Daily BriefsIndustrials

Daily Brief Industrials: Techno Associe, Nissin Electric, Keisei Electric Railway Co, Kyocera Corp, Praj Industries and more

In today’s briefing:

  • Sumitomo Elec Buys Out Sub Techno Associé) At ¥1,695/Share – Insulting Explanation. Deserves More.
  • Sumitomo Electric Buys Out Sub Nissin Electric (6641) At ¥1,700/Share – ATH But Still Too Low
  • Keisei Electric: Needs Activists to Push the Market
  • Nissin Electric (6641 JP): JPY1,700 Tender Offer from Sumitomo Electric
  • Techno Associe (8249 JP): JPY1,695 Tender Offer from Sumitomo Electric
  • Kyocera (6971 JP): Massive Downward Revision
  • Praj Industries: Today’s Unimaginable Is Tomorrows Conventional Wisdom

Sumitomo Elec Buys Out Sub Techno Associé) At ¥1,695/Share – Insulting Explanation. Deserves More.

By Travis Lundy

  • Sumitomo Electric Industries (5802 JP) is taking over to subs through tender offers. Both are light. Both this one for Techno Associe (8249 JP) and the one for Nissin Electric.
  • Both deals are light -slightly offensive, but in different ways. The Board decisions are more offensive than the actual prices, but it’s Sumi Elec buying, so those are offensive too.
  • There’s a history here. Sumi Elec went to 51% at an offensively low price (EV/EBITDA below zero) in 2019. But this is probably a done deal anyway.

Sumitomo Electric Buys Out Sub Nissin Electric (6641) At ¥1,700/Share – ATH But Still Too Low

By Travis Lundy

  • Sumitomo Electric Industries (5802 JP) has announced a takeover of two of its subsidiaries today. The larger one is Nissin Electric (6641 JP)
  • This deal, done for governance purposes, hits an all-time high price. But, like others, it ignores synergies in pricing, has an inadequate premium, and process is just bad.
  • But given the shareholder structure, this is highly likely to sail through un-molested. 

Keisei Electric: Needs Activists to Push the Market

By Oshadhi Kumarasiri

  • We think there’s something fundamentally wrong with Keisei Electric Railway Co (9009 JP)’s current valuation.
  • Its core business with an estimated fair value of ¥720bn, currently has an implied valuation of negative ¥942bn (stub value).
  • If investors can convince the management to dispose its stake in Oriental Land (4661 JP), we think there’s more than a 200% upside to Keisei Electric’s valuation.

Nissin Electric (6641 JP): JPY1,700 Tender Offer from Sumitomo Electric

By Arun George

  • Nissin Electric (6641 JP) has recommended Sumitomo Electric Industries (5802 JP)’s tender offer of JPY1,700 per share, an 22.7% premium to the undisturbed price (2 February).
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
  • The tender offer is attractive in comparison to peer multiples and historical price ranges. Excluding the offeror, there are no substantial shareholders. This suggests a done deal. 

Techno Associe (8249 JP): JPY1,695 Tender Offer from Sumitomo Electric

By Arun George

  • Techno Associe (8249 JP) has recommended Sumitomo Electric Industries (5802 JP)’s tender offer of JPY1,695 per share, an 36.9% premium to the undisturbed price (2 February).
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
  • The tender offer is attractive and represents an all-time share price high. This suggests a done deal. The tender offer period is from 3 February to 22 March.

Kyocera (6971 JP): Massive Downward Revision

By Scott Foster

  • Kyocera cut FY Mar-23 operating profit guidance by more than 30% while leaving sales guidance unchanged. Draw your own conclusions about the reliability of company forecasts.
  • Sales began to decline in 3Q and the rate of decline is likely to increase in 4Q. There is a large inventory overhang.
  • The shares dropped 3% today. Wait for capitulation as the reality of recession sinks in.

Praj Industries: Today’s Unimaginable Is Tomorrows Conventional Wisdom

By Nurture Capital Advisory

  • Robust medium-term earnings growth, softness in commodities to ease margin pressure.
  • Beneficiary of new energy capex, likely blending of Compressed Biogas with CNG furthers capex outlook.
  • Stock has corrected 45% from peak, valuations turn more reasonable.

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