In today’s briefing:
- GMO Internet (4784) – Squeeze-Able So Squeezing, Offering Likely Gets Pulled – AVOID LIKE THE PLAGUE
- [Japan Activism/M&A] – Thinking About Positioning Around the Tsuruha/Welcia Vote
- Japan Post Holdings – Waiting for Godot…
- Sanyo Trading (3176 JP) – Steady Delivery with Sustainability Emerging as a Key Driver
- Trial: Soon to Be Japan’s Largest Supermarket
- Without a Disciplined Cash Allocation in a Company, Share Repurchases Are Welcome to Investors
GMO Internet (4784) – Squeeze-Able So Squeezing, Offering Likely Gets Pulled – AVOID LIKE THE PLAGUE
- GMO Internet (4784 JP) was created by the reverse takeover of a listed cad/media company by its parent company’s “internet infrastructure” business. GMO Internet Group ended up with ~98%.
- In the process, the stock rose 500%. Now, as part of its promise to the TSE allowing TSE Prime membership for the extraordinarily low-float target, the parent is offering shares.
- The squeeze has it at 180x Dec25e EPS, 111x EBIT, 70x book. The offering likely gets pulled and the stock isn’t shortable… so what next? Pain, and an ECLWO.
[Japan Activism/M&A] – Thinking About Positioning Around the Tsuruha/Welcia Vote
- The Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) AGMs to elect directors and approve the share exchange agreement to merge the two.
- 10% Tsuruha shareholder Orbis objects to the merger ratio AND the later tender whereby Aeon goes to 51%, saying everything is underpriced. ISS/GlassLewis recommend voting against the merger.
- I haven’t seen the proxy reports but I’ve done the math. Investors/arbs should look at the possibilities/probabilities and understand what dependencies exist. Shareholders are not helpless, no matter the outcome.
Japan Post Holdings – Waiting for Godot…
- Does the underperformance since the recent results announcement provide an opportunity?
- While the company strategy is moving in the right direction, the pace of change is slow.
- With ownership of Japan Post Bank reduced to below 50%, there is potential change afoot there
Sanyo Trading (3176 JP) – Steady Delivery with Sustainability Emerging as a Key Driver
- Q1-2 FY9/25 results met expectations, with the company’s diversified operations helping offset softness in Industrial Products and Life Science.
- A key positive was the acceleration of growth in Sustainability, driven by green technology and energy solutions, which reinforces its potential as a core earnings driver.
- Fine Chemicals remained resilient, backed by domestic demand for industrial rubber.
Trial: Soon to Be Japan’s Largest Supermarket
- As confirmed last month, Trial will acquire Seiyu later this year, giving it access to 240 more stores to add to almost 350 already in operation.
- The prospect of combining Trial’s undeniable knowhow in retail tech and its laser-focused concern with reducing costs could cause rivals serious problems.
- Despite the obvious benefits, Trial’s share price has fallen to around the same it was a year ago largely due to concerns over OPM but profitability will improve fast.
Without a Disciplined Cash Allocation in a Company, Share Repurchases Are Welcome to Investors
- Since most Japanese companies at this point have more cash on hand than they need, it is only natural that they will step up shareholder returns, including share buybacks.
- The reason why many companies have more cash on hand than necessary due to lack of investment for growth is because they do not have a disciplined cash allocation.
- If the company does not have a disciplined cash allocation, share repurchases that lead to allocations to the most effective investments at the investor’s discretion are welcome to the investor.
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