In today’s briefing:
- GMO Internet (4784) Offering – This Is a GINORMOUS Re-IPO – AVOID LIKE THE PLAGUE
- [Japan M&A] – Three+ Years Later, Shimizu Comes In To Buy Out Minorities in Nippon Road (1884)
- GMO Internet Placement: Secondary Sell-Down (Quasi IPO) To Meet Prime Listing Requirements
- GMO Internet (4784 JP): A Huge US$1.9 Billion Secondary Offering
- [Japan M&A/Activism] Infroneer To Buy Out Activist Target Sumi Mits Construction (1821) Cheapish
- Sankyo Co: Big Buyback + Five Years Left Until Opening of Mega MGM Osaka Integrated Casino Resort
- Nippon Road (1884 JP): Shimizu Corp (1803 JP) Tender Offer Is Light but Likely Done
- Trust in Muji Reaps Big Returns
- GMO Pepabo Inc (3633 JP): Q1 FY12/25 flash update
- Cyberlinks (3683 JP): Q1 FY12/25 flash update
GMO Internet (4784) Offering – This Is a GINORMOUS Re-IPO – AVOID LIKE THE PLAGUE
- Last year, GMO injected its internet business into GMO Internet (4784 JP) and took shares as consideration. Somehow, GMO Internet got a TOPIX inclusion earlier this year.
- The company has 1.24% float of 3.4mm shares. GMO Internet Group – the parent – will now offload 91.7mm shares in an equity offering to meet TSE Continued Listing Requirements.
- That is about ¥279bn at current price against float of ¥10bn. Full market cap is ¥850bn. That’s 170x Dec25e Net Income. I expect the price will fall. You were warned.
[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.
GMO Internet Placement: Secondary Sell-Down (Quasi IPO) To Meet Prime Listing Requirements
- GMO Internet Group (9449 JP) is looking to sell its 33.4% stake in its subsidiary GMO Internet (4784 JP) to meet free-float requirements.
- As the current free-float is tiny, the deal is more like a quasi-IPO rather than a placement, in our view.
- In this note, we will talk about the deal dynamics as well as updates on the company’s financial performance.
GMO Internet (4784 JP): A Huge US$1.9 Billion Secondary Offering
- GMO Internet (4784 JP) has announced a secondary offering of 91.7 million shares, worth around US$1.9 billion.
- The selling shareholder is GMO Internet Group (9449 JP). The secondary offering aims to increase the tradable share ratio to satisfy the TSE Prime Market’s continued listing criteria.
- The offering represents 239.4 days of the 1-year ADV, the highest compared to the recent large Japanese placements. Pricing is likely to be on 5 June.
[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.
Sankyo Co: Big Buyback + Five Years Left Until Opening of Mega MGM Osaka Integrated Casino Resort
- On 12 May, Sankyo Co Ltd (6417 JP) announced a big share buyback worth 13.66% of total issued shares (excluding treasury shares).
- Aggregate amount of the purchase cost is up to 60 billion yen (9.7% of its current market cap).
- We continue to have a Positive view of Sankyo which continues to demonstrate its commitment to deliver higher shareholder returns through aggressive share buybacks.
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.
Trust in Muji Reaps Big Returns
- Muji continues its impressive growth streak both at home and abroad – sales in March alone rose 33% in Japan.
- Muji has grown in part because of its ability to move into new categories, even cosmetics and food, possible because Muji’s biggest asset is how well it is trusted.
- The latest, with significant potential given inbound demand, is Muji Stay which includes its own hotels, rooms in other hotels and inns, as well as house rentals on Airbnb.
GMO Pepabo Inc (3633 JP): Q1 FY12/25 flash update
- Revenue in Q1 FY12/25 increased YoY, driven by higher-priced contracts in EC Support and Financial Support businesses.
- Domain & Rental Server (Hosting) revenue and operating profit progress lagged, despite increased customer spend from price revisions.
- Handmade Products business achieved significant operating profit growth, aided by minne Ads, despite a decline in gross merchandise value.
Cyberlinks (3683 JP): Q1 FY12/25 flash update
- Revenue grew by 4.4% YoY to JPY4.5bn, with recurring revenue up 9.4% YoY to JPY2.1bn.
- Operating profit increased 16.6% YoY to JPY414mn, with a 1.0pp rise in OPM to 9.2%.
- Trust segment revenue dropped 36.7% YoY, while Government Cloud segment revenue increased 3.9% YoY to JPY2.1bn.
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