to the undisturbed price.
- The offer represents an all-time high and is 26.0% higher than the 2022 partial tender offer price. However, it is light compared to peer multiples.
- The offer is below the midpoint of the target IFA DCF valuation range. However, the required minority acceptance rate is not onerous, and this is a done deal.
SMPP Ltd Pre-IPO – In the Right Space (Defence), at the Right Time but Growth Has Been Inconsistent
- SMPP Ltd is planning to raise about US$476m through its upcoming IPO in India.
- SMPP Ltd. designs and manufactures defence equipment, specialising in ammunition components and personal protection products for the Indian armed forces, police, and security agencies.
- In this note, we look at the company’s past performance.
Epco Co Ltd (2311 JP): Q1 FY12/25 flash update
- In Q1 FY12/25, revenue increased by 10.3% YoY to JPY1.5bn, while operating profit declined by 19.8%.
- Renewable Energy Service business revenue rose 54.3% YoY, with recurring profit returning to the black from a prior loss.
- Design Service business revenue increased 0.5% YoY, with a 4.3% rise in recurring profit due to efficiency improvements.
CIMC Enric (3899 HK): Deep Value
- CIMC Enric Holdings (3899 HK)‘s YTD decline in share price provides an opportunity to pick up this name, which sees a solid sequential earnings improvement this year.
- 1Q25 revenue growth accelerated to 24.4%, from 2.9% in 2H25. While 1Q25 new orders have dropped, there is a sharp rebound in Apr, with a more positive 2H25 outlook.
- At 9.3x FY25 PER after going ex-dividend (27 May), it is cheap relative to 14.7% 3-year EPS CAGR. The stock is also trading at the low-bound of the 3-year range.
Ravi Infrabuild Projects Ltd Pre-IPO Tearsheet
- Ravi Infrabuild Projects Ltd (1607447D IN) (RIPL) is looking to raise about US$178m in its upcoming India IPO. The bookrunners for the deal are Axis, Motilal.
- RIPL is one of the leading infrastructure construction firms in India, experienced in executing structural projects such as flyovers, bridges, railways, highways, and expressways.
- RIPL had grown 16.6x in terms of its average order size, reaching INR2,577m (as on Dec 2024), as per the company.
World Holdings (2429 JP): Q1 FY12/25 flash update
- Revenue increased to JPY63.5bn (+15.8% YoY), with operating profit at JPY2.5bn (+292.9% YoY) and recurring profit at JPY2.4bn (+298.0% YoY).
- Products HR business revenue was JPY28.1bn (+9.7% YoY), with segment profit at JPY750mn (+202.4% YoY).
- Real Estate business revenue was JPY12.5bn (+61.2% YoY), with segment profit at JPY1.5bn (+206.9% YoY).
Harmonic Drive Systems (6324 JP): Full-year FY03/25 flash update
- Consolidated sales for FY03/25 declined 0.3% YoY to JPY55.6bn, with operating profit down 94.4% YoY.
- Q4 parent orders increased 22.9% YoY to JPY8.0bn, driven by industrial robots and semiconductor equipment orders.
- HDSI forecasts 1H FY03/26 sales at JPY27.0bn, with operating profit of JPY300mn, recovering from previous losses.
Kulr Technology: Battery Technology Company Looks Overheated
- Kulr Technology (NASDAQ: KULR) makes technology to manage heat levels in batteries.
- We believe KULR has failed at building a product relevant to a large market.
- Now, with less than $11 mln in annual revenue after 12 years of trying, KULR appears to have built a cottage industry in promoting its own stock.
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